Disney listed 6 updates to their risk factors in their latest 10-Q. Companies are required to update the risk factors in a 10-Q when one of them materially changes in the operating quarter. This is not a complete list of risk factors, just a list of items that Disney felt needed updating based on the current environment.

1. “Changes in technology, in consumer consumption patterns and in how entertainment products are created affect demand for our entertainment products, the revenue we can generate from these products or the cost of producing or distributing products.”

Cord cutting and streaming reduced the revenue from cable subscribers to products like ESPN. They responded to this challenge by offering direct to consumer products like Disney+ and hulu. Both services are currently unprofitable.

2. The success of our businesses is highly dependent on the existence and maintenance of intellectual property rights in the entertainment products and services we create.

In the US copyrights expire at the end of the 95th year after the original copyrighted date. Disney is so old that some copyrights like Steamboat Willie (1928) will lose copyright protection and become negatively impacted.

3. Regulations applicable to our businesses may impair the profitability of our businesses.

New laws may make it more expensive or illegal to do business in particular areas of the world. For example, in 2019 India implemented regulation and tariffs impacting certain bundling of channels. Also, in 2022 the U.S. and other countries implemented a series of sanctions against Russia in response to events in Russia and Ukraine. The biggest example is obviously the mandatory COVID shutdowns.

4. A variety of uncontrollable events may disrupt our businesses, reduce demand for or consumption of our products and services, impair our ability to provide our products and services or increase the cost or reduce the profitability of providing our products and services.

This is referencing stuff like hurricanes hitting Walt Disney World in Florida or if COVID comes back. They say they have insurance against some of these risks but many things like COVID aren’t insurable.

5. Environmental, social and governance matters and any related reporting obligations may impact our businesses.

This references new climate change regulations that might make it more expensive to operate their parks.

6. Labor disputes may disrupt our operations and adversely affect the profitability of one or more of our businesses.

The writers and SAG-AFTRA strikes have impacted the productions and pipeline for programming and theatrical releases and the resolution of these labor disputes will increase the costs and reduce the profitability of making new content in the future.

Summary

The above risk factors were the ones Disney thinks changed recently and might materially affect profitability. There are plenty of other existing risk factors that might cause Disney to lose money that did not make this list. 

Please keep in mind that profitability does not mean a higher stock price. Stock prices change depending on the demand from buyers and sellers, not the performance of the underlying business.