Disney’s Closed Parks Are Bleeding Billions, but the Company’s Brand Is as Strong as Ever

Chris Lindahl
·4 min read

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Billions in cash burned from shuttered theme parks. Closed theaters. No dividend. Sliding TV ad revenue. There was plenty of terrible news aired during the Walt Disney Co.’s first quarterly earnings call since the coronavirus pandemic hit, but it wasn’t all doom and gloom: Viewers are flocking to both ESPN and the company’s new favorite child, Disney+, as a way to keep themselves occupied during lockdown, signs that the empire remains strong even while financial results are mixed at best.

Total operating income across Disney’s vast holdings for Q2 was down 37 percent to $2.42 billion. That quarter ended just two weeks after the US economy was roiled by lockdown measures in mid-March.

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Executives estimate the company last quarter took a $1.4 billion hit due to the coronavirus, with $1 billion of that thanks to shuttered theme parks and docked cruise ships. Of that billion, over half was the result of its US parks, Disneyland and Disney World, being closed for two weeks — just a taste of the financial pain to come for the company, even after it furloughed 100,000 workers.

While Shanghai Disneyland is set to reopen May 11, top brass offered no answers as to when its cash-cow US parks will begin to reopen.

“While it’s too early to predict when we’ll 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,” CEO Bob Chapek said.

At the China park, that will include advanced reservations, social distancing, masks for workers and guests, temperature checks, and contact tracing. Those measures offer a preview of what could be the new normal at its US parks — and other large venues around the country — once they reopen.

Now, the good news: Disney+ has amassed 54.5 million subscribers. After launching in the US in the fall, the service has expanded to western Europe and India, with Japan, the Nordic countries, and Latin America later this year. Disney is already close to hitting its forecast target for 2024 of 60 million-90 million subscribers.

But Disney+, Hulu, and ESPN+, which together make up its direct-to-consumer division, are losing money — the loss-leading strategy has long been the company’s plan, long before the first case of COVID-19 was diagnosed.

“As we said, our company’s top priority, and the key to our growth, is our direct to consumer group,” Chapek said. “I’m pleased to say that the response to Disney+, in particular, has exceeded even our highest expectations.”

As exclusive content has cemented itself as the coin of the streaming realm, Disney is hedging its bets that a robust, well-stocked streaming service with hot franchise titles like Marvel and Star Wars will only continue to increase the value of its biggest asset: the brand. It’s the brand that drives people to theme parks and cruise lines — typically its largest money earner.

Meantime, executives highlighted numbers at ESPN as a plus — even though ad revenue was down 8 percent in the quarter and there are no live sports.

The network pushed the debut of the Michael Jordan docuseries “The Last Dance” ahead by two months, and its first six episodes made it ESPN’s highest-rated documentary of all time. The live NFL draft delivered its largest-ever audience of 55 million viewers who tuned into broadcasts made up of over 600 live cameras from inside people’s homes. Overall, primetime ratings were up 11 percent among adults 18-49 in April, compared to the same time last year.

“ESPN has truly stepped up in the absence of live sports,” Chapek said. “If it’s a gradual process for sports to return for a period without spectators, we can count of ESPN to bring the same level of innovation as we saw with the NFL draft and continue to deliver a great experience”

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