The third quarter earnings report from the Walt Disney Company shows the magnitude of the COVID-19 shutdown to all aspects of the business.
Specifically in the Parks, Experiences and Products division, losses were reported at $3.5 billion in revenue, a decrease of 85%. This resulted in an operating loss of $2 billion.
On the subsequent earnings call, Christine McCarthy Chief Financial Officer said that Walt Disney World is generating a "positive net contribution" at current attendance levels, with demand expected to grow. However, upside at Walt Disney World is less than originally expected, attributed to the recent surge in COVID-19 in Florida. According to McCarthy, spending is very strong per capita, likely resulting from a pent up demand for Disney.
Bob Chapek said that there was ample demand prior to the surge in Florida cases, which subsequently dropped off as guests became wary of traveling to Florida. 50% of guests are still traveling from a distance, with the remainder coming from within Florida. Attendance from long distance visitors has been replaced by local and annual passholders where possible, but it was noted that locals do not carry the same spending value as those who travel further and stay for longer. A higher level of cancellations has also been seen since the rise in cases which was not apparent when the parks were announced to be reopening.
Elsewhere at the company, Media Networks was down 2%, Studio entertainment was down 55%, and Direct-to-Consumer and International (which includes Disney+ and its more than 60 million global subscribers) was up 2%.
“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, Chief Executive Officer, 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.”
You can view the full earnings report here, and below is the Parks, Experiences and Products statement.
Parks, Experiences and Products
Parks, Experiences and Products revenues for the quarter decreased 85% to $1.0 billion, and segment operating results decreased $3.7 billion to a loss of $2.0 billion. Lower operating results for the quarter were due to decreases at both the domestic and international parks and experiences businesses and to a lesser extent, at our merchandise licensing and retail businesses.
As a result of COVID-19, our domestic parks and resorts, cruise line business and Disneyland Paris were closed for all of the current quarter. Our Asia parks and resorts were closed for a portion of the current quarter, as Shanghai Disney Resort re-opened in May and Hong Kong Disneyland Resort re- opened in late June (Hong Kong Disneyland Resort closed again in July).
The decrease at licensing and retail also reflected the impact of COVID-19, which resulted in decreases in licensing earned revenue and lower minimum guarantee shortfall recognition, the closure of our Disney Stores for most of the quarter and the write-down of store assets.
We estimate the total net adverse impact of COVID-19 on segment operating income in the quarter was approximately $3.5 billion.
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