3. Economic Outlook
United States
• Unemployment at 5-year low 5.0%
• Disposable Income 3.34% Annualized Growth
Rate (based on 0.83% CQGR over 18 Quarters)
• Wage growth around 1.0% Q/Q in 2015
• Inflation (Core PCE Price Index)
1.3 Y/Y Oct – Flat M/M
• Real PCE growth stronger than 2014
• Expansionary Consumer Future Expectations
• Low Gasoline prices
-2.0%
-1.0%
0.0%
1.0%
2.0%
3.0%
4.0%
10500
11000
11500
12000
12500
13000
13500
14000
11
Q1
11
Q3
12
Q1
12
Q3
13
Q1
13
Q3
14
Q1
14
Q3
15
Q1
15
Q3
BillionUSD
%ChangeQ/Q
U.S Wage Growth vs Disposable
Income
Disposable Income
Wages Q/Q Growth (%)
6 per. Mov. Avg. (Wages Q/Q Growth (%))
Unleaded Gasoline Futures – March ’16 - $1.33
Source: CME Group
4. Economic Outlook
China
• Slowing GDP Growth 6.8% (IMF)
• Strong Wage Growth
• Inflation lower in 2015 at 1.5% Y/Y
• Consumer Confidence at Dec ‘14 level
• Strong Retail Spending 11.0% Y/Y (Oct)
• Middle class spending in Asia-Pacific region 42% of
Global Total (OECD Development Center)
• Slowing industrial production “only” 5.6% Y/Y
growth in October 2015
6. “Cord Cutting”
due to price
hikes
Need for
customization of
packages
Comfort/Ease of
Access
Online
Video
Media Industry Overview
Global
7. 0
2000
4000
6000
8000
10000
2011 2012 2013 2014
MillionUSD
U.S Home Entertainment
Spending
Rental Sell Through Digital
0
1000
2000
3000
4000
5000
2011 2012 2013 2014
MillionUSD
U.S Home Entertainment Spending
- Digital
Electronic Sell Through VOD Streaming
Media Industry Overview
8. Market Data
Previous Close 111.89
52-week High 112.08
52-week Low 90
Market Cap 1845B
Outstanding Shares 1.65B
Free Float 1.57B
EPS FY 4.9
P/E Ratio 22.83
Diversified worldwide entertainment company with
operations in five business segments
Company Overview
31%
14%
9%
2%
44%
Revenue Distribution
Parks and Resorts
Studio Entertainment
Consumer Products
Interactive
Media Networks
ESPN, multinational leader in sports, has locked most long-
term rights for the next decade
Disney’s unique ecosystem of running created or acquired
intellectual property through its lines of business
Catalysts: Star Wars (Dec 18) & Shanghai Disney (Spring 2016)
10. Media Networks
The acquisition of long-term sports rights
ensures that no significant shift from current
preeminent position in rights
ESPN reaches 50% larger audience than all other
national sports networks combined
ESPN leads the market in the digital field
975
163
123
110
96
68
55
23
E S P N NF L
NE T W ORK
F OX
S P ORT S 1
GOLD
C H A NNE L
NBC
S P ORT S
MLB
NE T W ORK
NBA T V F OX
S P ORT S 2
AVERAGE MINUTE HOUSEHOLD AUDIENCES (000)
Non-ESPN
638
975
5:03
8:08 8:52
3:43
8:20
T V ONLY T V + 1 T V+ 2
TIME SPENT WITH ESPN MEDIA PER
ADULT USER IN THE AVERAGE MONTH
TV Digital or Radio
11. • 6 main locations (theme parks & resorts)
• 148,341,000 visitors in 2014
• Economic Outlook Stronger PCE
• MyMagic+ technological Innovation
• Projected 7.0% average annual sales growth during
the next five years for parks and resorts.
