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Disney digital gains offset by IRL lows

The media giant's parks, experiences and products segment took a US$1-billion hit due to COVID-19, while DTC & international's revenue tripled in Q1.
May 6, 2020

With theme parks and retail stores closed, cruise ships and tours suspended, and significant disruptions to the supply chain, Disney took a big hit in Q2 due to the COVID-19 pandemic and ensuing shutdowns. Several of its segments were affected, most significantly parks, experiences and products, which collectively took a US$1 billion hit.

The segment’s revenues decreased for the quarter by 10% to US$5.5 billion and the operating income dipped by 58% to US$639 million, due to decreases at both the domestic and international parks and experiences businesses. The games and merchandise licensing businesses also declined, to a lesser extent than parks, but Disney did not specify the break down.

Merchandise licensing saw a decline over last year: While 2020 figures were offset by new Frozen merch, it wasn’t enough to make up for the sales tied to Mickey’s 90th birthday or the Avengers movie, releasedin Q2 last year. COVID-19 also adversely affected merchandise licensing, Disney said.

Over on the theatrical side, Disney also delayed, and in some cases shortened or cancelled, film releases, as well as suspended stage play performances—all of which fall within the studio entertainment segment.

Revenues in the studio entertainment category increased by 18% to US$2.5 billion, though the segment operating income decreased by 8% to US$466 million. Disney didn’t specify what led to the gains, but the operating income decrease was to due to lower results from legacy operations and higher film impairments and dips in theatrical distribution and stage plays, partially offset by an increase in TV and SVOD distribution.

Several films went on Disney+ early to compensate for shortened theatrical windows, including Onward (pictured), which was released on March 6 domestically before many of the COVID-19 theaters closures in mid-March.

On the media networks, direct-to-consumer and international side, there were advertising sales impacts. There were also disruptions in production and availability of content, including the cancellation or deferral of most sports coverage.

Each of the networks’ financial results dipped slightly, including Disney Channel due to a decrease in affiliate revenue and higher marketing costs. There was a decrease in subscribers, which was partially offset by an increase in contractual rates.

Direct-to-consumer and international revenues were up to US$4.1 billion in Q2 2020, up from US$1.1 billion last year. Segment operating loss increased to US$812 million, from US$385 million, due to launch costs for Disney+ and the consolidation of Hulu.

Due to all of these losses, Disney is estimating that COVID-19 led to as much as US$1.4 billion in losses, inclusive of the US$1 billion loss in the parks segment.

About The Author
Alexandra Whyte is Kidscreen's News & Social Media Editor. Contact her at awhyte@brunico.com

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