The Walt Disney Company has revealed its profits are down by USD $1.4 billion for the first quarter of 2020 as it is forced to cancel movie releases, reduce advertising sales and close its theme parks around the world.
Disney’s Chairman, Bob Iger has said that the company was staring down ‘unprecedented’ obstacles, but remained confident about the company’s long-term outlook. That was, in spite of the fact that all aspects of Disney’s business model have been dramatically impacted by the coronavirus, which was close to wiping out its entire profit for the quarter.
The company’s online streaming service, Disney+ has reported a drop in revenue, and with movie theatres around the globe locked down, the company is unable to generate revenue from theatrical releases.
According to a report from The BBC, Disney’s 2019-launched streaming service increased its subscriber base from 50 million on the 8th of April to 54.5 million on the 4th of May, but its direct-to-consumer and international unit - which includes its streaming service Disney+ reported a $812 million loss for the first quarter.
The problem has been compounded for the company with its advertising arm seeing drastic reductions in advertising spend from companies that have cut their advertising budgets in the absence of live sports on its ESPN sports network.
Disney’s theme parks and cruises have been a consistent revenue driver for the company, but with the coronavirus operating restrictions, this has caused a $1 billion drop to its total $1.4 billion loss of revenue for Q1 2020.
Disney has revealed that it has launched a number of initiatives to increase its operating revenues, including a $900 million reduction to its capital investment plans, and suspending a scheduled dividend payment to investors. Disney’s quarterly revenue surprised analysts with a 21% year-on-year increase, however, profits fell from a mighty $5.4 billion to just $460 million.
In January, Disney closed its Shanghai and Hong Kong parks, with Tokyo following in February, and France and the US closing in March. The company’s cruise line division has suspended operations for now.
Chief executive Bob Chapek has said that Disney is looking at a “phased approach” to opening a new park in Shanghai in just a week’s time which would take reservations ahead of opening and limit the park’s overall attendance.
“We are seeing encouraging signs of a gradual return to some semblance of normalcy in China,” he said. “While it’s too early to predict when we’ll be able to begin resuming all of our operations, we are evaluating a number of different scenarios to ensure a cautious, sensible and deliberate approach to the eventual reopening of our parks.”
Chapek anticipates that there is enough demand to drive revenue from its limited opening of the new Shanghai park, but conceded that the forecast for opening additional parks around the world was unclear.
Nicholas Hyett, an equity analyst at Hargreaves Lansdown said that “it’s difficult to think of a company which better illustrates the ups and downs of the coronavirus outbreak and its effect on companies… while we think the business has one of the best asset bases of any listed company, the damage the current crisis will do remains unclear.”
Chairman Bob Iger has previously said that he has “no doubt that we will get through this but it will take some time.”