• 4 Cruise Ships: Fantasy, Dream, Magic & Wonder
• ROIC's in the mid to high-teens for the new cruise
ship operations
• Constant renewal of shows, stands and visuals
with Disney’s successful brands. ie: Star Wars
Parks & Cruise Line
Parks & Resorts Cruises
0.00%
2.00%
4.00%
6.00%
8.00%
10.00%
12.00%
14.00%
16.00%
18.00%
20.00%
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
2010 2011 2012 2013 2014
Historical 5 Year Revenue - Parks and Resorts
Revenues % Change OI OI/Rev
12. 5 year
economic
plan:
consumer
led
Lower yuan
stimulates
tourism
China lifts
1-Child
Policy
Largest
growing
middle
Class
GROWTH
OPPORTUNITY
• Joint venture with Shanghai Shendi partners
• Features six themed lands, two hotels, a park, and a
shopping & entertainment district
• Location:
Next to country's 3rd largest airport
330 million people live within a three-hour drive
China's fastest growing city in population,
income, investment, and tourism
• Government offered land for additional expansion
Parks & Cruise Line
Shanghai Disney Resort
13. Studio Entertainment Pipeline
Movie
Consumer
Products
Books/Comics
Educational
Materials
Clothing Video Games Attractions
Film Release Schedule
Name Producer Release Date
The Good Dinosaur Pixar 11/25/2015
Star Wars: The Force Awakens Lucasfilm 12/18/2015
The Finest Hours Walt Disney Pictures 01/29/2016
Zootopia Walt Disney Animated Studios 03/04/2016
The Jungle Book Walt Disney Pictures 04/15/2016
Captain America: Civil War Marvel 05/06/2016
Alice: Through the Looking Glass Walt Disney Pictures 05/27/2016
Finding Dory Pixar 06/17/2016
The BFG Walt Disney Pictures 07/01/2016
Pete's Dragon Walt Disney Pictures 08/12/2016
Doctor Strange Marvel 11/04/2016
Moana Walt Disney Animated Studios 11/23/2016
Star Wars Anthology: Rogue One Lucasfilm 12/16/2016
Beauty and the Beast Walt Disney Pictures 03/17/2017
Ghost in the Shell DreamWorks 06/14/2017
Guardians of the Galaxy Marvel 05/05/2017
Star Wars: Episode VIII Lucasfilm 05/26/2017
Pirates of the Caribbean: Dead Men Tell No TalesWalt Disney Pictures 07/17/2017
Global Box Office
$1.1 Billion -
highest-grossing
animated film of
all time
2016 -Frozen
flume ride (Epcot) Impact on
3Q2014:
Consumer
Products revenue
jumped 22%
Disney is
launching a
short film
called "Frozen
Fever"
“Frozen Free Fall”
Surpasses 100
Million
Downloads
14. • Revenue
– 5 Year Sales CAGR = 6.63%
– “Recession Resistant”
• Improving Margins
• Major revenue from United States
– Limited impact of strong USD
• Stock Repurchase Program
– Undervalued stock
Financial Analysis
74%
13%
9%
4%
Regions
United States and Canada Europe
Asia Pacific Latin America and Other
'11 '12 '13 '14 '15
Basic EPS (excl. extra
Items)
$2.56 $3.17 $3.42 $4.31 $4.95
Basic EPS (excl. Extra
Items) @ 2011 Shares
$2.56 $3.03 $3.27 $3.99 $4.46
$ -
$1.0
$2.0
$3.0
$4.0
$5.0
$6.0
Basic EPS
-10.0%
-5.0%
0.0%
5.0%
10.0%
15.0%
20.0%
0
10,000.0
20,000.0
30,000.0
40,000.0
50,000.0
60,000.0
'06 '07 '08 '09 '10 '11 '12 '13 '14 '15
Total Revenues
Revenues Y/Y growth Net Income Margin
20. ESPN’s block off from negative aspects of
consolidation of cable industry
Defense!
ESPN exclusive long term control of sports
rights for decades Supplier Power
A-La-Carte system benefit would be offset by
higher cost per channel. ie: Apple TV
suspended because media companies that
want more money for their programming.
Sports value relies on it being LIVE
Dual revenue stream, strong position in
advertiser’s eyes.
21. • China (Parks & Movies)
• SVOD affiliations (Netflix,
Hulu, Maker)
• Huge Film pipeline & end
product variety
• Tech Start-Up
“Accelerator” Program
with Techstars – 2nd year
• “Cord Cutting” at Cable
Networks (ESPN, ABC)
• Cost increases at Sport
Networks
• Regulation (Media
Segment)
• Intellectual Property
Infringement
• Heavy Capital
Expenditure
requirements
• Media segment as major
source of revenue
• ESPN
• ABC
• Competent Management
• Diversified Revenue
streams
• Strong revenue & FCF
growth
• Brand status
• Technologically
Innovative
• MyMagic+
• 3D printed toys
Strength Weaknesses
OpportunitiesThreats
SWOT Analysis
22. Economic Outlook - US
High correlation between PCE and GDP
68.5% of GDP (as of 2013, IMF)
Real PCE slower increase than expected
Savings rate increase in Q3 2015
5.0% (Q2) vs. 5.2% (Q3)
PCE Drivers:
1. Unemployment
2. Wages
3. Price Level
4. Consumer Confidence
5. Strong USD
6. Gasoline Prices
Source: Bloomberg
4.8
4.8
4.9
4.9
5.0
5.0
5.1
5.1
5.2
5.2
0.0
20.0
40.0
60.0
80.0
100.0
120.0
InflationExpectations
EconomicExpectations
Consumer Future Expectations
Conference Board Expectations
Conference Board Inflation Expectations
24. Global
Diversified across various platforms
1. Hulu (33%) owned
• Rumors about possible inclusion of Time
Warner
• Underestimated
• New Ad-free service
2. Netflix
• Exclusive Movie Pay Windows 1 & 2 for
movies 2016 – 2018
• Pressured to include
advertisements/Commercials
3. Maker Studios (acquired 2014)
• Leader in Short-Form Video (650
subscribers)
Digital
25. GROWTH OPPORTUNITY:
Technological Innovation
Disney Accelerator
MyMagic+
• Tech Start-Up Accelerator Program (2014 –
present)
• In partnership with TechStars
• Firms in Consumer Entertainment/Media
• Funding
• $20,000 up-front
• $100,000 convertible debt note
• 3-Months Mentor program
• Top Disney Executives
• Investors
• Entrepreneurs
• Legal Experts
• Venture Capitalists
• Etc.
