Jessica Goodfellow
May 6, 2020

Coronavirus has so far cost Disney $1.4 billion

Theme park closures, delayed movie releases, production delays, sports cancellations, a drop in ad sales—COVID-19 has severely impacted Disney's business so far this year and will continue to cause disruption.

Coronavirus has so far cost Disney $1.4 billion

Disney's profits collapsed by 91% during the first three months of 2020, as many of its divisions suffered heavy losses as a result of the COVID-19 pandemic.

While revenue for its second quarter ended March 28 was up 21% to $18 billion, Disney saw total operating income drop 37% to $2.4 billion.

The damage to Disney's empire in the quarter was widespread. The entertainment conglomerate's parks and experiences division was the most significantly impacted by the novel coronavirus in its second fiscal quarter, as it was forced to close its parks and resorts and suspend its cruises. As a result, that segment's profit dropped by 57% from $1.5 billion in the quarter last year to $639 million this year, while the business estimated that segment lost around $1 billion in revenue. 

Concerningly, this is the result of only a few weeks of park closures domestically, which means the impact will likely be far greater in the upcoming quarter. Although this will partially offset by the re-opening of Shanghai Disneyland, which it announced will be open in a limited capacity from May 11.

Excluding parks and experiences, Disney estimates a further $400 million was lost due to business disruption across its other divisions. In total, the impact of COVID-19 on the quarter was as much as $1.4 billion.

Its studio entertainment division was negatively impacted by the closure of movie and live entertainment theatres, with that segment operating income decreasing 8% to $466 million. Revenues for the quarter increased 18% to $2.5 billion. A decrease in sales to third parties in the pay and free television windows was offset by growth in TV/SVOD distribution due to sales of content to Disney+.

Meanwhile, disruptions in the production and availability of content caused a downturn in advertising revenue, the business said. For example, the cancellation of major sporting events in mid-March led to a drop in average viewers and subscibers to ESPN, which in turn led to decreased ad revenue. Overall, its media networks division recorded a 28% increased in revenue to $7.3 billion in the quarter, with segment operating income increasing 7% to $2.4 billion.

A green shoot in the quarter came from recently-launched streaming service Disney+, which helped boost direct-to-consumer and international revenues from $1.1 billion to $4.1 billion in the quarter.

Just five months after its launch, the service has surpassed 54 million paid subscibers globally, it was announced on the company's earnings call, 8 million of which it acquired through its pre-existing HotStar service in India. It is well-ahead of its long-term subscriber projections—it had estimated it would have between 60 and 90 million subscribers by 2024.

Direct-to-consumer operating loss increased from $385 million to $812 million, due to costs associated with the launch of Disney+ and the consolidation of Hulu.

Disney CEO Bob Chapek, who was appointed in February to replace Bob Iger, said that while the COVID-19 pandemic has had "an appreciable financial impact on a number of our businesses", the business is "confident in our ability to withstand this disruption and emerge from it in a strong position."

"Disney has repeatedly shown that it is exceptionally resilient, bolstered by the quality of our storytelling and the strong affinity consumers have for our brands, which is evident in the extraordinary response to Disney+ since its launch last November," he added.

Related Articles

Just Published

1 day ago

An 'Inactivewear' line made for all your binge-watch...

A collaboration between streaming provider Binge and fashion retailer The Iconic, instigated by Thinkerbell, yields a 19-item line of luxury loungewear.

1 day ago

How Huawei is using local projects to try to ...

Localisation is Huawei's branding strategy for the year. Its 'Connect the North' project in Canada is one example of this.

1 day ago

Milo positions itself as a sports drink in Vietnam

The beverage brand seemingly takes a page from Nike in a campaign from Ogilvy Vietnam and Sweetshop director Noah Conopask.

1 day ago

Singapore’s top influencer investigated for racist ...

Wendy Cheng, aka Xiaxue, stands by her stance in a defensive blogpost, and one brand has already pulled a partnership with her.