Mon, December 06, 2021

in-focus

With theaters and theme parks hit hard, Disney revenue fell 22% over the holidays


The coronavirus continued to hammer Disney in the final months of 2020, with the company's revenue dropping 22% over the holiday period while it eked out a much smaller profit than usual.

For the entertainment giant's first quarter, which runs from October through December, Disney saw revenue go from $20.9 billion in 2019 to $16.3 billion in the same period in 2020, as coronavirus shutdowns and consumer caution cut attendance at movie theaters and Disney theme parks, the company said Thursday.

The revenue - which comes heavily from advertising, merchandise, TV and digital subscriptions - is slightly better than the $15.9 billion many analysts expected. The company did make money, but by a much reduced margin: its operating income plunged from $4 billion in 2019 to just $1.3 billion in 2020, a drop of 67%. Once taxes are factored in, the company's profit stood at just $29 million, after topping $2.1 billion in the same quarter a year earlier.

The Disney Plus streaming service was a bright spot, however. The company said that as 2021 began the service had reached 95 million subscribers, up from the 86.8 million it cited at an investor day in mid-December.

The unit is not expected to be profitable for several years. But investors are watching the subscriber number closely as Disney looks to tighten its hold on the streaming market as a solid No. 2 behind Netflix, which has about 200 million global subscribers. (Disney also has an additional 40 million Hulu subscribers and 12 million ESPN Plus subscribers.)

In fact, Wall Street does not seem much concerned with the impact of the virus, preferring instead to focus on the streaming growth. Buoyed by ongoing enthusiasm for those services, Disney's stock closed Thursday at a record high of $191, up 58% since the beginning of November. The share price rose an additional 2% in afterhours trading after the new figures were released.

The news for the rest of the company, however, was bleaker. The earnings followed a familiar trend for 2020: Disney posted an 82% drop in operating income in the previous quarter ending in September,

The firm has been hit hard by the closure of most of its theme-park attractions in Southern California and reduced capacity and attendance in Florida. During the most recent quarter, revenue at Disney theme parks dropped 53%, from $7.6 billion a year ago to $3.6 billion in 2020, while the company lost $120 million at the division after posting a gain exceeding $2 billion the year previous.

Executives noted an "estimated detriment of approximately $2.6 billion at the Disney parks" due to the virus - that is, operating income would have been that much higher without the lockdowns and capacity restrictions. Theme park losses are slowing somewhat, going from $2 billion in the spring to $1 billion in the summer to the $120 million this quarter, thanks both to reopenings and, of course, cost-cutting. The company also hopes the re-opening of California Adventure in April could provide a boost.

Asked on an investor call about the forecast for theme parks, Disney chief executive Bob Chapek said it will be "determined by the rate of vaccinations...We have ample demand despite everything that's happening with the pandemic."

Due to an internal reorganization, the company did not break out results for its studio division. But that, too, has been hit hard as movie theaters remain largely closed and most big releases stay on shelves or are moved to streaming, as Pixar release "Soul" was at Christmas. In 2019, Disney posted revenue of nearly $4 billion at its studio, driven by hits such as "Frozen II" and "Star Wars: The Rise of Skywalker."

It remains uncertain when Disney will bring its movies back to theaters. One of the next major releases, the Marvel film "Black Widow," is scheduled for May after being postponed a year by the pandemic. Chapek said the company is "still intending it to be theatrical but we're going to be watching very carefully" to determine whether it might move to a streaming platform. He did not suggest a further postponement was likely.

Disney canceled its dividend in the second half of 2020 as its finances remained under pressure. Executive chair Bob Iger saw his annual compensation package go from $47 million to $21 million last year, while Chapek took in $14.2 million for the year.

The results come exactly a year after Chapek took over from Iger after the latter surprisingly stepped down. The waters quickly turned choppy after that as the virus spread around the world.

Published : February 12, 2021

By : The Washington Post Steven Zeitchik