Courtesy of Michael Buckner for Variety
Coronavirus took a chunk out of the Walt Disney Company’s profits during its most recent quarterly results, but the popularity of Disney Plus helped cushion the blow of the pandemic. It also enabled the company to easily exceed Wall Street’s diminished expectations, an achievement that bolstered Disney’s shares.
The family entertainment giant reported adjusted earnings per share of 32 cents for the period ending on January 2, down from $1.53 from the year-ago period. That’s a significant decline, but not the losses that the investment community had expected to see. Revenues at the conglomerate dropped 22% from $20.9 billion to $16.2 billion. Disney also recorded $17 million in profits, an unexpected surprise though one that fell short of the $2.1 billion windfall that Disney reported in the year-ago period. The report comes as the COVID-19 public health crisis has upended several key tenets of the company’s business, shuttering many of its theme parks, waylaying its cruise lines, halting its Broadway productions, and devastating its theatrical film business. The park closures have been particularly painful, resulting in an estimated $2.6 billion hit to operating income due to lost revenue.
And yet, Disney has largely endured those setbacks, its stock continuing to rise to record levels, even as the company keeps pushing back the release of movies and its parks are closed or sparsely attended. Investors remain focused on the robust growth of its streaming offerings, particularly Disney Plus, its buzziest Netflix challenger. In December, Disney said the platform had 86.8 million subscribers — this quarter that number grew to 94.9 million subscribers. Disney credited the streaming service’s release of Pixar’s “Soul” and the second season of “The Mandalorian” with attracting new users. Across all of its services, which also include Hulu and ESPN Plus, Disney had 146 million subscribers.
Most of these streaming services have yet to make money, but they are losing much less than they did just twelve months ago. Revenues for the direct-to-consumer division increased 73% to $3.5 billion and operating losses decreased from $1.1 billion to $466 million. The company said it does not expect Disney Plus, Hulu and ESPN Plus to achieve profitability until 2024. Disney Media and Entertainment Distribution, which encompasses Disney’s streaming as well as its film and television businesses and its licensing arms, saw revenue drop 5% to $12.7 billion, while operating income dipped 2% to $1.45 billion.
Analysts were expecting the company to report revenue of $15.92 billion and a loss of 38 cents per share. Disney Plus was projected to attract just over 90 million subscribers — a figure it handily beat. Disney’s shares rose roughly 3% in after hours trading on the strength of its report, before dipping slightly.
With its cruises suspended and parks in California, Hong Kong, and Paris closed, Disney’s parks, experiences and products segment saw revenues for the quarter decrease 53% to $3.6 billion. It reported a loss of $119 million.
In a call with analysts shortly after the report was released, Disney CEO Bob Chapek said in places where the company’s theme parks have reopened, such as Shanghai and Florida, there has been “ample demand.”
When asked if parks revenue is likely to bounce back to 2019 levels by 2022, Chapek highlighted Dr. Anthony Fauci’s comments on the “Today” show earlier Thursday that it might be “open season” for the general U.S. public to get vaccinated in April. “If that happens, that is a game changer,” said Chapek, noting that that might accelerate parks reopening expectations. Even if Disney’s parks reopen or increase capacity, the Disney chief expects social distancing and mask-wearing to remain through the end of the year.
Despite the challenges, Disney signaled it wasn’t giving up on parks, with Chapek touting the parks ongoing plans for expansion and the development of various global attractions themed to “Ratatouille,” “Guardians of the Galaxy,” and “Zootopia.” He also suggested that the hiatus has led the company to consider ways to improve the business.
“There’s nothing like a pandemic to challenge the status quo and make you fairly introspective about a lot of things,” Chapek said.
Variety's Brett Lang contributed to this post.