ii view: Disney theme park closures softened by streaming success

by Keith Bowman from interactive investor |

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Its parks are now back open and a review of the suspended dividend is due later in the year. 

Third-quarter results to 27 June 2020

  • Revenue down 42% to $11.78 billion (£8.98 billion)
  • Operating income before exceptional costs fell 72% to $1.1 billion
  • Adjusted Earnings Per Share (EPS) down 94% to $0.08
  • Dividend payment suspended

Chief executive Bob Chapek says:

“Despite the ongoing challenges of the pandemic, we’ve continued to build on the incredible success of Disney+ as we grow our global direct-to-consumer businesses. The global reach of our full portfolio of direct-to-consumer services now exceeds an astounding 100 million paid subscriptions — a significant milestone and a reaffirmation of our DTC (direct-to-consumer) strategy, which we view as key to the future growth of our company.”

ii round-up:

Entertainment giant Walt Disney (NYSE:DIS) reported better-than-feared third-quarter results as its theme parks were closed for much of the period and new film releases delayed. 

Adjusted earnings of 8 cents per share beat analyst forecasts for a loss nearer to 60 cents per share. Growth in streaming subscribers at its direct-to-consumer business helped to offset an 85% drop in sales at its parks, experiences and products division. 

Disney shares rose by more than 5% in after-hours US trading, having fallen by nearly 19% year-to-date. Shares for rival streamers Netflix (NASDAQ:NFLX) and Amazon (NASDAQ:AMZN) are up 57% and 70% in 2020. In July, Netflix reported a 27% jump from the previous quarter in global subscribers to 193 million as consumers stayed at home under lockdown watching TV. 

Disney Plus streaming customers rose to 60.5 million as of the start of this week, up from 54.5 million in early May. Combined with its other Hulu and ESPN+ offerings, Disney now has more than 100 million streaming customers worldwide. It is also planning a new general entertainment streaming service in 2021 under its ‘Star’ brand, previously bought from Fox.

Covid-19 and the closure of its theme parks for much of the quarter are estimated to have hit profits to the tune of $3.5 billion.

Studio entertainment sales more than halved to $1.74 billion as the release of films such as Mulan, about a Chinese warrior, were delayed given closed cinemas around the world. In an unusual step, Mulan is set to be released on Disney Plus from early September at a viewing cost of $30. 

Attendances at the now-reopened theme parks have been relatively low, particularly for its Florida outlets where cases of coronavirus have been rising. 

Payment of the quarterly dividend remains suspended, although a review of the decision is expected later in the year. 

ii view:

Early management estimates of between 60 million to 90 million streamer subscribers by the end of its 2024 fiscal year now appear very conservative. Promotional offers from telecom providers such as Verizon in the US and have helped fuel success, aided most recently by consumer home lockdowns under the pandemic.  

But park closures under Covid-19 have seen Disney’s shares lose most of last year’s 30% gain. The dividend payment has now been lost. Meanwhile uncertainty over the timing of a return to anything like normal business has left management unable to offer any financial guidance. 

That said, Disney is still the world’s largest theme-park operator, attracting an estimated 160 million visitors a year in more normal times. Its media content bank includes the many successes from Pixar Animation, Marvel and the Star Wars franchise. Given its vast experience in the entertainment arena, its hard to see Disney not making some form of eventual long-term recovery. 


  • Diversity of businesses, strong brands and media content bank
  • Launched a streaming service to rival Netflix


  • Covid-19 has closed or disrupted many of its businesses
  • Apple (NASDAQ:AAPL) has commenced its own streaming service

The average rating of stock market analysts:


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