Parsing Disney's Annual Report

10-K forms (annual reports) filed with the U.S. Securities and Exchange Commission provide useful information about a firm’s prospects and threats, though we might also quip that 10-Ks also contain lots of statements related to business risk that collectively (and playfully on the part of the reader) suggest the firm faces steep obstacles.

It still is notable, in that sense, that Disney’s latest 10-K contains a discussion about content “misalignment.”

“We face risks relating to misalignment with public and consumer tastes and preferences for entertainment, travel and consumer products, which impact demand for our entertainment offerings and products and the profitability of any of our businesses,” the report states.

In a broad sense, that simply speaks to the unpredictability of content production. Story-telling is an art, not a science, so consumer tastes and preferences often are unpredictable. That is why some movies and shows do well, while others do not.

In the same vein, the cautionary statements about changes in economic conditions, technology or security and intellectual property rights might seem obvious. So too, “uncontrollable events such as the Covid epidemic, regulations, execution risks or competition.

Ths list of such dangers typically is quite extensive, as Disney’s is, so we should not read too much into such clauses.

Still, some will likely interpret the wording about misalignment as more than standard descriptions of business risk. The report also notes that “consumers’ perceptions of our position on matters of public interest, including our efforts to achieve certain of our environmental and social goals, often differ widely and present risks to our reputation and brands."

In other words, the big push for corporate activism might have hit a wall. We’ll have to look for other evidence of a public backlash to the “social activist agenda.” I don’t know that I’ve ever read a similar statement in any annual report.

The reasons for Disney's misalignment with public tastes and preferences arguably are complex. Some argue that the company has become too focused on producing sequels, remakes, and franchises, at the expense of original stories.

Others argue that Disney has lost touch with its core audience of children and families. Still others argue that Disney is simply not producing enough high-quality content overall. But some argue Disney content has suffered because it also has an activist agenda out of step with much of its intended audience.