Like any household with kids, Disney is a big name with our kids. They love Disney movies, characters, and toys.
The other day, both Kid 1.0 and Kid 2.0 asked me if they should invest their gift money in Disney stocks and become Disney shareholders, rather than investing in XEQT, the all-in-one ETF. Their reason? A lot of their school friends talk about Disney and they thought it’d be a good idea to become owners of this well-known company.
“Disney must be making so much money with their movies and theme parks.”
“My friends went to Disneyland for Christmas and it cost so much money,” both kids stated.
As an investor and a personal finance blogger, I really enjoyed both kids asking investing related questions, because these questions forced me to simplify my explanations. To be perfectly honest, I have a tendency to over complicate my explanations, since I like to use lots of numbers to back up my explanations…
On a not-unrelated note, I guess Mrs. T and I are doing something right and that I have not failed as a father…
So what did I answer my kids? Should they buy some Disney stock shares?
Should I consider investing in Disney?
For this analysis, I kept it as simple as possible, since I was explaining to my kids whether or not they should invest in Disney stocks and become shareowners.
Essentially, I went with a 30,000 foot view type of explanation rather than getting into the nitty gritty and all the different financial numbers.
With that in mind, let’s take a look at how I answered this question from my kids.
Are recent Disney movies any good?
For those of you that aren’t familiar with Disney, the Walt Disney Company owns many different business assets. Film production Companies like Walt Disney Pictures, Walt Disney Animation Studios, Pixar, Marvel Studios, Lucasfilm, 20th Century Studios, and Searchlight Pictures are under the Walt Disney Studios division. Each of these companies makes and distributes films.
Since a big part of the Disney business is making movies, I asked both kids if they liked Disney movies that we watched recently.
- Star Wars: The Rise of Skywalker – both kids thought the movie was nowhere as good as the original Star Wars trilogy
- Ron’s Gone Wrong – enjoyed the movie and thought it was funny
- Diary of a Wimpy Kid – didn’t like it, they liked the non-animated version better
- Soul – didn’t like it although both Mrs. T and I enjoyed watching it
- Luca – enjoyed the movie but wouldn’t watch it again
- Turning Red – it was funny but thought other Pixar movies were better
- Onward– both kids thought it was a great movie.
- Chip ‘n Dale: Rescue Rangers – thought it was a silly movie but didn’t love it
- The One and Only Ivan – liked the movie
- Frozen II – both liked the movie but thought the first one was way better
- Toy Story 4 – it was OK, liked the first three better
- Ralph Breaks the Internet – loved the movie
Other non-kids movies that Mrs. T and I watched and our thoughts:
- The King’s Man – meh, it was OK. The previous two King’s Man movies were way better
- Death on the Nile – A decent movie, but wouldn’t watch it in the theatre though
- Prey – Not a great movie.
- Obi-Wan Kenobi – we both liked it, loved how the Obi-Wan Kenobi series filled in the gaps between the first and second trilogy.
- Black Widow – meh, that’s all I got to say.
- Shang-Chin and the Legend of the Ten Rings – The movie was great until toward the end. The end was completely silly and ruined the story.
- Eternals – What a waste of time
- Spider-Man: No Way Home – we both liked it a lot
- Doctor Strange in the Multiverse of Madness – the story was weak and I only watched it on the plane because I had to kill time
- Thor: Love and Thunder – the other Thor movies were way better. The storyline was a meh
- Black Panther: Wankanda Forever – the movie was OK but both Mrs. T and I felt that the majority of the Marvel movies that came out after Avengers: Endgame were not as good.
- Cruella – an enjoyable movie, mostly because of Emma Stone’s strong performance
Then for the million dollars questions – would you pay $15 to watch the movie at the theatre? I proposed the question to both kids.
For the most part, they wouldn’t spend $15 to watch these Disney movies at the theatre. They’d rather watch them at home via streaming or borrow DVDs from the library. The only movies they’d consider watching at the theatre were “Frozen II” and” Ralph Breaks the Internet.”