• $1 Billion project functional in 2015
• Bracelet acts as:
• Door Key
• Wallet
• FastPass
• Provides better guest experience
• Allows Disney to better study visitors
Editor's Notes
Thank you Sebastian, the company that we picked is Disney, the entertainment conglomerate. When we looked into the media industry we knew we wanted a company that is positioned to take advantage of the growth in digitalization and we found that Disney is perfectly suited through its ESPN Watch program, its status as content creator and not a distributor, and the strong brands under its belt.
Disney owns ESPN, the multinational leader in. Also, Disney irreplaceable competitive advantage of developing or acquiring intellectual property such as Avengers or Starwars, and running them through all their lines of business. We the Star Wars fever and their park opening in Shanghai as catalyst of additional growth.
But lets start from the basics, on this chart you can see that Disney has 5 business segments: Media Netwoks, Parks and Resorts, Studio Entertainment, Consumer Products and Interactive.
The biggest component of Media Networks is ESPN.
Three things to highlight from ESPN:
In the Media Industry, Content is King and ESPN has acquired long-term sports rights that ensure no significant shift from current preeminent position.
ESPN reaches a 50% larger audience than all other national sports networks combined…. The Worldwide leader is sports isn’t just a slogan.
Moreover, ESPN is well positioned for the digital growth. As you can see on the chart, ESPN dominates in market share and minutes per user. As digital advertising increases , ESPN will be a major beneficiary.
As a result, ESPN remains one of the least time-shifted networks in television. ESPN content on TV, radio, PC, smartphone, or tablets, delivers unduplicated reach of over 190 million adults or 79% of the population in the average month, and 101 million men or 86% of that population in the average month.
Minutes spent with WatchESPN per device has grown 79% on average.
California, Florida, Paris, Hong Kong, Tokyo and Shanghai
80% of revenues of parks are Domestic, which are posed to benefit from a stronger PCE.
Disney recently piloted demand-based ticket pricing because its parks are so full it is trying to spread demand out.
Domestic theme-park attendance was up 4 percent, and per-guest spending increased 2 percent.
Most attendance Disney had nine parks landing in the top 10
My Magic+
As the U.S. economy stabilizes, disposable personal income is expected to improve. This would give rise to the demand for luxuries including travel, leisure, entertainment etc. The hotel as well as the theme park industry can be linked to the disposable personal income of consumers.
Cruise:
The Company offered 29 different tour packages during 2015.
Now we look into the Shanghai opportunity within the parks division:
Its partner Shanghai Shendi a fully state holding company knows the in’s and out’s of the entertainment and media industry for the Chinese culture. Also as it is a Joint Venture, it mitigates risk.
Compared to only 24.1 million and 19.6 million people who live within the same distance of Disney’s U.S.
We believe the growth that Disney will derive from this venture opening in Spring has not been priced into the stock value. Partially due to Disney not wanting to over estimate it’s figures. Also, the recent economic turmoil in Chinese stock market has associated China with fear. The truth is that China is the largest growing middle class. Sebastian showed how the global CPE (Consumer Personal Expenditure) would increase from 23% to 42% of the world. Furthermore, as you can see from our graph, we believe these are important factors of this growth opportunity:
the consumer led economy plans from the Chinese government
Low currency that may stimulate tourism
China’s lift of the 1-child policy
Largest growing middle class
Increased Consumer Spending
Similar story with Avengers…
Owns 33% Hulu
Which said an à la carte plan would most likely raise consumer costs by 14 percent to 30 percent and reduce the diversity of channels.
Sports viewers are 3 times less likely to even ever consider cutting the cord.
Millennial subscribers kept pace with the overall rate of growth in multichannel from 2007 to 2013
In 2013, 96% of viewing to ESPN was done live
