Disney profit drops by 91% as lockdown restrictions bring parks, films and sports to a grinding halt
The Walt Disney Company has taken a big hit in the times of the coronavirus pandemic as many of its entertainment segments have come to a standstill. In the second quarter, the House of Mouse’s profit dropped a staggering 91% to $475 million from $5.4 billion a year ago.
According to an Associated Press report, Disney said costs related to the Covid-19 outbreak slashed its pretax profit by a whopping $1.4 billion. The entire US economy has faced a massive downturn as the outbreak has paralyzed all economic activities. Over 1.2 million people in the country have been hit by the deadly virus with over 71,000 dead.
The silver lining was the Disney Plus streaming service that made its debut in the US last November and started in the UK and other parts of Europe last month. As of Monday, May 4, the company said Disney Plus had 54.5 million subscribers, the AP report added. The figure is dwarfed by the 183 million subscriber base that Nefflix has globally. It is Disney Plus that helped in increasing the revenue by almost $3 billion for Disney’s direct-to-consumer and international venture. Hulu and ESPN Plus, two other streaming services that are owned by Disney, had 32.1 million and 7.9 million paid subscribers, respectively, the report added.
Overall, Disney revenue went up by 21% to $18.01 billion, a little short of the $18.06 billion margin the analysts predicted. Its shares fell by about 2% in after-market trading.
Disney Shanghai park to open on May 11 with precautions
Company CEO Bob Chapek said in a conference call with analysts that Disney eyes reopening of Disney Shanghai park on May 11. The opening will be a phased one with limits imposed on attendance, implementing social distancing procedures, temperature screening and contract tracing besides having in place an advance reservation system.
According to one report in USA TODAY, Chapek said Shanghai Disneyland has a capacity of 80,000 but the Chinese government has restricted it to 30% of the capacity.
“We are going to open up far below that to have our training wheels on," he said, adding the park will ramp up to the new limit in a few weeks. The American parks, however, could reopen only in 2021.
The company shut its parks in mid-March as the coronavirus spread. Its theme parks furloughed around 100,000 workers without pay in the US and 43,000 of them were at Walt Disney World in Orlando, Florida. Those workers could still avail their benefits for up to a year.
Disney’s film studios have also seen suspension of production. A number of big-budget movies of the year were pushed back, including ‘Mulan’, ‘The New Mutants’, ‘Antlers’ and ‘Black Widow’ to late 2020 or beyond.
ESPN, owned by Disney, and its streaming arm ESPN Plus are also suffering since there is little live-action in the sporting arena because of the pandemic. Chapek also said the company has “substantially reduced” compensation of the senior executives and will maintain the cuts until a “substantive recovery” is seen. Disney is also not holding its semi-annual dividend planned in July as that would save about $1.6 billion.
Disney Cruise Line will remain suspended with Chapek saying that could be the company’s last travel-related business to come back online. But he expected the business to come back strong because of the loyal fans.