Everything We Just Learned about Disney from Its New CEO
Welcome to the top of the corporate ladder, Bob Chapek! You’re now the CEO of The Walt Disney Company, and the business fell apart within 72 hours of your arrival. No, it’s not your fault.
Still, you’ll need to survive a trial by fire unlike any we’ve ever witnessed before for a new Disney leader.
Thankfully, you were just kind enough to hold a conference call that reveals the hard truths about the current state of Disney, warts and all. We wish you all the best in leading the company out of these hard times.
Here’s everything Chapek just told us about Disney’s current status.
Disney Relayed a Message of Positivity
Former CEO and current Executive Chairman, Bob Iger, started the call. And this conference meeting was a first for Disney officials and financial analysts. It occurred remotely, with all Disney employees dialing in from home.
Iger started so that he, the most trusted person at Disney, could deliver a speech about the strength of Disney’s reputation. He stated that it was due to a century of trust it’s built with consumers.
Afterward, the Executive Chairman commented on Disney’s resiliency throughout the years. He pointed out that the company has experienced “economic downturns, natural disasters and other unforeseen events.”
Then, Iger mentioned specific brands that have remained strong during the pandemic. He listed: “Disney, Pixar, Marvel, ABC, ESPN and Star Wars.”
Afterward, Iger thanked essential workers, particularly medical employees, for everything they’ve done during the pandemic. However, it’s the next comment that struck me as thoughtful.
Finally, Iger expressed his gratitude to Disney employees, many of which he and Chapek recently furloughed. Iger’s statement about them was:
“Even in the face of adversity, their dedication to our company and our mission is unwavering and we couldn’t be more proud of them.”
Disney Had Some Recent Successes
Chapek trumpeted ESPN’s massive successes with ESPN’s The Last Dance and the 2020 NFL Draft. Disney’s new CEO indicates that the former show is actually the number one show for men in America across all demographics.
As for the NFL Draft, ESPN has hosted it since the 1980s. I say this to provide some perspective when I note that it broke all viewer records with 55 million viewers across three days of broadcasting.
Alas, neither of these events took place during Disney’s fiscal second quarter. Chapek mentioned them to show that the company is churning out great ideas and impressive results during the pandemic. In fact, ESPN finished first in prime time in the main demo among all cable channels for April.
Chapek didn’t mention a couple of other triumphs that he could have. The Disney Family Singalong earned more than 10 million viewers. It did so well that Disney will air a sequel this Sunday.
Also, ABC News has dominated during the pandemic. David Muir has become the most famous anchor of the 20th century due to his performance as the host of ABC World News Tonight.
One Park Returns Next Week!
Of course, the most significant success is one that hasn’t happened quite yet. Chapek revealed that Shanghai Disneyland will return to operation on May 11. Yes, that’s only a few days from now!
During the earnings call, Disney executives were reluctant to speak about other parks. They did briefly discuss Disney Cruise Line, which I’ll address in a bit. However, Disney’s executives meticulously laid out the details for Shanghai Disneyland.
When the park returns, it will include a phased reopening as expected. Disney will require advanced reservations to avoid guests arriving only to discover that the park has reached (temporary) maximum occupancy for the day.
Guests and cast members alike will wear masks, as is required in China. Similarly, Disney will honor all social distancing and healthcare rules in Shanghai. So, the early park experience will differ a bit from when Shanghai Disney closed on January 25.
Park officials will employ temperature checks, contract tracing, and other measures. Their express purpose is to identify potential Coronavirus carriers before they enter the park.
All these ideas are ones that MickeyBlog has suggested will become a part of Walt Disney World when it returns. The presumption is that Shanghai Disneyland will function as a beta test for whether the ideas are safe and practical.
Disney Still Loves the Theaters
Recently, the movie industry has embroiled itself in an aggressive debate about the theatrical window.
One movie studio, Universal Studios, recently stated that it will release some movies on home video at or around the same time as their theatrical release dates.
AMC Theatres and Regal Cinemas went ballistic, as both companies stated that they will never exhibit a Universal movie as long as that policy holds. To you as a movie fan, this stance means that you won’t see a Jason Bourne flick in a theater anytime soon.
Realistically, Universal’s films don’t earn enough money for this position to matter much. However, Disney dominates the movie industry to a profound degree.
