Streaming surge provides cheer for Disney amid pandemic

Disney said the pandemic wiped another $3.1 billion (€2.6 billion) from its operating profit during the third quarter, as cinemas and theme parks remained largely empty.

But the world’s largest media group revealed it has now lured 73.7 million subscribers to its Disney Plus streaming platform almost a year after its launch, sending shares more than 5 per cent higher in after-hours trade.

Disney Plus benefited as lockdowns spurred high demand for shows to watch from home, although it remains lossmaking. Disney’s direct-to-consumer business unit – which includes Hulu and ESPN as well as Disney Plus – posted an operating loss of $580 million in the quarter on $4.9 billion of revenues.

“The real bright spot has been our direct-to-consumer business, which is key to the future of our company,” said Bob Chapek, the former theme parks boss who was promoted to chief executive in February.

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Coronavirus has pummelled the rest of Disney this year. The company has grappled with empty cinemas, closed or low-capacity theme parks, weaker advertising sales and shuttered TV and film production. In September, it laid off 28,000 employees of its theme parks business in the US.

Total revenues in the third quarter dropped 23 per cent year-over-year to $14.7 billion, while adjusted earnings swung to a loss of 20 cents a share. Analysts were looking for sales of $14.1 billion and an adjusted loss of 73 cents a share.

The company posted a net loss of $710 million in the quarter, compared with a gain of $777 million in the same period last year. Operating income shrunk more than 80 per cent from a year ago to $606 million, after the $3.1 billion hit Disney tied directly to the pandemic.

Disney shares have fallen only 7 per cent this year as investors remained confident in the group’s longer-term prospects.

Restructured

The company last month restructured its operations to prioritise streaming, following calls by activist investor Daniel Loeb for Disney to invest more in producing shows and films for its streaming platform.

The near-term fate of Disney’s shares appears tied to how long the pandemic endures. Its stock jumped 12 per cent on Monday after positive news regarding a vaccine.

“It will be a long, non-linear climb out of this [earnings hole], but with success to date in streaming and recent vaccine news, our confidence has increased in [Disney] scaling to new heights,” Morgan Stanley analysts said this week. – Copyright The Financial Times Limited 2020