A year ago this month Disney was riding high as it revealed it had racked up a massive $70 billion in revenue and $15 billion in operating income for fiscal 2019 while it also celebrated the launch of Disney Plus.
On Thursday, the company announced darker news for 2020: Amid the coronavirus, it saw operating income drop 45% for the year to just $8.1 billion, and fall a whopping 82% for the fourth quarter to just $600 million. Once taxes are factored in, the company lost $700 million during the quarter, which encompassed the July-September period, a rare drop for the country’s most prominent entertainment company.
Disney has been battered by the pandemic, which has kept it from attracting large numbers to its theme parks and from opening new movies in theaters. Theaters in many states remain closed or underpopulated, forcing Disney to shift much of its movies to 2021. And Disneyland is shuttered as California Gov. Gavin Newsom, a Democrat, has maintained strict reopening requirements. Walt Disney World in Florida is open, but executives have acknowledged business has been slower than anticipated.
The company did offer some cheerier news amid the bleakness. It disclosed that it counted 73 million global subscribers to Disney Plus, making the streaming service a juggernaut in its first 12 months and a clear favorite in the streaming wars among any service not named Netflix. Revenue totals for the quarter of $14.7 billion were also higher than analysts’ forecasts of $14 billion, while its loss per share was about 20 cents compared to expectations of 70 cents. Revenue for 2020 was down 6%.
The company benefited during the quarter from an 11% revenue jump in its TV division. A further boost could come from its prime-time series, many of which have resumed shooting. Its highly rated “The Good Doctor” has just returned to the air, as has “Dancing With the Stars”; the former saw a star’s positive coronavirus test but continues to shoot.
Disney also saw revenue growth in the merchandising-heavy division that includes Disney Plus, which increased 41% compared to the fourth quarter a year ago, before Disney Plus had launched.
Wall Street was heartened by some of those numbers, sending the share price 3% higher in after-hours trading.
Disney also said it lost $1.1 billion at its theme parks during the fourth quarter. Although that number is dismal, it is a reduction in losses from the previous quarter of $2 billion, as the company reopened parks in Florida over the summer.
But some analysts noted that the quarterly revenue figure was still down 23% compared to 2019. And once all expenses and taxes are included, the company lost about $700 million in the quarter after running in the black many previous summers.
One curiosity Thursday arose with the studio division, for which Disney reported a $1.6 billion revenue figure – a 52% drop – despite the fact that its two notable releases, “The New Mutants” and “Mulan,” barely grossed $100 million worldwide. Much of the money ironically either came either from outside licensing deals – the very deals Disney Plus aims to get rid of – or from Disney Plus paying the studio division for rights.
In response to the challenges, Disney has sought to tighten its belt. It laid off 300 workers from ESPN earlier this week and also has drastically pared down the number of employees at theme parks. It also has sought to centralize more of its delivery to digital last month rearranging various distribution departments of the company toward that aim, particularly on Disney Plus.
That service has been home to a number of social media hits, including “The Mandalorian,” whose new season debuted last month. The company is aiming to release at least one piece of major content each quarter, with the Pixar original “Soul” coming in December. On Thursday, Disney announced that “WandaVision,” the service’s first Marvel series, will be released on the platform in January.
But Disney Plus’s success is tempered by the investment costs associated with it. A MoffettNathanson report says the division could lose $2 billion each this year and next; Disney had acknowledged it won’t be profitable until 2024.
The company Thursday also did not reveal numbers for “Mulan,” which cost Plus subscribers $30 to watch. Disney chief executive Bob Chapek said the experiment was successful enough in the company’s eyes that it could well be repeated with other movies.
“We saw enough very positive results,” he said, “to know we’ve got something here in terms of the premiere access strategy. He added, “What we’ve learned from Mulan is there will be a role for it strategically with our portfolio of offerings.”
There was little acknowledgment in the call of the country’s rising coronavirus numbers, as new cases hit a record of 153,280 Thursday. In addition to Chapek’s dig at Newsom, he also noted the advent of a new cruise ship that will be ready in 2021, when he said executives believed the worst of the pandemic will be over, allowing the ship to be used. Executives also cited encouraging news this week in vaccine research.
Chapek attempted to put a good spin on the news. “Even with the disruption caused by COVID-19, we’ve been able to effectively manage our businesses while also taking bold, deliberate steps to position our company for greater long-term growth,” he said in a statement.
But in the call, he also acknowledged the difficulties in theme parks and pointed the finger at Newsom.
“We are extremely disappointed that the state of California continues to keep our theme parks closed despite our proven track record,” he said, as he referred to reopenings in Florida and Asia. “We believe state leadership should look objectively at what we’ve achieved. . .as opposed to setting an arbitrary standard.”
In light of the shaky numbers, the company announced Thursday it had decided to forgo its semiannual dividend for the second half of 2020, following a similar action last spring.
Disney has faced pressure from activist shareholder Dan Loeb as well as Disney heiress and company critic Abigail Disney to stop the dividend. Loeb has said money should be spent on content; Disney has charged that a dividend was unfair while so many employees have been suffering or laid off.