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A look at how acquisitions have helped Disney’s Studio Entertainment business

It’s no secret that the Walt Disney Company (NYSE: DIS) makes some of the best movies and they all have a loyal fan base. The company’s movie production comes under the Studio Entertainment segment, which comprises three divisions – theatrical distribution, home entertainment, and TV/SVOD distribution and other.

In the time period from 2006 to 2012, Disney made what can be called its best acquisitions – Pixar, Marvel and Lucasfilm. These three companies are behind some of the most popular movies of all time, including Toy Story, The Avengers and Star Wars. Let’s take a look at how Disney’s Studio Entertainment business has fared in the years after all the aforementioned firms joined the Mouse House.

Disney's Studio Entertainment revenue growth by year from 2012-2018

In the years from 2013 to 2018, the Studio Entertainment business has seen revenues grow steadily except for 2017, which saw a decline of 11%. These increases were helped by higher theatrical distribution revenues. Theatrical revenues grew 30% in 2014 thanks to Frozen.

During this six-year period, Studio revenues saw the highest growth at 28% in 2016. This was driven by a 58% increase in theatrical distribution revenue, fuelled by releases like Star Wars: The Force Awakens, Captain America: Civil War, Finding Dory, Zootopia and The Jungle Book. Of these, Star Wars, Captain America and Finding Dory came from Disney’s acquired assets Pixar, Marvel and Lucasfilm. The ‘Force’ is quite evident here.

Yearly revenue growth of Disney's Studio Entertainment divisions from 2012-2018

The drop in Studio revenues in 2017 was simply because Rogue One: A Star Wars Story could not match up to its predecessor and there was one Pixar release as opposed to two in the previous year. Two Marvel titles helped to partially offset these decreases. In 2018, theatrical distribution revenues jumped 48%, aided by the release of four Marvel titles.

The home entertainment division has remained weak through most of this period with the exception of 2014 and 2016, in which the unit saw revenue increases of 20% and 17% respectively. As mentioned before, these were the years in which some of the highest-grossing films were released.

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In the most recently reported quarter, Studio Entertainment revenues rose 33% to $3.8 billion. Theatrical distribution revenue results were driven higher by releases like Avengers: Endgame, Aladdin, Captain Marvel and Toy Story 4.

Disney had some strong releases this year and has some more coming up like Frozen 2 and Maleficient: Mistress of Evil. It can be assumed that Disney will see some strong revenue growth in 2019 continuing its winning streak.

Disney’s shares have gained 17% thus far this year and over 10% in the trailing 12 months.

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