Disney Flexes Its Power After Thunderous Week Of Results (NYSE:DIS)

UK Gala Screening of Marvel Studios" Thor: Love & Thunder

Gareth Cattermole/Getty Images Entertainment

Disney’s (NYSE:DIS) summer got off to a rocky start the other month when its odd interpretation of the story behind (some version of) Buzz Lightyear came crashing down to Earth. The movie underperformed by a significant amount for a variety of reasons and set off a firestorm of controversy. In all, it also set a negative tone for the studio at a crucial time, but over the last week Disney was able to rebound across two different paths, showing why it’s not wise to doubt the Mouse.

So what happened and how will it impact the studio with its all-important earnings reveal ahead?

First as always, some background.

We don’t have to dwell on Lightyear for that long, you can read my recap and analysis here, but it’s important to underscore how it hurt Disney’s reputation. The movie was seen as a reach for the studio as it not only went super-meta in thinking, but it completely discarded a number of the elements that made Buzz a big name in its IP roster, including bypassing the character’s original voice (Tim Allen) in favor of what they perceived as a buzzier name (Chris Evans).

What investors have seen over the last few years is a glut of reboots and spin-offs of popular franchises, but the savvier ones have noticed the ones that do well are the ones that honor the past – not re-write it.

Case in point – Ghostbusters.

Sony’s (NYSE:SONY) all-female reboot didn’t necessarily fail because it gender-flipped the concept – it failed more because it tried to start from scratch with no real ties to the original. It was a mistake the studio did not make again when it re-launched the franchise for a second time in 2021 with Ghostbusters: Afterlife.

That film brought back the original cast and creatives and as a result saw big success – even in a pandemic.

In truth though the female aspect that supposedly hampered the 2016 version was really a smokescreen. To many critics it was an easy cop-out answer and one that was very click-bait friendly. Lightyear had its own cop-out answer in the form of a plot point that featured the first same-sex couple in a Pixar film.

That led many to use the “go woke, go broke” mantra.

Although as one commenter astutely pointed out – if you want to doubt Disney, you’ll go broke a lot faster.

Lightyear is a one-off aberration, and while it could have led to a franchise, the smart money was on Disney always going right back to the traditional Toy Story universe.

And if there was any bad blood between Disney and consumers, it vanished over the weekend with Thor: Love & Thunder. The fourth installment in the Thor franchise – and latest in the Marvel Cinematic Universe – went on to net $143 million domestically and more than $300 million worldwide.

Yes, Thor and Lightyear are different types of films, but remember Lightyear was decidedly more adult than Toy Story and earned a PG rating so there is cross-over here. Thor also leveraged marketing partners that skew younger including McDonald’s (MCD) and Xbox (via Microsoft (MSFT)).

It’s not Minions, but you can connect the dots.

Moreover, it was continued proof that the traditional model still works and that’s with audiences fully aware Thor: Love & Thunder will likely be on Disney+ before the summer is over. That news also is a boon for theaters who had derided Disney’s “screen to stream” approach during the pandemic and thought it was leading to the death of the local Cineplex.

Again – smokescreen.

Speaking of stream, that takes us to the other bit of good news which ties into Disney’s television offerings. That group got an early morning surprise on Tuesday when its combined divisions earned over 100 Emmy nominations, putting in the same space as Warner Bros. Discovery (via HBO/HBO Max) (NYSE:WBD) and Netflix (NASDAQ:NFLX) which each had a triple-digit haul.

If you want to argue the value of Emmy nominations, this may be a good place to stop reading.

Emmys and other awards represent a sizable chunk of budget for studios which heavily campaign for the honor. It can be a massive expense that doesn’t always guarantee results. It’s also a very touchy subject in Hollywood as studios like to play the quantity vs. quality game.

Disney owned FX likes to count its nominations separate, of which this year it had 23, up from the 16 it had last year. However, its parent company sees more value in the sum of its parts – which also includes ABC, Hulu, Disney+, Freeform, ESPN and Nat Geo. So that 23 is important but it is even more impactful as part of that larger picture.

Netflix also took offense to the “counting” practice as last year it lost the title of most-nominated network to HBO, because the Academy counted HBO Max’s nominations in HBO’s total. Personally, I see HBO and HBO Max as interchangeable, but for Netflix which needs to not only validate its awards spend (especially now), but it wants to keep that perception of it beating HBO.

Again though that’s part of why Netflix is in uncharted territory with its stock price. Netflix is just Netflix and not as diversified as Disney, WBD, Apple or any of the other streaming players.

Yet where Disney scored its biggest win here is not just in the numbers, but what the numbers represent.

ABC for example scored seven nominations for rookie comedy Abbott Elementary, including three for the show’s creator Quinta Brunson (who’s also the lead and a writer). It’s incredibly difficult for a rookie broadcast network series to break through in the Emmys or really any award show in that first year. In the past decade it’s only happened a handful of times and not only did Abbott score a series nomination, but its cast also was rewarded with four individual nominations.

For a medium struggling with the rise of streaming, this is a huge (and history making) win for Disney/ABC and really any of its broadcast brethren – as well as their investors.

Disney also saw a big win in streaming with Only Murders In The Building, the Steve Martin/Martin Short/Selena Gomez led series scored 17 nominations coming in just behind reigning champ Ted Lasso from Apple.

Hulu, which was the first streamer to win Best Drama at the Emmys, has struggled to re-insert itself in the race beyond The Handmaid’s Tale which was not eligible this year to compete (as it didn’t air new episodes in the last year). Not to be to on the nose, but Building built on that initial success and finally helped the service rebound.

But Building wasn’t the only Hulu project to score big.

Two limited run series – Dopesick and Pam & Tommy – also broke through with 14 and 10 nominations, respectively. All together between its various projects Hulu snagged 58 total nominations, which isn’t Netflix’s 105, but more than doubles the streamer’s haul from 2021.

It also again adds to Disney’s overall totals.

Moreover it also re-enforces the narrative Disney wants to set for investors – which is it’s dominant in all aspects of entertainment, and not all of its content is “kid” focused.

Remember, a large reason for Disney’s acquisition of 20th Century Fox and its increased stake in Hulu is because it needed an outlet for that adult content which it couldn’t air on Disney+ or under the Disney proper banner.

That “kid” label has obviously done well for Disney over the years, but its team has long realized it needed an increase diversification of its portfolio. A big part of that is also so that when one leg collapses (i.e. Lightyear), the whole company is still well supported.

And that’s never more needed than now as Disney prepares to present its earnings which will come out on Aug. 10. Realistically the only thing that should matter there is the overall bottom line but in this streaming-first world we’ve shifted into, the only thing analysts are looking for is the subscriber count for Disney+.

That’s a precedent set by Netflix that I’m sure its team is currently regretting because it really doesn’t tell the whole picture, which is another reason these smaller pieces play such an impactful role in the larger picture.

Eventually maybe we’ll see the quality dynamic take over more aspects, but until then, quantity seems to rule the day and why the sum of the parts is so crucial.

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