Disney's Last 3 Months of Performance: Insights, Questions & Hope

Disney's Last 3 Months of Performance: Insights, Questions & Hope

Disney had probably its most difficult investor moment as it announced its earnings for what has been the worst quarter in any year of the company’s history. Disney is a story telling organization, and no story is perhaps better than its own. And the arc of this part of the story is exceptional. It’s important to know what went on and what it means going forward. We will share the highlights, the questions and concerns, as well as the hopes for going forward.

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To begin with, dialing into the call you are put on hold with music. Two pieces of music were played right before the conference call. The first was Olaf singing When I Am Older The lyrics includes the following:

  • This will all make sense when I am older. Someday I will see that this makes sense.
  • One day, when I’m old and wise, I’ll think back and realize, that these were all completely normal events.
  • I’ll have all the answers when I’m older, Like why we’re in this dark, enchanted wood.
  • Growing up means adapting. Puzzling out your world and your place.
  • See, that will all make sense when I am older. So there’s no need to be terrified or tense.

Conference Call Highlights

Here are the highlights of the quarterly call:


  • Nearly 4.7 billion was loss during this third quarter. Contrast this to last year they posted a profit of 1.43 billion.
  • Revenues are down by 42% compared to the same quarter last year to 11.8 billion. It was 20.3 billion a year ago.
  • There is still a small profit, with adjusted earnings per share coming in at 8 cents per share. It was a $1.35 a year ago.
  • That said, the dividend was suspended for 1st half of 2020. Board to determine whether to do a dividend toward the latter half of the calendar year.
  • Disney is sitting on some 23 billion in cash, cash equivalents and restricted cash at the end of this period. Much of this money was raised during March and April when low interest rates were available to U.S. corporations. It was a “get it when you can” insurance policy. They took advantage of that.

Direct to Consumer

  • Disney+ has reached 60.5 million subscribers domestically, 100 million paid subscription video on demand (SVOD) internationally . This includes markets such as Western Europe, India and Japan. Soon Disney+ will be in 9 of the top 10 economies in the world.
  • Mulan will be released on Disney+ on a premiere access basis September 4th, which will be $29.99 in the U.S. Where theaters are opened, it will be released there as well. Mulan will give them a chance to learn under the premiere access offering.
  • Shows like Hamilton and Black is King is bringing in new subscribers that were not coming in.
  • Mandalorian 2 is on its way. Marvel content (Loki, Falcon and the Winter Soldier, & WandaVision) is on the horizon, as they are able to re-enter production.
  • This part of the company is a “top priority and key to the future of the company” according to Chapek.
  • Disney will be releasing in 2021 a new international streaming service called “Star”. It will include the ABC, FX, Freeform, Searchlight and 20th Century Studio brands.
  • In many markets, the offering will be fully integrated into Disney’s established Disney+ platform from both a marketing and a technology perspective and it will be distributed under the Star brand which has been successfully utilized by the company for other general entertainment platform launches, particularly with Disney+ Hotstar in India.”
  • Why Star Brand instead of Hulu? Star is a successful distribution platform. Why not take great content and send it through that. Hulu takes third party content. Star will not. Hulu has no brand awareness or real international license abroad.

Movie Studio Entertainment

  • World wide theatrical results were dramatically lowered with closed theaters.
  • No significant titles were released, and the comparison to Avenger’s End Game and other major releases last year make the difference between this year and last significant.
  • What does Mulan’s situation say to theater owners? According to Chapek, Mulan is a “one off” as opposed to there being a new business model. But Disney is interested in learning from what happens in terms of the number of transactions.
Mulan film poster.

Media Networks

  • This group, which includes ABC, ESPN and Disney channels, reported a 48% jump in operation income to 3.15 billion. Operating income was up. Lower production and programming costs supported that same time period.
  • Higher programming sales were driven by release of some syndication shows like Simpsons and Modern Family.
  • ESPN was much lower because of the absence of sports programming. But ESPN benefited from lower production costs offset by lower advertising revenues.

Parks, Experiences and Products

Cinderella Castle for 50th Anniversary of Walt Disney World. Photo by J. Jeff Kober.
  • COVID-19 was an approximately $3.5 billion dollar impact on operating income at Disney’s Parks, Experiences and Products during that quarter. That is a decrease of 85% to a little less than one billion.
  • Roughly 50% of Walt Disney World’s guests are coming from outside of the general “local area” with the other 50% coming from in state.
  • Walt Disney World is driving a positive net result despite lower business. Low inbound travel is having an impact. However, that upside from re-opening is less than expected due to the surge of COVID-19 cases in Florida.
  • Reservation stream showed that Disney had demand. But COVID’s re-emergence caused greater trepidation. Disney replacing local and annual pass holders in place of those buying tickets and making hotel reservations.
  • Parks are showing a net positive contribution. Not opening a park if Dosmeu couldn’t create a revenue that showed a profit shortly thereafter. Not as high as it should be but in a net positive contribution. Shanghai opens in that same realm as well.
  • It was noted that per caps are very strong, and that visitors are hungry for the Disney experience. Also, many, including locals, have not yet seen Rise of the Resistance or even the full Star Wars Galaxy’s Edge.
  • Different guests have different values to their contribution. It is not because of price reductions.


  • Bob Chapek (CEO) & Christine M. McCarthy (Senior Executive VP and CFO) on the call. Bob Iger was not on the call.
  • A new investor call is coming shortly to overview more of the Direct to Consumer news.
  • Chapek noted that Disney earned 145 primetime Emmy nominations throughout all their brands. Mandalorian held 15 nominations alone.

Questions I Wish Were Asked:

  • Why are the water parks not open?
  • How can you afford a Splash redo at this time?
  • What is it going to take to get Disneyland reopened?
  • What did Bob Iger get from being on the California economic task force for reopening?
  • What is the fate of three new cruise ships?
  • Why can’t Mandalorian be in Galaxy’s Edge?
  • What messages are you sending to Performing Disney Cast Members by going off and doing other shows without their labor?
  • Questions I did not ask. Diversity–I would have asked a question about executive diversity. There’s still more to be done, but Christine McCarthy was very sharp, articulate and focused during the call.
Christine M. McCarthy, CFO, Walt Disney Company.

Rays of Hope

  • Many portfolio segments in the company are successful (Disney+)
  • No mention of layoffs. Not that this won’t happen, but it wasn’t put out there to appease investors. That’s not to say that it would be a bad idea to get rid of a lot of fat in the organization. A lean, mean team is favorable. But it should be done in good economic times, not bad.
  • There isn’t enough profit, but there is a profit at the parks. They are not operating those businesses that have re-opened at a loss.
  • Now is the time to see a park with few crowds.
  • Hard to imagine anyone wanting to do a takeover with so many challenges, and sitting on so much cash.
  • Perhaps this will shake those loose short term fair-weather investors and bring in more solid long-term believers. People who invest for decades, not days.
  • Investors drove stock up 5 percent during after hours trading.
  • The Walt Disney Company is not the struggling 7th place studio it was in the early 1980’s. It is now one of the most admirable organizations in the world.

I mentioned two pieces of music being played, the first being a piece of Olaf. The second was a Star Wars orchestral, reminding you that ultimately, this is about hope. That’s what George Lucas saw in those movies–messages of hope. Hopefully, hope can sustain Disney as it moves through this painful period.

A new hope. From Star Wars Rogue One.

J. Jeff Kober