For Mrs. T and I, we both feel that 99% of the recent Marvel movies (released after Avengers: Endgame) sucked big time. The stories were weak and the studio was simply trying too hard to tie all the movies together to create the next chapter for Marvel movies. The only one that was really worth watching at the theatre was Spider-Man: No Way Home. We certainly wouldn’t spend $15 and go out of our way to watch movies like “Eternals,” “The King’s Man,” or “Black Widow”.
Do you need Disney+?
Next, I wondered about Disney+ streaming service. Disney+ is facing a lot of competition in this space, such as Netflix, Apple TV+, and Amazon’s Prime Video. Do people actually feel the need for Disney+ when they’re already paying for another streaming service?
When we were in Denmark for Christmas, Mrs. T’s parents had Netflix, so we let both kids watch kids’ shows and movies on Netflix occasionally. Most of the time they were able to find shows or movies that they wanted to watch right away. From time to time, it might take five minutes for them to decide. Overall, they both seemed satisfied with the content Netflix had.
So I asked them – did they feel that they were missing out with only Netflix in Denmark and wanted to watch Disney movies? Or was Netflix content sufficient?
Unsurprisingly, they both told me that they were happy with the Netflix content. To them, paying extra money just to be able to watch some Disney movies and shows was not worth it.
Based on this answer, I assumed many families across the world end up with the same conclusion – if they had to pick a streaming service, they probably would pick Netflix over Disney+. This is probably one of the reasons why Netflix has a subscriber base of 230.75 million while Disney+ only has a subscriber base of 161.8 million (~30% less).
In addition, I asked both kids how much it would cost to make movies and shows. They were shocked to learn that “Frozen II” cost $150 million to make, “Toy Story 4” cost $200 million to produce, and “Thor: Love and Thunder” cost $250 million to make.
Sure, “Frozen II” and “Toy Story 4” both made billions at the box office and “Thor: Love and Thunder” made over $760 million, but whichever way you slice it, it costs a lot of money to make movies and shows and the investment doesn’t always pay off. Furthermore, there are movies like “Black Widow” that cost millions to make but only made a small profit.
Would you go to Disneyland or Universal Studio?
We all know Disney makes a lot of money from their theme parks around the world. So I asked both kids – would you rather go to Disneyland or Universal Studio? I explained to them that Disneyland had characters and rides from Disney, Star Wars, and Marvel while Universal Studio had Harry Potter rides.
To my surprise, both kids preferred Universal Studio because they really really love Harry Potter.
Kid 1.0 also told me that his friends that went to Disneyland all ended up waiting in line for a long time and it was not all that much fun.
Does Disney pay dividends?
Since we talk about dividends a lot at home, both kids asked if Disney pays any dividends. Both of them seemed to understand the value of having your money working hard for you, getting regular pay cheques, and reinvesting the money to maximize the power of compounding.
They were both disappointed to learn that Disney only started paying dividends in late 2011 and stopped paying dividends in December 2019. Furthermore, the historical yield was less than 1.6% so the dividend payment amounts were low relative to the amount of money invested.
Did my kids invest in Disney?
So, did my kids invest in Disney? Based on the four questions I asked them, they decided that it was not worth it to invest in Disney shares. They decided they were better off investing in XEQT and owning a small portion of many different valuable companies.
I was very pleased with their decision because I believe it was the correct decision.
From a macro level, I think Disney is facing more and more challenges in all of their businesses. It costs a lot of money to make new content and all the new movies and shows don’t always pay off.
Other streaming competitors like Netflix, Apple, and Amazon are pumping billions into creating great content so Disney’s so called “monopoly” on great content just isn’t there anymore.
While theme parks are excellent revenue generators for Disney, the theme parks are getting too expensive for budget-conscious families, especially since many families are struggling to keep up with the increasing cost due to high inflation.
If I were a Disney shareholder today, I’d be worried.
Dear readers, would you invest in Disney now? Are you a Disney shareholder?