Disney (DIS. US) handed over a financial report superior to its competitor Netflix (NFlx. US) after US stock market trading on May 11 (Wednesday). According to the financial report data, as of the second quarter of fiscal year 2022, that is, the end of the first quarter of Gregorian calendar 2022, Disney's operating revenue was US $19.249 billion, a year-on-year increase of 23%. Disney CEO chapek attributed his outstanding performance to the continuous recovery of offline businesses such as theme parks and the popularity of streaming media business. Specifically, in terms of subscription user data of streaming media platform, unlike the first reduction in the number of members in Netflix in the first quarter of 2002 for the first time in a decade, "Disney +" global paid users increased by 7.9 million month on month, 76% higher than the 4.5 million expected by analysts. By the end of the quarter, the total number of streaming media subscribers under all Disney brands had reached 137.7 million, also higher than the 135 million expected by analysts. However, despite the substantial growth in revenue, it did not meet market expectations. Previously, analysts predicted that Disney's revenue would reach $20.03 billion this quarter. Not only did the revenue fail to meet the growth expectation, Disney increased revenue without increasing profit this quarter, and the net profit fell sharply. Data show that Disney's net profit from continuing operations fell 48% year-on-year, from $912 million last year to $470 million, almost halving. Disney shares fell to a two-year low of $99.5 on May 12. As of the closing of US stocks on May 13, Beijing time, Disney closed at US $104.31/share, with a total market value of US $189.9 billion, continuing the downward trend of volatility since this year. Compared with the highest value of $156.35 per share of Disney stock this year, it has fallen by more than 35%. Figure / Disney share price trend Source / screenshot of tiger securities It can be seen from the financial report data that the sharp decline in net profit is mainly due to the fact that the member income of streaming media business is difficult to offset the huge expenditure, which also expanded the operating loss of streaming media from US $290 million to US $887 million. Therefore, in March this year, Disney and Netflix announced a business model that they had previously despised - the introduction of advertising in streaming media. Obviously, in order to make profits, Disney's streaming media business is also trying to move closer to the "aiyouteng" model. However, from the current situation of "aiyouteng" and Netflix, advertising may not bring more profit support to Disney. In other words, for global streaming media, the profit dilemma is still difficult to solve. Theme parks continued to double in growth From the financial report data, Disney's performance is more prominent. At the specific business level, Disney's performance in theme parks, experience and products and services can be described as quite gratifying. Due to the slowdown of the epidemic, after the revenue growth of the business doubled in the last fiscal quarter, the offline business segment with theme parks and cruise ships as the core still maintained a revenue growth of more than 100% in the second quarter of fiscal 2022, from US $3.173 billion to US $6.652 billion, approaching the revenue of US $7.6 billion in the fourth quarter before the epidemic in 2019, and the operating profit also changed from a loss of US $587 million to a profit of US $1.385 billion. Figure / year-on-year growth of Disneyland business Source / screenshot It is mentioned in the financial report that in fiscal year 2022, Disney's theme park and experience related businesses have been greatly reduced by the COVID-19. Especially in the United States, the relaxation of passenger flow restrictions has greatly increased the popularity of theme parks, hotels and restaurants. However, the financial report also mentioned that internationally, the growth of theme parks and experience related businesses is relatively slow. The financial report pointed out that in the quarter, the business related to theme parks in the United States increased by 182.3%, higher than 119% in the world. Moreover, Disneyland Paris was fully opened in the first quarter of this year, which brought a significant increase in revenue compared with the suspension in the fourth quarter of last year. However, Shanghai Disneyland and Hong Kong Disneyland were only open for 78 days and 3 days respectively in this fiscal quarter. Most of the time, they were in the situation of sparse passenger flow or complete shutdown, which affected the growth of revenue in the international market. Disney said in the financial report meeting that the closure of Asian theme parks (including Hong Kong and Shanghai) directly led to a decrease of $350 million in its operating profit in the latest quarter. However, after inquiring about the financial performance of Hong Kong Disney, fuel finance found that in 2021, the annual financial revenue of Hong Kong Disney increased by 19% to HK $1.7 billion, but the net loss was still as high as HK $2.4 billion. Before that, Hong Kong Disneyland had lost money for six years. It is not difficult to see that the epidemic is not the main reason for the loss of the park. In other words, its own business model has difficulties or is more worthy of Disney's reflection. In terms of cruise business, although its current operation still faces the restriction of passenger flow, it has made considerable progress compared with the complete shutdown in the same period last year. Admittedly, although Disney's offline business has not recovered before the epidemic, Li Dongdong, the founder of science fiction fan community, "geek film" and a senior user of streaming media in North America, believes that with the control of the epidemic, Disney's most profitable paradise business will improve for a long time. The recurrence of the epidemic situation in some regions will not affect the bright performance of its offline business in 2019. At the same time, it can also have better linkage with the group's online business. The growth rate of streaming media subscribers exceeded expectations, but the loss expanded Revenue growth is not just theme parks, experience and products and services. According to the financial report data, Disney's revenue in the media entertainment and distribution business increased to $13.62 billion from $12.44 billion in the same period