Disney, Staggered by Pandemic, Sees a Streaming Boom


The Walt Disney Company reported doomsday financial results on Tuesday as a result of the coronavirus pandemic and a television-related write-down, with net quarterly losses totaling $4.72 billion.

But Disney’s newest and, as far as many investors are concerned, most important business — streaming — experienced blockbuster growth as people quarantined at home. Disney said it had more than 100 million subscribers worldwide across its Disney+, Hulu and ESPN+ streaming services. Powered by the release of “Hamilton,” Disney+ has about 60.5 million by itself, hitting the low end of its initial five-year goal after only nine months in operation.

To further strengthen its streaming business, Disney said that it would bypass theaters in the United States, Canada and part of Europe and make “Mulan” — a $200 million film — available to Disney+ subscribers on a premium basis. Indefinite access will cost $30 on top of Disney+ membership and start on Sept. 4.

“Mulan” had been scheduled for release in theaters worldwide in March. Disney said it would still release the live-action movie in countries where theaters are open but Disney+ is not available. That includes China, where the film’s story takes place.

Revenue in the quarter that ended on June 27, the third in Disney’s fiscal year, added up to $11.78 billion, falling from $20.26 billion a year ago. In the most-recent quarter, Disney furloughed an estimated 100,000 employees, cut executive pay by up to 50 percent and took out a $5 billion line of credit to bolster its liquidity, on top of $8.25 billion secured in March. The company also suspended its summer dividend and slashed $700 million in expansion spending at its domestic theme parks.

Per-share losses totaled $2.61 — a stark departure from the spectacular growth the company delivered from 2006, when it bought Pixar, to last year, when it swallowed the majority of Mr. Murdoch’s entertainment empire. In the same period last year, Disney had a profit of 79 cents per share.

Excluding one-time items, Disney squeaked out per share profit for the most recent quarter of eight cents, better than analysts were expecting. The items included nearly $5 billion of write-downs, in large part related to Disney’s traditional international television business. Disney has closed down more than 20 overseas cable channels so far this year.

Increasingly cost-conscious consumers are canceling their cable and satellite service in larger numbers, resulting in lower subscriber fees and advertising sales for companies like Disney, which owns the FX, Freeform, National Geographic, Disney Channel and Disney Junior cable networks. It is not just overseas: Richard Greenfield, a founder of the LightShed partners research firm, estimates that Americans will be cutting the cord at an 8 percent rate by the end of the year, compared with a 6 percent rate in the spring.

Despite the impact of the pandemic, Disney’s share price has been remarkably buoyant, with investors overlooking near-term losses and focusing on comeback efforts — most notably the return of some sporting events and the reopening of a retrofitted Walt Disney World to a limited number of visitors. The early success of Disney’s streaming division has also helped Disney shares, which climbed 5 percent in after-hours trading on Tuesday, to about $123.

Hulu has been on a roll because of new programming, including the FX-supplied series “Mrs. America,” which received eight Emmy nominations. Disney+ created a cultural thunderclap in early July, when it released a live capture of the original “Hamilton” stage production.

But building streaming services is tremendously expensive. Losses at Disney’s streaming division grew to $706 million from $562 million in the quarter.

Disney Media Networks, a division that includes ESPN, was helped by the pandemic, at least from a fiscal standpoint. It had operating profit of about $3.2 billion, a 48 percent increase, because ESPN was able to defer substantial rights payments to the N.B.A. and Major League Baseball. Disney’s movie studio held its own; operating profit fell 16 percent, to $668 million, in part because theaters were closed and the company did not have to spend hundreds of millions of dollars to advertise the arrival of new films.

But it was a brutal period for Disney’s theme park division, where operating profit plunged $3.7 billion, resulting in a loss of about $2 billion. Christine M. McCarthy, Disney’s chief financial officer, told analysts that Shanghai Disneyland, which reopened in early May, had started to bounce back. But the company’s Florida mega-resort, Walt Disney World, which reopened in mid-July, has performed worse than the company had anticipated.

“We expect that demand will grow when the Covid situation in Florida improves,” Ms. McCarthy said on the conference call. Florida reported roughly 5,500 new coronavirus infections on Tuesday. That is down from more than 9,000 a day last week but is still among the highest infection rates in the nation.

Disney’s theme parks have long been watched as a bellwether for the broader economy. It is unclear whether the masses — reeling from widespread pay cuts and job losses — will be able to afford Disney vacations in the months and years ahead. So far, Disney has not reduced its ticket prices.

NBCUniversal, which operates two major theme parks in Orlando, has also indicated that demand is lighter than anticipated. Universal has put into place multiple rounds of layoffs since its Florida parks reopened in early June, and the company in recent days announced a startling promotion for Florida residents: buy one two-park adult ticket ($164) and get unlimited visits through the end of the year. NBCUniversal said last week that revenue at its theme park unit shrank to $87 million in the most-recent quarter from $1.46 billion.


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