So, Hollywood observers have wondered about Disney’s position on the subject. After all, the company debuted Onward on Disney+ barely a month after its theatrical release.
Disney will also debut Artemis Fowl on its streaming service on June 12. And other titles like Frozen II and Star Wars: The Rise of Skywalker appeared on Disney+ much earlier than expected.
Despite the financial incentives to emphasize Disney+, Chapek redeclared his company’s admiration for the theatrical release. The company’s position is that the movie experience shouldn’t take place entirely in the home.
More about Disney+
Even so, Disney’s streaming services have done extraordinarily well. During the call, the executives updated Disney+ subscriber numbers. Through May 4, 54.5 million people have signed up for this product.
Axios recently published a graph that displays how remarkable this total is. Netflix needed six years to reach this total. Amazon Prime required two years, and many of its subscribers didn’t sign up for the streaming aspects.
In fact, Hulu just reached 32 million, and Disney officials are incredibly proud of that total. Disney+ has outperformed even the most ambitious estimates by reaching 50 million in less than six months.
Also, Chapek adds that several other international markets will receive launches later in 2020. So, he alleviated any modest concerns about lower totals once the stay-at-home order ends.
No matter whether the movie theater experience survives Coronavirus, Disney viewers should have confidence that the company still possesses multiple storytelling outlets.
Between Hulu and Disney+, we’re talking about 86.5 million people subscribing to Disney digital services. That’s a lucrative financial stream that will pay benefits long term. It’s the silver lining during the pandemic.
Financial analysts had questioned Disney’s decision to eliminate licensing revenue streams in favor of creating its own product. Even during this call, the executive team indicated that some parts of the balance sheet were lower due to this decision.
Overall, Disney+ has performed so strongly that the temporary losses qualify as trivial. At its current pace, the streaming service would NET Disney more than $3.5 billion over the next 12 months.
This statement presumes that Disney maintains its previously stated profit of $5.56 for every $6.99 subscription. So, you can tell how lucrative this service can become for the company. Heck, it’s already there…and these numbers don’t even include Hulu!
The Parks Were Doing Great Until…
Let’s finish with the subject that matters the most to you: the theme parks. You’ve already read on MickeyBlog that Coronavirus cost Disney $1 billion during the quarter. Well, the average impact was $1.4 billion; it’s just that theme parks absorbed most of the setbacks.
Disney has taken several steps to address these financial losses. The non-furloughed executives at the company wouldn’t have their pay return to normal until Disney is back on firmer footing.
Also, Wall Street didn’t love another smart decision of Disney’s. The company will forego $1.6 billion in dividends that it would ordinarily pay out. Obviously, there’s nothing ordinary about what’s happening right now.
Without providing details, the executives revealed that the company will save $900 million in capital expenditures this fiscal year. Presumably, Disney won’t spend as much on construction and other projects during the pandemic.
Now, a question remains about whether Disney has canceled anything already on the docket. We probably won’t know the answer until the parks reopen.
However, Disney sometimes allots money to unannounced projects. So, there’s no reason to jump to conclusions either way.
Attendance Was Way Up
McCarthy also detailed how well Disney parks had performed before Coronavirus shut down the various locations. Attendance at the American parks dropped 11 percent during the second quarter.
Yes, that sounds like bad news. What you must remember is that both Disney parks were closed for 15 percent of the quarter. Up until that point, all parks other than Hong Kong Disneyland were trending well ahead of the prior year.
The CFO indicated that attendance dropped 18 percent due to the virus, which makes sense. The timing negated the potential benefits of Spring Break trips to Disney.
While people could visit, they were spending a great deal more than during 2019. McCarthy stated that per capita spending improved by 13 percent year-over-year!
Per-room spending wasn’t impacted by the shutdown. It’s only calculated when the resorts are open. As such, it’s unsurprising that these numbers are the best in the quarter. Guests spent six percent more than in 2019.
Occupancy would have gone up, too. Alas, the 15-point hit from Coronavirus tipped this stat the wrong way. Occupancy dropped 16 points when it should have remained relatively flat.
In short, Disney was pacing for historic second-quarter revenue in the parks division. Coronavirus has negatively affected so many aspects of society. Still, it’s hurt Disney so many ways that the situation seems personal. But a virus couldn’t target a corporation, right? RIGHT?!