last year. Disney said in the financial report that this was mainly due to the 23% revenue growth of the streaming media business. In addition to streaming media business, this section business also includes cable TV business and content sales and authorization business. In fiscal year 2022, the wired network business increased by 5% year-on-year, with little difference compared with last year. However, in terms of online authorization in content sales and authorization business, it decreased by 3% year-on-year to $1.9 billion in the current fiscal quarter. This also became one of the reasons why its total revenue in the current fiscal quarter was lower than analysts' expectations. This quarter, analysts expected Disney's performance to be $20.03 billion, while its actual revenue was $19.249 billion. "The early termination of an external content authorization reduced its due revenue by $1 billion this quarter," the financial report said Figure / early termination of copyright authorization Source / screenshot In fact, it is not only Disney, but also a number of American streaming media, including Netflix, Amazon, apple and HBO, that terminate the authorization of their own content to other platforms in advance, which is a frequent action in the past two years. It is reported that in 2020, when the contract of friends produced by Netflix and Warner Bros. expired, Warner Bros. withdrew the copyright of friends and exclusively transferred it to its platform HBO. Despite losing a staggering $1 billion a year, Warner Bros. no longer makes wedding clothes for others. The practice of blood transfusion for its own streaming media has also become the path chosen by Apple TV and Disney. They have successively terminated content or partial licensing with Netflix. Because of this, since the start of the North American streaming media war in 2020, Netflix, which originally relied on the dual advantages of its own content and copyright content to attract subscribers, has gradually lost the content moat. In the short term, although Disney terminated the content authorization with other platforms in advance, it did lose part of the copyright income. However, as one of the players of the emerging platform, rather than just the content provider, Disney's way of food shortage may play a role in brutally attacking other platforms. Another noteworthy data in Disney's quarterly financial report comes from Disney's "Disney +". According to the financial report data, "Disney +" global paying users increased by 7.9 million month on month, 76% higher than the 4.5 million growth expected by analysts, and better than the decline of Netflix 2 million users. For this change trend, Zhang Yi, founder of AI media consulting, said that on the one hand, Netflix has fallen into the bottleneck of user growth due to continuous development and growth in the global market, but Netflix has occupied a high position in the market in the field of streaming media. On the other hand, "Disney +" has only been launched for two and a half years. It is still in the upward stage of the product life cycle and has not reached the peak. It has great market development potential. In addition, in terms of the moat of the content, Li Dongdong said that although Netflix has strong self-control ability, the opening of new projects is always limited due to the excessive funds spent on hematopoiesis. However, Disney has a big family and a big business. Its solid content library has accumulated heavy plays of IP such as "Marvel" and "Star Wars" and animation content of family fun, which naturally reserves more content. Therefore, it has a continuous advantage in user innovation. It is worth noting that the earnings conference also mentioned that the new "Moonlight Knight" series of Marvel Comics and the film "youth Metamorphosis" produced by Pixar this quarter have promoted the growth of users of the "Disney +" platform. Netflix didn't have a hot money like "squid game" in this fiscal quarter. In addition, the advantage of the game between Disney and Netflix lies in the price. Although Netflix has previously adjusted the price reduction in emerging markets, such as the 60% price reduction in the Indian market, which has been as low as US $2.62/month, the price of "Disney +" hotstar (originally Indian streaming media) as low as US $1.03/month is obviously slightly better. In addition, in terms of local entry subscription fee, the price of the former is US $9.99/month and the latter is US $7.99/month. Disney still has obvious advantages. But for Disney streaming media, the price advantage also means the dilemma of profit. In the case that long video platforms are crazy about investing in self-made content to consolidate their own IP library, Disney has also invested a lot of money in content production. Figure / Disney's streaming media loss expanded by more than 100% year-on-year Source / screenshot Specifically, in this fiscal quarter, the expenditure growth of Disney's streaming media "Disney +" and Hulu in production, production, marketing and technology was significantly greater than the revenue growth brought by subscribers, resulting in an operating loss of US $887 million, an increase of more than 100% year-on-year. It is worth noting that Disney also said that this year, its investment in streaming media content will reach $11 billion, accounting for almost half of the film and television production budget of more than $26 billion. Can advertising save "Disney +"? Under the fierce competition, the high price content expenditure of streaming media has become a reality that is difficult to change. But even so, the profit dilemma of streaming media still needs to be resolved. Limiting shared accounts may become one of the ways for giants to open source. Netflix mentioned in its earnings report last quarter that its legacy of "account sharing" has lost a lot of revenue, which will be rectified in the future. In the same way, Disney + can now share accounts with 7 people. After large-scale innovation, it can reduce the ratio of shared accounts, so as to improve users' ARPU. In addition, developing new business models is also a new attempt of Disney. Although in the earnings meeting, CEO chapek explained that high-quality content will promote the growth of paid subscribers, and the growth of subscribers will improve profitability. For this reason, Disney has also repeatedly mentioned that "it will try to launch 'Disney +' subscription content interspersed with advertisements in the second half of this year, so as to