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Disney Posts Loss as COVID Hurts Business

The Walt Disney Company logo
(Image credit: Disney)

Hard hit by the COVID-19 pandemic, The Walt Disney Co. reported a loss in its fiscal third quarter.

The company reported a loss of $4.7 billion, or $2.61 a share, compared to net income of $1.8 billion, or 79 cents a share, a year ago.  The earnings included a $5 billion restructuring charge.

Revenues fell 42% to $11.8 billion.

“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,” said Bob Chapek, CEO, The Walt Disney Company. “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 strategy, which we view as key to the future growth of our company.”

CFO Christine McCarthy said COVID-19 cost the company $3 billion, mainly at its parks unit.

Chapek said that the company’s top priority is its streaming services. On the company’s earnings call he said the company now has more than 60.5 million Disney Plus subscribers.

The company said that Disney Plus subscribers will be able to watch the film Mulan--whose release was delayed by the pandemic, for $29.99 on Sept. 4. At that time, the film will be released in theaters, where theaters are open.

In the company’s earnings report, the company said that as of June 27, Disney Plus had 57.5 million subscribers, ESPN Plus had 8.5 million subscribers and Hulu had a total of 35.5 million subscribers. Disney Plus had monthly revenue per paid subscriber of $4.62. ESPN’s monthly revenue per sub was $4.18, down 22% from a year ago. Hulu’s SVOD revenue per sub was down 10% to $11.39, but its Live TV plus SVOD revenue was up 17% to $68.11.

Chapek also said that the company would be launching an international direct-to-consumer entertainment streaming service under the Star brand in 2022. The service will rely on programming from Disney’s TV, movie and studio operations.

The Star launch will use the same formula as Disney Plus, using a tech platform, programming and brand already owned by the company, Chapek said. He noted that Hulu has “no brand awareness outside the U.S.” Hulu also uses third-party content, which the new Star service will not.   

Operating income for Disney’s cable networks rose 50% to $2.5 billion. Revenue was down 10% to $4 billion. Operating income was up due to lower programming and production costs at ESPN. Ad revenue was down because of the absence of major sporting events. 

At FX income was up because of reduced marketing and programming costs and the shift of original programming to later quarters. 

At Disney’s broadcasting operations, operating income rose 55% to $477 million, as revenues increase 12% to $2.5 billion. The company said operating income increased because of lower network and production costs, an increase in affiliate revenue and higher programming sales. Ad revenue was down 17%.

Disney’s direct-to-consumer and international unit had an operating loss of $706 million, up from $562 million a year ago. Revenues rose 2% to $4 billion. Launch costs for Disney Plus contributed to the loss. Results were up at ESPN Plus, due to subscriber growth and higher income from UFC pay-per-view events.