Disney will take a $1.5 billion write-down in the third quarter as a result of last week’s removal of about 50 original movie and show titles from Disney + and Hulu .
Last month, in Disney ‘s earnings call , CFO Christine McCarthy said the company expected to take a $1.5 to $1.8 billion writedown in the June quarter for the removal of content from its entertainment platforms . stream.
By devaluing the value of content assets, Disney can eliminate them from its balance sheet and reduce its tax burden.
In an SEC filing on Friday , the company said:
As previously announced, The Walt Disney Company (together with the subsidiaries through which its various businesses are conducted, the “Company”) is revising content, primarily on its direct-to-consumer services (“DTC”), to align with a strategic shift in approach to content curation and as a result, is removing some content from its platforms.
On May 26, 2023, the Company removed certain produced content from its DTC services. Accordingly, the Company will post an impairment charge of $1.5 billion in its fiscal third quarter financial statements to adjust the carrying amount of these content assets to fair value.
More removals to come
In the filing, Disney said it is continuing to review DTC content and expects more content to be removed in the fiscal third quarter, resulting in a write-down of up to approximately $400 million.
The Company is continuing its review and currently expects other generated content to be removed from its DTC and other platforms, largely during the remainder of the fiscal third quarter.
As a result, the Company currently estimates that it may incur additional impairment charges of up to approximately $0.4 billion related to the content generated. The Company does not anticipate significant cash expenditures in connection with the write-down charges related to the generated content.
In addition, the Company may terminate certain license agreements for the right to use content on its platforms, which would result in the removal of the licensed content from its platforms and result in depreciation and/or termination fees, as well as payments in cash.
The Company currently anticipates that such charges and payments relating to licensed content will be significantly less than the impairment charges relating to generated content.