Disney Earnings Show The Entertainment Giant Adjusting To The Pandemic

The Walt Disney Co. DIS business model was badly hit by the pandemic as COVID-19 shut down its theme parks and cruise line and cut into its movie revenue thanks to theater closures. But last Thursday, the entertainment giant posted an unexpected profit as it reported fiscal first-quarter results that easily topped expectations. Disney's success in streaming served as a counterweight to the weakness in its virus-exposed theme parks and experiences businesses.

The Netflix-Crushing Plan Is Taking Shape

Disney made it clear that Disney Plus is going to be a force to be reckoned with all year long. Moreover, Disney can pull it off do it with a fraction of the effort of its mega-rival Netflix NFLX. Back in December, Disney shared plans to release approximately 100 film and television projects, four fifths of which will go directly to Disney+. Along with Marvel series and Star Wars shows, Disney has quality and quantity in its legacy it can easily spread around.

See also: How to Buy Disney Stock

Figures

Revenue of $16.25 billion exceeded analyst expectation of $15.92 billion expected. Adjusted earnings per share were 32 cents compared to the expected loss of 38 cents. Subscribers to Disney+ skyrocketed even more thanthe 90.2 million expected as they amounted to 94.9 million. Disney now has more than 146 million total paid subscribers across its streaming services as of the end of the first quarter, but this is still pale compared to Netflix's 204 million reported at the end of 2020. But Disney+ is expected to have 230 million to 260 million subscribers by 2024. While Disney still posted a third straight quarter of revenue declines, the drop was not quite as severe as expected considering that most of Disney's lucrative businesses are limited by the pandemic. Content sales and licensing revenues sank 56% to $1.7 billion during the quarter as Disney had no new theatrical releases from October to the end of December.

Parks Remain Closed

While some of Disney's theme parks have reopened with limited capacity, the main one in California, along with European, remain closed. Disneyland and Disney California Adventure have both been closed since last March, forcing Disney to cut tens of thousands of jobs last year. Revenue at the parks, experiences and products segment plunged 53% to $3.58 billion due to closures, limited capacity and cruise suspensions. During the quarter, Covid-19 caused this division to lose of $2.6 billion from its operating income.

A Game Changer

Despite the difficulties, there's reason to believe that Disney could emerge from the pandemic a significantly stronger business than before due to its rising streaming star. Additionally, vaccines will likely be a game changer for its theme parks and experience division.

However, it will likely be thanks to Disney+ that Disney emerges from this unprecedented health crisis to again rewrite the rules of the entertainment industry.

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