• by Thom Forbes  @tforbes, May 6, 2020

On the positive side, Disney had 54.5 million paid subscribers to its new Disney+ streaming service on May 4, up from 35 million on March 28. Just about everything else in its Q2 2020 earnings report looked like a precipitous downward slope on the Expedition Everest ride at Animal Kingdom in Lake Buena Vista, Florida.

“The company said … the overall financial impact of the coronavirus shutdown on quarterly income from continuing operations before income taxes was as much as $1.4 billion. Overall, Disney’s total revenue in the quarter was $18 billion, edging Wall Street estimates, but adjusted earnings per share fell far short of the bar due to the COVID-19 crisis,” Patrick Hipes writes for Deadline.

“The pandemic’s impact was especially pronounced in its Parks, Experiences and Products segment. Disney estimated the impact on its operating income for that segment was about $1 billion mostly due to revenue lost because of closures. The company reported a 58% drop in operating income for the segment this quarter compared to the same period last year,” write  CNBC.com’s Lauren Feiner and Sarah Whitten.

“On the company’s analyst call, [new CEO Bob] Chapek discussed the new procedures Disney would put in place at its parks once they reopen, including limiting guest capacity, implementing density control and health precautions like temperature checks and masks,” they continue, adding that its newest park, Shanghai Disneyland, will reopen on May 11. 

“There are two schools of thought on Disney. One is that the storied company and its iconic brands have survived numerous economic downturns -- even a world war. This view holds that the company’s many fans will return quickly once the pandemic ebbs. Executive chairman Robert Iger stressed this, stating on Tuesday’s call that ‘we believe people will resume familiar activities once this pandemic ends,’” Dan Gallagher writes for The Wall Street Journal.

“Wall Street seems to believe this as well,” he adds, pointing out that its share price “has fared much better than peers in the theme-park, cruise-ship or movie-theater categories.”

“The more realistic school of thought, reflected by at least four analysts who have downgraded Disney shares to neutral ratings since March, is that a global pandemic is unlike any challenge the company has faced in the past. Media analyst Michael Nathanson said Monday that the current situation ‘creates significant and unrivaled earnings risk for the foreseeable future,’” Gallagher continues.

“Disney’s theme parks have long been watched as a bellwether for the broader economy. It is unclear whether the masses -- now reeling from widespread pay cuts and job losses -- will be able to afford Disney vacations when the gates do reopen. It took two years for Disney’s parks and cruise ship division to fully recover from the last recession,” writes  Brooks Barnes for The New York Times.

“The company must also navigate other troubling media trends. TV advertising (Disney owns ESPN, ABC, FX and other channels) is plummeting. Newly cost-conscious consumers are also canceling their cable service in larger numbers. At least 1.6 million people cut the cord between January and April, about 20% more than analysts had expected,” Barnes continues.

But Disney+, which launched Nov. 12, as “the entertainment giant’s online hub to stream almost everything it produces, has grown into a megahit. Disney Plus streams shows and movies from Disney’s franchises including Star Wars, Marvel and Pixar, and all the family-friendly movies and animation from Disney itself, plus new originals and programming it acquired by taking over Fox, like ‘The Simpsons,’” write  CNET’s Mike Sorrentino and Joan E. Solsman.

Meanwhile, CEO Chapek “has said that more of its movies could circumvent cinemas as they remain shuttered around the world due to the coronavirus pandemic” and “that it will will review its release slate ‘case by case’ going forward into the summer,” Bob Arnold writes for Yahoo News. 

“We very much believe in the value of the theatrical experience. As you know, we had seven $1 billion films in calendar year ’19,” Chapek said on the earning call transcribed by The Motley Fool. “But we also believe that either because of changing and evolving consumer dynamics or because of certain situations like COVID, we may have to make some changes to that overall strategy.” 

As for the literal billion-dollar question about when Disneyland and Disney World and its other theme resorts might reopen in the U.S.? 

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

But “it could be a while before Disney swings open the gates to the Happiest Place on Earth,” points out  Brady McDonald for the Orange County Register. “California theme parks can’t reopen for months based on a plan laid out by Gov. Gavin Newsom in a four-stage road map for reopening the state’s economy.”