COVID-19 Causes 42% Drop in Disney Revenue... Theme Parks in Tears, Streaming Smiles

[Image source=AP Yonhap News]

[Image source=Reuters Yonhap News]

[Asia Economy Reporter Jeong Hyunjin] Walt Disney's business portfolio is changing due to the impact of the novel coronavirus disease (COVID-19). While lockdown measures during April to June this year, when the COVID-19 impact intensified, dragged down Disneyland's revenue, the streaming service Disney+ rapidly increased its subscribers, resulting in mixed fortunes across divisions. The movie "Mulan," which had postponed its release twice due to the COVID-19 situation, ultimately decided to launch on Disney+ to adapt to the changes.

According to Bloomberg and other sources on the 4th (local time), Walt Disney's total revenue for the third quarter (April to June) of fiscal year 2020 was $11.779 billion, a 42% decrease compared to the same period last year. The net loss recorded was $4.718 billion, turning from a $1.43 billion profit in the same period last year to a deficit. The Wall Street Journal (WSJ) reported this as the first quarterly loss since 2001.

The most severely affected division was the theme park segment, including Disneyland. Revenue in this segment dropped by more than 85%, from $6.575 billion last year to $983 million this year. This was because, amid the rapid spread of COVID-19 in the U.S. during April to June, all Disneyland parks, resorts, and cruises in the U.S. suspended operations. Disneyland Paris in France also closed, and Shanghai Disney Resort in China reopened only in May, while Hong Kong Disneyland resumed operations in June. Disney estimated the COVID-19 impact caused a $3.5 billion shock. As a result, a net loss of $1.96 billion occurred. Bob Chapek, Disney's CEO, stated, "We are responding flexibly with government and local health authorities, and changes will be made if necessary."

On the other hand, the media networks division, including streaming services, saw almost no decline in revenue. Revenue for the media networks division from April to June this year was $6.562 billion, down only 2% compared to the same period last year. The number of paid subscribers to Disney's streaming services, including Disney+, Hulu, and ESPN+, reached 100 million. Among them, 60.5 million are Disney+ subscribers, even though the service has been available for less than a year. CEO Chapek revealed that the goal is to increase Disney+ subscribers to up to 90 million by 2024.

The earnings announcement on this day drew attention to the news of the movie "Mulan" being released on Disney+. Although the theatrical release was postponed twice in March and August, due to the ongoing spread of COVID-19, it was ultimately decided to release the movie via the streaming service. "Mulan" will be available from the 4th of next month for $29.99. This is the first time Disney has offered separate content priced above the monthly subscription fee of $6.99. It is being watched closely whether this will influence the future of the movie and content industry. However, in some countries, the movie will also be released in theaters simultaneously.

Additionally, the studio entertainment business recorded revenue of $1.738 billion, down 55% year-over-year, but the advertising segment saw revenue increase by 2% compared to last year, reaching $3.969 billion.

The market views Disney's recent earnings as better than expected. WSJ reported, "Investors showed greater interest in Disney+'s results," and "Disney's stock price rose nearly 5% in after-hours trading following the earnings announcement." Disney's stock price rebounded after hitting a recent low in March due to the COVID-19 impact and has risen about 37% since then. However, it remains 19% lower compared to the beginning of the year.