Disney is now losing massive amounts of money starting up their own streaming service. They have turned a $300 million revenue stream (with a high profit margin) into a large deficit by pulling out of the Netflix deal and doing it themselves. Their obsession with control is costly in the short to medium term. The long run remains to be seen. UBS estimated that their break even point where they move from loss to profit on streaming at 32 million subscribers given a $9 price point. Since the actual price point is $8 the likely need about 36 million subs to break even. They have around 10 million and that includes non-paying trial members.
So in your opinion, Disney has wasted tens of billions of dollars buying back their own stock. AT&T is a disaster waiting to happen. They tripled their debt over the past decade and their once sterling bond rating has been cut to barely above junk bond status. Their media properties would be toast without the wireless and telecom divisions to subsidize them. Like the FAANG companies, AT&T has a large, non-media cash flow to fund competition in this arena.
That business plan is not materially different than Apple, Amazon, etc. What is different is their cash flow isn't growing rapidly and much of it is committed to the 5G rebuild of their wireless network. Thus they are borrowing against future cash flow to support new ventures. Disney is the only old media company with sufficient breadth to both fund initiatives and stock buybacks from internal cash flow. That doesn't mean any particular initiative is a wise one.
Adjusted for inflation, the box office take was better during the PT than the ST. Merchandise sales are lower than during the PT days. Merch is now approaching levels seen during the long hiatus of the first decade of the millennium. Hasbro toy sales are a good slice of overall merchandise and a reasonable proxy for the whole. They averaged $211 million annually (at 18-20% royalty rate) from 2009-2014. Sales doubled in 2014 with TFA then fell 40% with RO instead. Hasbro's SW sales fell further with the reaction to TLJ. Even in nominal terms, SW toy sales having grown in over a decade. When inflation is considered, sales have shrunk.
In summary, Disney faces years of losses in streaming which is cannibalizing profitable DVD, cable and Netflix distribution deals. The movies are seeing a decline in popularity - dramatically so if measuring tickets sold rather than nominal dollars. Merchandise isn't growing and may be shrinking. On current pace, SW is a fading franchise; granted it's faltering from once stratospherice levels. The Mandalorian can help to address the decline in merchandise. Nothing other than massive and rapid subscriber growth can fix the streaming video losses in the short run. But to recapture the public imagination and gain a new generation of fans, Disney has to fix the movie franchise which can appeal beyond their paywall. They've managed that once in 5 movies but the toy sales falling right back to where they were when no movies were being made tells me that the success of TFA has not translated into a permanent appeal.
