Disney's Free Pass Extended -- Heard on the Street

By Dan Gallagher 

As a family-friendly entertainment giant, Walt Disney Co. knows how to emphasize the positive.

The company's quarterly results Tuesday afternoon were certainly an exercise in that. The quarter ended June 27 was the first to reflect the full effects of the coronavirus pandemic and its related shutdowns. Predictably, theme-park revenue plunged 85% year-over-year to just $983 million. Studio entertainment revenue slid 55% to $1.7 billion, as movie theaters remain shut down. The company noted that the last segment got some help by selling content such as the latest "Star Wars" movie to its Disney+ streaming service.

That service is one of the few good things Disney has going for it right now. So naturally, it got a lot of attention from the new chief executive, Bob Chapek, during the company's call. The company said Disney+ had 57.5 million paid subscribers by the end of the quarter, and Mr. Chapek noted that about 3 million have been added since.

That means it took Disney+ about nine months to reach a level that took Netflix about eight years to achieve. It also means Disney now has a viable direct distribution channel for its movies, which the company seems eager to test. Mr. Chapek announced plans to shift the live-action version of "Mulan" from a theatrical release to a "premiere access" offering on Disney+. The movie will cost $30 to stream -- a premium to other recent films pushed into streaming by theater shutdowns. But with Mulan's reported production budget in the $200 million range, Disney has some costs to recoup.

The positive streaming news was enough to send Disney's share price up 5% in after-hours trading. Streaming has provided an important backstop to the company at a time when nearly everything else is going wrong. Disney's share price may be down 19% this year, but it has still outperformed most of its media, theme park and movie peers.

Even so, other key parts of the business still have a big hole from which to climb out. Chief Financial Officer Christine McCarthy noted Tuesday that revenue from the limited reopening of some of its theme parks has been less than expected, due primarily to the recent surge of Covid-19 cases in Florida. Disney may be riding out this storm, but it isn't abating just yet.

(END) Dow Jones Newswires

August 04, 2020 18:57 ET (22:57 GMT)

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