By Gary Symons
TLL Editor in Chief
The world’s largest entertainment company reported mixed results from a quarter dominated by the impact of the COVID-19 pandemic on its various business operations, causing Disney stock to fall 4 per cent in after hours trading.
Analysts pointed to disappointing results for Disney+, as the streaming service failed to deliver the subscriber numbers investors were looking for, while at the same time the pandemic continued to wreak havoc on the company’s theatrical releases and its parks division.
The results served as a kind of inflection point for the impact of the pandemic on business operations for companies like Disney. While lockdowns served to boost subscriber numbers for Disney+ for most of 2020, those sign-up numbers are starting to fall as lockdowns are eased in the US and Canada. Analysts expected Disney to report 109 million subscribers, but the company only logged 103.6 million subscribers as of the end of the quarter.
At the same time, lockdowns still affected other aspects of Disney’s business. The company was forced to shut down its theme parks, its cruise ships were tied up to the docks, and the blockbusters that normally dominate the box office numbers have been delayed, or released as VOD or streaming hits on Disney+. The delay in the release of those big Disney and Pixar hits has also affected the wider licensing community, as a wide variety of products simply haven’t been released.
Overall the company’s revenue fell slightly short of Wall Street’s expectations, ringing in at $15.61 billion in revenue, whereas analysts had expected to see $15.87 billion in revenue.
On the bright side, the year of the pandemic did have a very positive impact on the launch of Disney’s streaming service, which showed stellar numbers until the lockdowns began to lift in the US. The recent drop in the rate of subscriptions is also not unique to Disney, as other services like Netflix similarly showed a sharp rise during lockdown, and a falling off in recent months.
Also on the positive side of the ledger, Disney’s massive infrastructure is creaking back into action. The company is now preparing for an absolute onslaught in theaters, with a huge lineup of Pixar films, Marvel blockbusters, and upcoming family blockbusters like Jungle Cruise, Black Widow, and Cruella. However, due to ongoing uncertainty about the crowds we’ll see in cinemas, those movies will debut simultaneously on Disney+, while other films like Marvel’s Shang-Chi and the Legend of the Ten Rings and the Ryan Reynolds adventure Free Guy will debut only in theaters.
Overall the entire media and entertainment division balanced out, resulting a modest increase of 1% in revenue, to $12.4 billion.
“We’re pleased to see more encouraging signs of recovery across our businesses, and we remain focused on ramping up our operations while also fueling long-term growth for the Company,” said Disney CEO Bob Chapek. “This is clearly reflected in the reopening of our theme parks and resorts, increased production at our studios, the continued success of our streaming services, and the expansion of our unrivaled portfolio of multiyear sports rights deals for ESPN and ESPN Plus.”
Overall, Disney sees this as the quarter where it begins the transition from a pandemic economy to a more traditional situation, and expects to see dramatically increased revenues in cruise, parks, and entertainment over the coming months.