Is Selling Churros a Better Business for Disney Than Streaming?

Author

Michael Beach
May 30, 2024

Setting the table: Recently, I was listening to Ben Thompson’s podcast (Stratechery).  He was interviewing Matthew Belloni (Puck/The Town), and they had the following back and forth.

MB: I spent $6 on a churro two weekends ago with my kid at Disneyland, so I know exactly what their real world businesses are like.

BT: You’re contributing more with your churro to the future of Disney streaming services than your actual subscription fees.

MB: That churro could not have cost more than 50 cents to produce and ship and heat up and put in my hand.

Why this matters: I began to wonder if selling churros (currently) is a better business for Disney than streaming.

Five big questions re: churro sales at Disneyland:1) How much revenue and profit does Disney generate annually from churros?2) How much revenue and profit does Disney generate annually from streaming?3) What revenue and profit share comes from theme parks vs. streaming?4) Is selling churros currently a better business for Disney than streaming?5) Which is a better business in the long term?

Big question #1: How much revenue and profit does Disney generate annually from churros?

Quick answer: $35M in total revenue and $32M in gross profit.

Quick math for annual churro sales at Disney theme parks:
1) 4.4M churros sold in 2018
2) 32% assumption for sales increase
3) 5.8M churros sold in 2023
4) $6 sales price per churro
5) $35M in churro revenue for 2023
6) 17M visit Disney theme parks each year
7) 34% (1 out of 3) of visitors buy a churro
8) $0.60 to produce (COGS) 1 churro
9) 90% profit margin
10) $32M in gross profit from churros

Wow: The churro stand outside Haunted Mansion does so much business it needs a queue line.

Quick math for the churro booth near Haunted Mansion:
1) Open 10 hours/day
2) $6 sales price per churro
3) 100 churros sold/hour
4) $600 in revenue/hour
5) $6K in revenue/day
6) $180K in revenue/month
7) $2.2M in revenue/year
8) $1.9M in gross profit/year

Big question #2: How much revenue and profit does Disney generate annually from streaming?

Quick answer: $20.6B in total revenue and –$1.7B in gross profit.

Big question #3: What revenue and profit share comes from theme parks vs. streaming?

Quick answer: Theme parks account for 48% of total revenue and 72% of profit.  Streaming accounts for 29% of total revenue and 0% (loss) of profit.

Big question #4: Is selling churros currently a better business for Disney than streaming?

Quick answer: Yes.  Disney’s churro business generated $32M in profit vs. $1.7B in losses for streaming.

Big question #5: Which is a better business in the long term?

Quick answer: Streaming, assuming Disney becomes the second major streamer to find profitability. A profitable streamer at scale will create billions of profit.

Quote from Ben Thompson – Author/Founder @ Stratechery:

“Disney has that. That is what the theme parks can provide, and that’s valuable. It’s also not going to get the same multiples as a media business, where you get massive leverage on your costs and they can spread worldwide. You have to actually build the parks, and the parks are actually capacity-constrained. And so I think there’s just sort of an acceptance, and maybe the nadir they’ve gone through with their stock price is the market accepting that reality, which is, look, it’s not going to be the Disney of old, and that’s fine, they’re going to be having this theme park business, it’s fundamentally a lower ROI business than the old media business, but it’s a real business, and that’s more than you can say for some of their competitors.”

Bottom line: Netflix is the model for a profitable streamer.  Last year, they generated $7B in profit, roughly equivalent to Disney’s annual churro business every 15 hours!!!

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