Disney's fiscal fourth-quarter exceeded revenue expectations but losses of $710 million for the period ended October 3, 2020, contributed to the House of Mouse recorded a GAAP net loss of $2.83 billion for the fiscal year. According to WDWNT, it is just the first time in over forty years that Disney has reported an annual loss.
Much of Disney's financial struggles can be attributed to its Parks, Experiences and Products and Studio Entertainment divisions, the two segments of the company that were most impacted by COVID-19. Due to the global pandemic, Disney was forced to temporarily close its parks around the world. While some (Walt Disney World in Florida, Tokyo Disney Resort, Shanghai Disney Resort and Hong Kong Disneyland Resort) have since opened with limited capacity, others (Disneyland in California) remained closed indefinitely.
The disrupted resulted in just fourth-quarter revenue of just $2.58 billion for the division, which is down 61% year-over-year. For the fiscal year, Disney reported annual revenue of $16.50 billion, which is down a whopping 37% year-over year.
"We estimate the total net adverse impact of COVID-19 on segment operating income in the quarter was approximately $2.4 billion," Disney said in its earnings report.
On the Studio Entertainment side, Disney was forced to delay, or in some cases, shorten or cancel theatrical releases (as well as play performances). Most notable was Disney's live-action remake, Mulan, which was delayed multiple times before releasing on Disney+ with a premium price ($30). It's estimated that Mulan made between $60-$80 million from its digital-only domestic debut, which is almost certainly well below what it would've made in theaters.
Studio Entertainment segment reported fourth-quarter revenues of $1.59 billion, down 52% year-over-year. For the fiscal year, the division reported $9.6 billion, which is down 13% year-over-year.
"Theatrical distribution was lower as there were generally no significant worldwide theatrical releases in the quarter compared to The Lion King and Toy Story 4, which were in release in the prior-year quarter," the company said. "The decrease was partially offset by lower marketing expense for future releases. The current quarter was negatively impacted by COVID-19 as many theaters throughout the world were either closed or operating at reduced capacity."
Disney is still trying to figure out how to best navigate the pandemic when it comes to its movies. The company is selectively releasing some of its films through its Disney+ streaming service while continuing delay its biggest blockbusters as it holds out for a theatrical release. After multiple delays Pixar's Soul will now go directly to Disney+ on December 25. Marvel's Black Widow, which was originally scheduled for May 1, 2020, has since been pushed back to May 7, 2021.
If there was a single bright spot in Disney's earnings report, it is the success of Disney+. Since launching last year, the streaming service has built up an audience of more than 73 million paid subscribers.
“Even with the disruption caused by COVID-19, we’ve been able to effectively manage our businesses while also taking bold, deliberate steps to position our company for greater long-term growth,” said Bob Chapek, Chief Executive Officer, The Walt Disney Company. “The real bright spot has been our direct-to-consumer business, which is key to the future of our company, and on this anniversary of the launch of Disney+ we’re pleased to report that, as of the end of the fourth quarter, the service had more than 73 million paid subscribers – far surpassing our expectations in just its first year.”
Despite the significant losses, Disney actually exceeded expectations on revenue, and some of that can be attributed to the growing success of Disney+. Back in October, Disney CEO Bob Chapek announced that the company was making a concerted effort to shift its focus towards streaming and it seems the move is paying off. With the coronavirus seemingly not going away any time soon, Disney will have to continue leaning on its streaming services.