The Disney earnings and losses news for 3Q2020 are as bad as it gets…..
Last Tuesday, The Walt Disney Company released their earnings report for the 3rd fiscal quarter of 2020 (ending June 30, 2020), showing revenue down 42% and income down 72% over last year for the quarter. Diluted earnings per share decreased 94%.
Chief Executive Officer Bob Chapek said in a written statement:
Despite the ongoing challenges of the pandemic, we’ve continued to build on the incredible success of Disney+ as we grow our global direct-to-consumer businesses. The global reach of our full portfolio of direct-to-consumer services now exceeds an astounding 100 million paid subscriptions — a significant milestone and a reaffirmation of our DTC strategy, which we view as key to the future grown of our company.
Chapek said he is “optimistic about our way forward.”
The impact of the COVID-19 pandemic was $3 billion for the quarter, including a $3.5 billion loss in the parks segment that was off-set by other segments. Chief Financial Officer Christine McCarthy added that in the 4th quarter, not including theme parks, there will be an extra $1 billion in costs due to COVID-19.
McCarthy said that the Walt Disney World theme parks were having a positive net contribution, but that it was lower than they had expected.
Chapek shared that as of August 3rd, Disney+ had 60.5 million paid subscribers. Combined, Disney+, Hulu and ESPN+ have 100 million subscribers.
Chapek celebrated the 145 Primetime Emmy Nominations, 92 of which were produced by the Disney family of studios.
Mulan, which had its theatrical release delayed several times, will be released to theaters and as a premier access offering on Disney+ on September 4th. Disney+ subscribers will be able to enjoy the blockbuster for an additional $29.99.
When asked about the current demand at the Walt Disney World theme parks, Chapek elaborated that initially there were more than enough reservation to fill the parks to socially distanced approved levels, but as COVID-19 rates increased in Florida, they received higher than expected cancellations. Most of those open spots were filled by locals and Annual Passholders, who typically spend less. McCarthy added that per capita spending was still great as locals and Passholders purchased more than usual since it had been awhile since they were in the parks.
When asked to elaborate more about the $29.99 Mulan release on Disney+ and if they’re would be more examples of this strategy, Chapek said they are looking at this as a “one-off,” not a new business model. He commented later that they are using this a learning tool and will watch not only the number of purchases for the film, but also the number of new subscribers to Disney+ the release generates.
Continuing with Disney+, Chapek was asked if the growth in the platform can be sustained with production down. Chapek said that ideas were still flowing for new content and the production will resume. He added that while new content brings in new subscribers, it’s the massive library of content that keeps the subscribers.
When asked about the strategy of using the Star brand in international markets, Chapek said they were mirroring the Disney+ strategy by using their existing content and combining it with a successful international brand. The Star platform is expected to be the same as Disney+.
Diluted earnings per share were down 430% from last year’s 3rd quarter, from $0.79 to a negative $2.61. Revenues for the company were down 42% compared to last last year, from $20.262 billion to $11.779 billion for the quarter. Operating income decreased 72% from $3.952 billion to $1.099 billion for the 3rd quarter.
Parks, Experiences, and Consumer Products: 85% decrease in revenues and 214% drop in operating income for the 3rd quarter.
Direct-to-Consumer and International: 2% growth in revenues and 26% decrease in operating income for the 3rd quarter
Media Networks: 2% decrease in revenues and 48% increase in operating income for the 3rd quarter
Studio Entertainment: 55% drop in revenues and 16% decline in operating income for the 3rd quarter
Parks, Experiences, and Consumer Products
Compared to last year’s 3Q, Parks, Experiences, and Consumer Products saw decline of 85% in revenues, from $6.575 billion to $983 million. For the quarter there was a 214% drop in segment operating income compared to last year’s 3rd quarter, from $1.719 billion to a loss of $1.960 billion.
All domestic parks and resorts, Disneyland Paris, and Disney Cruise Line were closed for the entire quarter. Shanghai Disney Resort reopened in May and Hong Kong Disneyland Resort briefly reopened in late June, but closed again in July. Disneyland is California is still closed. All Disney cruises have been suspended until October 31st.
Disney Stores were also closed most of the quarter as were many other retail locations that would be selling Disney merchandise.
Disney estimates that the COVID-19 pandemic caused a drop of $3.5 billion in operating income in the parks segment.
Revenue at Studio Entertainment was down 55% compared to this quarter last year, from $3.836 billion to $1.738 billion. Operating income declined 16%, from $792 million to $668 million for the quarter compared to last year.
There were no significant titles released to theaters this quarter, compared to Avengers: Endgame, Aladdin, and Dark Phoenix last year.
Source: The Walt Disney Company
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Two Disney Sisters