By R.T. Watson
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (August 5, 2020).
Walt Disney Co. posted its first quarterly loss since 2001,
nearly $5 billion, as the majority of its business segments reeled
from government efforts to corral the coronavirus by shutting down
public spaces around the world.
The Covid-19 pandemic has closed Disney's theme parks, virtually
eliminated movie distribution and curtailed live sports, a key
programming source for Disney TV networks. However, the world's
shut-in nature has helped the company's Disney+ streaming service
secure more than 60 million users in nearly nine months, a mark
that Netflix took about eight years to achieve.
Disney said Tuesday it lost $4.72 billion in the three months
ended June 27, compared with a profit of $1.43 billion in the
year-earlier period. Total revenue fell 42% to $11.8 billion.
The company's prior quarterly loss, amounting to $567 million,
came in early 2001, according to FactSet data.
Investors appeared to be more interested in the strong results
from Disney+, which reported strong subscriber growth and next
month will premiere the long-postponed live-action remake of
"Mulan." Disney shares rose about 5% in after-hours trading
following the earnings release.
The shares have rallied more than 36% from their pandemic low in
late March, according to FactSet, but are still off about 19% this
year.
As expected, Disney's theme-parks business was hit the hardest
in the just-ended fiscal third quarter. The company estimated the
pandemic had a $3.5 billion negative impact on the segment. The
result was a $1.96 billion loss for the business, compared with
$1.72 billion in operating income a year earlier. The company's
domestic parks, resorts, cruise lines and Disneyland Paris were
closed during the entire period. Shanghai Disney Resort and Hong
Kong Disneyland were able to operate for a portion of the
quarter.
"We continue to work with national and local health and
government officials in this very fluid situation and are making
adjustments as necessary," said Disney Chief Executive Bob
Chapek.
Last month's reopening of Walt Disney World theme park in
Orlando, Fla., has so far been disappointing, finance chief
Christine M. McCarthy said Tuesday.
"The upside we are seeing from reopening is less than we
originally expected given the recent surge in Covid-19 cases in
Florida," she said on an earnings conference call. Less than a
month ago, Walt Disney World reopened at reduced capacity and with
heightened safety measures.
Disney postponed plans to open Disneyland in Anaheim, Calif.,
after the state canceled its plan to allow the park to reopen at
limited capacity, amid fears that reopening other public spaces too
soon had caused a resurgence in Covid-19 cases.
Last month in China, the company had to close Hong Kong
Disneyland less than a month after the park reopened as government
officials renewed restrictions on public gatherings amid a fresh
outbreak of cases.
In a bid to adapt to the pandemic's impact, the company said its
big-budget remake of "Mulan," originally slated to open in theaters
this spring and postponed several times since, will now debut as a
premium-priced download on Disney+. Starting early next month, it
will be available for about $30 in the U.S., Canada and several
other major markets. The company said the movie will open in
theaters in markets where cinemas are operating.
Mr. Chapek indicated that it doesn't envision streaming as the
go-to outlet for other big-budget movies in the future.
"We're looking at 'Mulan' as a one-off," the CEO said, adding
that he hoped releasing the movie on its streaming platform would
help attract subscribers.
Disney+ represented one of the company's few bright spots. Since
launching the service in the U.S. nearly nine months ago, Disney
has built up its subscriber base at record pace. On Tuesday, Mr.
Chapek said Disney+ had surpassed 60.5 million subscribers
world-wide. Disney recently debuted the service in parts of Western
Europe, India and Japan.
Mr. Chapek called the service the company's top priority and
said he expects it to be available in nine of the world's top 10
economies by the end of the year. Disney+ will be available in
Scandinavia, Belgium and Portugal next month and Latin America in
November.
Disney is getting some help via the limited resumption of
professional sports. The company's ESPN network recently began
broadcasting the return of the NBA and MLB leagues. Thanks to
strong ratings so far, Disney could see an uptick in television
advertising revenue in the months to come after experiencing an
entire quarter without most of its usual live-sports
programming.
It's unclear when Disney will begin generating significant
box-office revenue. Theaters in some overseas markets have started
to reopen and major U.S. theater chains are hoping to do the same
later this month. Following "Mulan," which is opening online in
most of the world, the company's next major film title is the
Marvel spinoff "Black Widow," slated for early November.
The economic pain of the pandemic is expected to be reflected in
much of Disney's future operations, including the production of new
films and series. Ms. McCarthy estimated that adhering to new
guidelines and implementing enhanced safety measures to protect
against the spread of Covid-19 will cost the company an additional
$1 billion between now and the end of the company's next fiscal
year.
Corrections & Amplifications "Mulan" will be available to
Disney+ subscribers as a download for about $30. An earlier version
of this article said the movie will cost that much to rent.
(Corrected on Aug. 4)
(END) Dow Jones Newswires
August 05, 2020 02:47 ET (06:47 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
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