2020 has been a rollercoaster year with more downs than ups, and it’s a ride Disney World will want to end sooner rather than later, as the Coronavirus has taken some sparkle away from the self-professed happiest place on earth. With the virus ravaging entire economies, culled an incredible an astonishing 28,000 employees at its U.S. theme parks, which include Walt Disney World and Disneyland, and the end of the tunnel isn’t yet nigh, as consumer sentiments have been seriously cramped by the spread of the virus. And it’s not just the theme parks and resorts either; as cinemas receive sparse crowds, 2020 has really taken the Mickey for Walt Disney Company.
Speaking in its latest earnings report for the quarter and fiscal year ended October 3, 2020, the company said, “COVID-19 and measures to prevent its spread impacted our segments in a number of ways, most significantly at Parks, Experiences and Products,” “Our theme parks were closed or operating at significantly reduced capacity for a significant portion of the year, cruise ship sailings and guided tours were suspended since late in the second quarter and retail stores were closed for a significant portion of the year. We also had an adverse impact on our merchandise licensing business. In addition, at Studio Entertainment we have delayed, or in some cases, shortened or cancelled, theatrical releases, and stage play performances have been suspended since late in the second quarter.”
The changing face of Disney’s business
Taking all these adverse effects into account, Disney estimates the impact of COVID-19 on its operating profit for fiscal 2020 at $7.4 billion, with the Parks, Experiences and Products segment alone taking a $6.9 billion hit. As the following chart shows, 2020 has been a year of seismic change for Disney too, and revenue in the segment that includes Disney’s parks, resorts and cruises, as well as its retail and product licensing business dropped by 37 percent in the twelve months ended October 3, with sales falling by much more than that in the second half of Disney’s fiscal year. Studio Entertainment was also heavily impacted by the pandemic due to widespread theater closures.
But it’s not all gloom and doom for the Burbank major. As people hunker down at home, they’ve turned to varied forms of entertainment accessible from the comfort of their living room, and Disney’s direct-to-consumer business, including Disney+, ESPN+ and Hulu have stood to gain the most.
In fact, Disney+ has come out of the blocks running at full tilt. Less than 12 months after launching in North America and the Netherlands on November 12, 2019, the streaming service reached 73 million paid subscribers, the company announced in its latest earnings report.
At launch, experts forecast that the service would reach between 60 and 90 million subscribers by 2024, an estimate that looks hilariously conservative in hindsight, although it did take a pandemic for the service to really turn on the afterburners for racking up its subscriber count.
Disney realizes that streaming video will represent a major portion of its future earnings, given its rich back-catalog of content dating decades. In fact, Disney+ acts as a hedge against dwindling cinema receipts, and this can be gauged by the highly anticipated live-action remake of “Mulan” skipping theaters to premiere directly on the Disney+ app for a $30 viewing fee.
This is a brave new world that we now face up to, and perhaps it is time that all of us, and Disney itself, accepts that direct-to-digital and streaming is the new de facto, even more so if cinemas, theme parks, and resorts receive a tepid response once this pandemic blows over.