As Disney’s legacy businesses continued to be hammered by the coronavirus pandemic, CEO Bob Chapek laid out a path forward for the company.
On a call with investors, the executive said that Disney would release live-action remake Mulan on Disney+ for an additional fee and would push more aggressively into streaming with a new global general interest service. The news, which came minutes after Disney disclosed a $4.7 billion loss during the spring quarter, impressed investors, who sent the stock up 5 percent during after-hours trading.
Investors were expecting a tough fiscal third quarter for Disney, which was forced to halt much of its business amid the pandemic. During the April-to-June period, its previously planned film releases continued to await their theatrical debuts, its theme parks sat empty, and its studio productions were halted. Disney’s Parks, Experiences and Products business saw the biggest impact during the period, taking an approximately $3.5 billion hit due to closures. Walt Disney World reopened in July, but the impact of that move won’t be known until Disney’s fiscal fourth-quarter results are released later this year.
Not all of Disney’s businesses ground to a halt, however. Disney+ continued to be a bright spot for the company, growing to an audience of 57.5 million subscribers during the period (60.5 million as of early August) and offering a home for the recent high-profile releases of Hamilton and Beyoncé’s Black Is King.
“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,” CEO Bob Chapek said in a statement. “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.”
Like its peers, Disney’s theatrical business has been reeling from theater closures. After pushing the release date for its live-action Mulan remake several times, the company took it off the 2020 release calendar entirely and also pushed back the planned debuts of several upcoming Star Wars and Avatar films. Though Chapek is calling Mulan‘s Sept. 4 release on Disney+ a “one-off” for the company, he also said they hope to study the launch and learn about how consumers will respond to the offering.
Studio revenues grew 18 percent year-over-year to $2.5 billion during the quarter and operating income dropped 8 percent to $466 million. Revenue at the company’s media networks division grew 28 percent to $7.3 billion and operating income increased 7 percent to $2.4 billion. In particular, ESPN continued to struggle to find new ways to entertain viewers without live sports and saw lower-than-average viewership.
Last quarter, when the effects of the pandemic were first being felt, Disney said the unexpected pause on its business resulted in a $1.4 billion hit. Disney has looked to reduce costs by cutting executive pay and stripping executive chairman Bob Iger of his salary. The company also conducted widespread furloughs, which impacted employees at Walt Disney Studios as well as Disney Parks & Resorts. And, in May, Disney said it would forgo its semi-annual dividend, which would save $1.6 billion in cash.
On a call with investors, Chapek reiterated that remains a “top priority and key to the future of our company.” For that reason, it will break theatrical windows to make Mulan available for $29.99. The company is also prepping a Star-branded streaming service, which will launch in 2021 and feature Disney-owned programming that may not fit into the Disney+ brand. Disney will disclose additional details about the service at an upcoming investor day.
Disney shares closed the day up nearly 1 percent.