Disney, Hemorrhaging Money in Q3, Places a “One-Off” Bet on ‘Mulan’

Let's unpack that complicated Q3 earnings report.

mulan 2020
How healthy is Disney in the pandemic? (Pictured: Mulan.) Disney

Despite the celluloid smiles and patented Hollywood endings featured across their litany of products, all is not sunshine and roses for The Walt Disney Company (DIS). According to the Mouse House’s Q3 earnings report, revenue last quarter was $11.87 billion, which missed expectations and marked a 42% drop compared to the year prior. As we’ve covered extensively over the last several months, the COVID-19 pandemic has leveled the company’s parks and resorts business, which typically accounts for one third of Disney’s annual revenue. Q3 saw a $3.5 billion hit in the parks division even as multiple sites continue to partially reopen.

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As of this writing, Disney stock stood at $117.29. Overall, the company has seen its share price fall 19% this year as the coronavirus has exposed how leveraged Disney’s brick and mortar operations are.

“This report has done little to stop Disney’s financial hemorrhage, with its parks and other entertainment assets unable to operate while the pandemic is still spreading,” Haris Anwar, senior analyst at Investing.com, told Observer.

If there’s one silver lining to this largely terrible fiscal year, it’s that Disney’s direct-to-consumer businesses have thrived amid global home confinement. Disney+, which boasted 54.5 million paid subscribers in early may, now stands at 60.5 million. Across Disney+, Hulu, and ESPN+, the company houses upwards of 100 million paid subscribers worldwide. By year’s end, Disney+ will be operating in nine of the top 10 economies across the world, according to Disney CEO Bob Chapek.

As a part of that push and as a result of the continued uncertainty surrounding American movie theaters, Disney will reroute blockbuster Mulan to a premiere access tier of Disney+ starting September 4 at $29.99 in the United States. In theatrical markets that are safe to reopen, the movie will receive a traditional big screen release. Chapek said on the company’s earnings call that he views this more as a “one-off” strategy and not necessarily a new business model.

“In an otherwise bleak earnings outlook, Disney’s explosive growth in its streaming business is the one saving grace, which is grabbing investor attention and causing the stock to rise,” Anwar said. “The company is taking full advantage of the stay-at-home environment and adding subscribers at a robust pace. Investors are looking beyond the tough quarter to continued reopening of parks, while Disney+ is expected to see further growth.”

Disney, Hemorrhaging Money in Q3, Places a “One-Off” Bet on ‘Mulan’