How Much Did Coronavirus Hurt Disney Last Quarter? Well…
The last time that we discussed Disney’s earnings, the headline was catchy. “Disney earns largest quarterly revenue total ever.”
What a difference three months can make.
One day, financial analysts will look back at The Walt Disney Company’s most recent fiscal quarter as the doomsday scenario. And the situation will get worse before it gets better.
Let’s take a look at the numbers that show how badly the Coronavirus pandemic has impacted Disney.
About Disney Revenue
Let’s start by acknowledging something important. Disney just reported earnings for the period of December 29, 2019, through March 28, 2020.
So, you can already infer something important here. Coronavirus dramatically impacted only three weeks from this quarter. Yes, the next earnings report will be MUCH worse.
In truth, this one’s not bad, all things considered. Disney generated $18 billion in revenue, which is an improvement of 21 percent from the second quarter of 2019.
The explanation is that Disney hadn’t completed and received the benefits of the Fox purchase yet in 2019.
Still, $18 billion is a good number that beats Wall Street estimates by half-a-billion. That’s a win everyone will happily take right now.
Alas, that’s only part of the story. Earnings dropped to 0.60 per share, which is down more than a dollar from last year’s $1.61.
Coronavirus is undeniably the reason why. Disney’s CFO, Christine McCarthy, stated during the earnings call that Disney parks lost $1 billion due to the pandemic.
The news sounds scarier when we examine net income. During the second quarter of 2019, Disney earned a massive $5.431 billion in net income. For the most recent three months, the number plummeted to $475 million.
Yes, Disney’s net income is down almost $5 billion in a year. The percentage drop, 91 percent, sounds even worse.
Disney by Division
Each quarter when we look at Disney’s financials, we evaluate them by division. This time, while we do it, I’ll also toss in a few ways that Coronavirus has hurt Disney’s bottom line.
I want you to have a full grasp over just how much the pandemic has damaged the company. However, before I get started, I want to stress that McCarthy believes that the company is on solid financial ground.
The Media Networks division grew the most of established businesses this past quarter. Income totaled $7.257 billion, an improvement of 28 percent from last year’s $5.683 billion.
Again, Disney owns more channels than it did during this part of fiscal 2019. So, that’s the explanation. Unfortunately, the lack of live sporting events has wiped out most ESPN programming.
As you may know, Disney charges cable carriers the most to air ESPN because of its lucrative sports packages. Meanwhile, the company charges advertisers a pretty penny for commercials during live sporting events.
So, Disney has taken a beating in this category since the pandemic shut down all major sports leagues.
ESPN has had a couple of hits, The Last Dance and the 2020 NFL Draft. However, those won’t count until next quarter. And even with those, it’s going to be a sharp downturn for Disney.
The other great news comes from Disney+. A year ago, the Direct-to-Consumer & International division grossed a modest $1.145 billion.
For the most recent quarter, revenue nearly quadrupled to $4.123 billion. Even as other parts of Disney struggle, the new streaming service has soared.
In fact, Disney+ is the largest beneficiary of the pandemic. It was already a triumphant endeavor, but recent events have elevated it even more.
During the earnings call, Disney stated that 54.5 million people have signed up through May 4. So, attendance has grown nine percent since April 8.
Also, Disney points out that several key international markets will receive launch dates later this year.
Of course, one of the reasons why Disney+ has done so much better is the doomed theatrical release of Onward. And that brings us to…
“This Sounds Like Bad News”
If you love Disney and don’t want to hear any bad news, you should stop reading now.
The second-hardest hit part of Disney’s business is Studio Entertainment. This division actually improved from the second quarter of 2019, but we all know that situation will change soon.
Heading into calendar 2020, everyone knew that the studio division couldn’t match last year. However, we weren’t supposed to feel the impact of that until the next two quarters.
Somehow, that thought process has proven correct. Studio Entertainment earned $2.539 billion, a gain of 18 percent from $2.157 billion in 2019.
Sadly, that number will approach zero next quarter. I’m not even joking. Onward last reported box office on March 19. The Call of The Wild also ended its theatrical run on that day.
Now, this Disney branch also earns revenue from home video and live theaters (Disney on Ice, Disney on Broadway, etc.). So, it won’t wholly zero out while movie theaters are closed. Still, we’re talking about another multi-billion loss for the company…and not even the worst one.
About the Parks
The official name for Disney’s fourth branch is Parks, Experiences and Products. Many people shorten it to Parks and Resorts, which is what it was called for years.
The parks division is obviously the bread and butter of the Disney empire. Normally.
Right now, every Disney park on the planet remains closed due to Coronavirus. As MickeyBlog has happily informed you, Shanghai Disneyland will return on May 11.
Until then, Disney’s earning no income from its parks. That’s like Facebook making no money from Facebook. Yes, both companies own other moneymaking ventures but come on.
During the fiscal second quarter, Disney’s three Asian parks weren’t open for two out of three months. Then, the other three closed with two weeks to go in the quarter.
Understandably, Disney’s revenue dropped…but not as much as you might expect. During this period in 2019, Disney earned $6.171 billion.
That number dropped to $5.543 billion for 2020. It’s a decline of “only” 10 percent. On top of the unexpected loss, it’s an incredibly frustrating number for Disney, too.
The executives on the conference call indicated that every Disney park but Hong Kong Disneyland had exceeded all reasonable expectations at the start of the year.
Then, the outbreak evolved into a pandemic, preventing customers from going to theme parks. So, Walt Disney World and Disneyland went from record-shattering attendance paces to closed for business.
Of course, some of these losses aren’t from the parks. Disney Cruise Line has also absorbed the kind of hit that generally sinks a ship. And Disney can’t sell merchandise at Disney Stores because they’re closed, too.
Disney will overcome all these temporary problems, but I can’t sugarcoat it here. This quarter was disappointing, and the next one is nightmare fuel for Disney executives.