Disney's profits plummet as coronavirus keeps its core businesses flailing
A year ago this month Disney was riding high as it revealed it had racked up nearly $70 billion in revenue and $15 billion in operating income for fiscal 2019 while also celebrating the launch of Disney Plus.
On Thursday, the company announced darker news for 2020: amid the coronavirus, it saw operating income drop 45% for the year to just $8.1 billion, and a whopping 82% for the fourth quarter to just $600 million. Once taxes are factored in, the company lost $700 million during the quarter, which encompassed the July-September period.
The company has been battered by the pandemic, which has kept it from attracting large numbers to its theme parks and from opening new movies in theaters. Both realms are usually very popular in the summer.
Disney did disclose that it now had 73 million global subscribers to Disney Plus, making the streaming service a juggernaut in its first 12 months of operation. And there were other silver linings: Revenue for the quarter of $14.7 billion were higher than analysts' forecasts of around $14 billion, while its loss per share was about 20 cents compared to expectations of 70 cents.
But the revenue figure was still down 23% compared to 2019. And once all expenses and taxes are included, the company lost about $700 million in the quarter after running in the black many previous summers (in 2019, it took in nearly $800 million once expenses and taxes were factored in).
In response to the challenges, the company has sought to tighten its belt. It laid off 300 workers from ESPN earlier this week and has also drastically pared down the number of employees at theme parks.
Disney Plus has been a platform for a number of social media hits, including "The Mandalorian," whose new season came out last month. The company is aiming to release at least one piece of major content each quarter, with the Pixar original "Soul" coming in December. On Thursday, Disney announced "WandaVision," the service's first Marvel series, will be released on the platform in January.
But Disney Plus' success is tempered by the investment costs associated with it. A MoffettNathanson report says the division could lose $2 billion each this year and next; Disney had acknowledged it won't be profitable until 2024.
The company also did not reveal numbers for "Mulan," which cost Plus subscribers $30 to watch. Disney Chief Executive Bob Chapek said the experiment was successful enough in the company's eyes that it could well be repeated with other movies.
"We saw enough very positive results," he said, "to know we've got something here in terms of the premiere access strategy. He added, "What we've learned from Mulan is there will be a role for it strategically with our portfolio of offerings."
Disney has been battered by a host of coronavirus factors, including the closure of movie theaters in many states, forcing it to shift much of its movies to 2021. Disneyland remains closed as California Gov. Gavin Newsom has maintained strict reopening requirements. Walt Disney World in Florida is open, but executives have acknowledged business has been slower than anticipated.
Chapek attempted to put a good spin on the news. "Even with the disruption caused by COVID-19, we've been able to effectively manage our businesses while also taking bold, deliberate steps to position our company for greater long-term growth," he said in a statement.
But in a call, he also acknowledged the difficulties in theme parks and pointed the finger at Newsom.
"We are extremely disappointed that the state of California continues to keep our theme parks closed despite our proven track record," he said, as he referred to re-openings in Florida and Asia. "We believe state leadership should look objectively at what we've achieved. . .as opposed to setting an arbitrary standard."
