Home Ad Exchange News Hard Hit By Coronavirus, Disney Suffers From Park Closures And Loss Of Live Sports

Hard Hit By Coronavirus, Disney Suffers From Park Closures And Loss Of Live Sports

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Disney and COVID-19
Disney Parks are closed. Broadcast and TV advertising is down. Movie releases and Broadway shows have no theaters to play in. Cruise ships are docked. Live sports have been canceled, decreasing ESPN viewership. Disney retail stores are closed, and film production has halted.

Many companies are weathering the economic effects of the coronavirus pandemic because they’ve diversified their revenue. But for Disney, almost every point of diversification has been felled by the coronavirus pandemic.

“The pandemic has hit us hard,” Disney Chairman Bob Iger told investors on the company’s Q2 earnings call Tuesday. But Disney is “exceptionally resilient,” which will get it through the tough times ahead.

Disney’s diluted earnings per share declined 93% to $0.26, down from $3.53 in the prior-year quarter, one of its main metrics of success. Although revenue increased 21% to $18 billion, operating income declined 37% to $2.4 billion and cash flow declined 30% to $1.9 billion.

Advertising impact

The loss of live sports has negatively affected ESPN’s advertising revenue much more than broadcast, such as ABC and local news.

Disney is seeing declines in advertising in categories including travel and tourism, theatrical releases, domestic auto, retail and restaurants, CFO Christine M. McCarthy said. While advertisers in financial services, DTC, streaming, tech, telecom and CPG “opportunistically” increased spend in April and May, that boost won’t make up for anticipated declines next quarter, she said.

Disney didn’t talk about how its own advertising and marketing investment plans have changed due to the coronavirus pandemic – though its business spans categories seeing increased ad investment (streaming) and decreased investment (travel and theatrical releases).

Streaming upswing

Disney Plus is up to 54.5 million subscribers as of Star Wars Day (May the Fourth). The streaming service’s subscription count was already two years ahead of most analyst predictions when it hit 50 million subscribers in early April. Hulu subscribers rose 27% year over year to 32.1 million.

Like NBCUniversal, Disney is also routing some of its theatrical content into the Disney Plus platform. Disney will release “Artemis Fowl” via Disney Plus on June 12 instead of theatrically. And Pixar’s “Onward,” which released theatrically in early March just before movie theaters closed, appeared on Disney Plus just two weeks after opening in theaters, giving the platform an enviably strong content roster.

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But all isn’t bright in streaming. Disney never planned to make money in streaming in its first years, as it invested in original content and global marketing, so the current rise in viewers isn’t helping Disney’s bottom line.

Although revenues increased from $1.1 billion to $4.1 billion during the quarter, the streaming sector’s operating loss increased from $385 million to $812 million.

Disney Parks

Disney’s parks, cruises and hotels all shuttered due to the coronavirus pandemic. Disney Shanghai and Hong Kong closed in January, the Tokyo park in February and Disney World, Disneyland and Disneyland Paris all closed during the last two weeks of March.

The people running those parks have been furloughed. Disney paid employees for 5 weeks before furloughing more than 100,000 employees, mostly in its parks division. And it’s paying their health insurance while they’re out of work.

But Disney Shanghai will be reopening May 11 with crowd density control measures in place, slowly ramping up to the maximum allowable capacity of 30% in the first few weeks of reopening.

And although Disney Cruise Line will probably be the last part of the business to restart, its customers are repeat vacationers and a Disney poll indicated they want to cruise again and trust the business to act responsibly.

“We think people will resume familiar activities,” incoming CEO Bob Chapek told investors. “Things that make them feel happy and connected with family and friends.”

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