For months it's been clear that Disney, the US's most prominent entertainment company, was facing a financial disaster unlike any in its history.
On Tuesday (US time), it became evident just how deep the carnage has gone.
Disney's numbers have been hammered by the coronavirus.Credit:AP
The company revealed that as a result of the coronavirus pandemic it took in just $US11.8 billion ($16.5 billion) in revenue and $US1 billion in operating income in the three-month period that ended in June, the height of lockdowns in the country. The numbers are a significant drop from the same period a year ago, when it generated $US20.25 billion in revenue and $US4 billion in operating income, and among the worst slides of the modern era.
The earnings report for the fiscal third-quarter gave numeric form to what had been the sense of many in the entertainment and financial communities: Disney, once the high-flying giant of Hollywood, has been brought low by the virus, its creations often unable to be produced or consumed.
Also Tuesday, the company said it would move Mulan, the action-adventure reboot that has been delayed several times since its March opening, to an unusual hybrid approach.
The movie will now be on Disney Plus in the US beginning September 4 at a rental cost of $US29.99. The same pattern will follow in Canada, Australia and some of Western Europe. In countries where Disney Plus is not offered or theatres are widely open, the movie will go to theatres. This will likely include China, where the movie is expected to generate a large percentage of its box office.
Disney is opting to split its release pattern as the US lags behind other countries in reopening plans in the wake of COVID-19 surges. Disney executives acknowledged how uncommon the tack was but called it a necessary exception at this moment.
The pandemic has "forced us to consider different approaches and look for new opportunities," chief executive Bob Chapek said in an analyst call.
Disney's $US11.78 billion in revenue in the quarter was lower than the $US12.37 billion many analysts expected, though earnings-per-share of 8 cents was above the 64-cent loss many forecast.
The company saw major revenue drops in several key categories compared to 2019.
Theme parks saw a plummet from $US6.58 billion to $US983 million, a plunge of 85 per cent. No American or European park was open in the quarter, while parks in Shanghai and Hong Kong reopened only midway during the period.
Mulan will soon be available on Disney Plus. Credit:AP
Its studio, which did not release any major new movies to theatres, saw revenue drop from $US3.8 billion during the quarter last year to $US1.74 billion this year, a slide of 55 per cent.
Its TV unit, however, was able to hold the line, as revenue stayed mostly flat at $US6.6 billion compared to $US6.7 billion last year, with many advertisers already paid up through the quarter. Harsher effects could be felt in the months ahead with the lack of new shows and a slowdown in the ad-sales market.
One of the rare bright spots in the quarter was Disney Plus, the streaming service the company launched in November. Disney executives said on a conference call it now has 60.5 million subscribers worldwide after moving a number of previously theatrical movies to the service, most notably "Hamilton" on July 4 weekend. The service is growing faster than many analysts expected, reaching 54.5 million in May and adding six million subscribers since.
The direct-to-consumer division, of which Plus is a part, saw revenue tick up slightly, by 2 per cent, from $US3.88 billion in the same quarter in 2019 to $US3.97 billion in 2020.
Still, with investment costs high, the company does not expect profitability from Disney Plus for several more years, and the direct-to-consumer division saw a loss of $US706 million in the quarter, 26 per cent more than last year.
The company's stock price has not dropped during the pandemic, as bargain-hunters and long-term investors have sent the price up more than 20 per cent since lockdowns began in mid-March. But some analysts expect the bleak quarterly numbers to prompt a sell-off.
Both Chapek and executive chairman Bob Iger face significant headwinds in the months ahead. Any hope of a Disney comeback in the last six months of 2020 will turn on several factors related to the pandemic: Whether sports, particularly the NBA and Major League Baseball, can continue uninterrupted and bring much-needed revenue to ESPN; whether prime-time shows can begin shooting to ensure a reasonable start to the broadcast-network fall season; and whether enough theatres can reopen in the US and around the world to begin collecting box office revenue.
While Mulan will not be in US theatres, Disney has high hopes for November, when it has Pixar's Soul and Marvel's Black Widow scheduled to open.
Disneyland will also need to reopen if the company wishes to restore its theme parks to its past glory; the park remains closed under California orders. The parks are key to Disney's financial fortunes: with $US6.76 billion in operating income last fiscal year, the division was the most profitable of any unit besides television.
The Washington Post