The world’s largest entertainment company was attacked on all sides by the now unstoppable coronavirus pandemic
Almost two months ago, Bob Iger revealed his plans to retire after 15 years as CEO of Walt Disney, in which he reformed the empire with smart acquisitions and prophetic strategies that doubled revenue to $ 69.6 billion and increased the value by more than 500%. of your actions.
However, the coronavirus pandemic prevented these plans. Now, Iger comes to the rescue of the world’s largest entertainment company, which is being attacked everywhere by the coronavirus.
Theme parks are a major source of profit for Disney: according to UBS, only the ones it has in the U.S. (which include cruises) contribute nearly 30% of its operating income, almost US $ 4.5 billion. The first to close – those in Shanghai and Hong Kong – did so in January. In February, the one in Tokyo followed. Disneyland, Walt Disney World and Disneyland Paris did the same in mid-March. This month, the company will suspend 43,000 employees of the division without pay.
The reactivation will be just as complicated. In an interview with Barron’s last week, Iger suggested that the company will likely have to do temperature tests and impose other restrictions on visitors and employees. Fewer people may go if customers continue to avoid crowds after quarantine is over. “People will never visit theme parks like they used to,” says Dennis Spiegel, an industry expert who projects that visitor numbers in this area would drop 30% when they reopen.
Disney operates four cruises and plans to add three more. After the virus wreaked havoc on ships like the Diamond Princess, the U.S. Centers for Disease Control and Prevention (CDC) prohibited them from sailing until July. According to a Harris Poll survey, people would be willing to get back on a plane or stay in a hotel in about four to six months, but they wouldn’t be on a cruise ship for another year or more. This could further affect the company’s complexes in the US, which generated $ 4.5 billion in operating income last year.
Disney closed most of its more than 300 stores worldwide, another blow to its finances. The closing of the parks exacerbates the problem: Customers are much more likely to purchase Disney merchandise while touring the parks. Consumer goods generated $ 4.5 billion in revenue and $ 1.8 billion in profit before taxes and interest, according to UBS.
Film and TV production
Last year, Disney was the queen of cinema: it released seven of the 10 highest grossing films of the year and grossed $ 10 billion thanks to titles like Avengers: Endgame and Frozen II. No one knows what will happen in 2020. The studio had to postpone upcoming releases, such as the remake with actors from Mulán and Black Widow. Yesterday, the premiere of Pixar’s Soul was postponed from June to November. Jungle Cruise, with Dwayne “The Rock” Johnson, had already been postponed until next year.
The boreal summer season has already plummeted because the pandemic canceled the filming of new TV shows and movies across the industry. An indicator that brings hope: Unlike parks, shops, and cruises, which will suffer permanent loss of income, the movie box office can recover over time. “Now 2021 is full of brand new tanks,” says Paul Dergarabedian, senior media analyst at Comscore. “There are many people in their homes nostalgically remembering activities such as eating out or going to see a movie.”
It’s easy to see the concern about how important Mickey Mouse, Luke Skywalker, Iron Man and Buzz Lightyear are to Disney. In the case of the company’s television networks, the big problem is sports, which are also paralyzed. The most notable case is that of ESPN, which contributes almost three quarters of the US $ 5.4 billion in operating income of the company with subscriptions from its cable operators. Last year, Disney reported total operating income of $ 14.9 billion. The biggest risk is college football, which draws about a third of its viewers in the business, according to John Hodulik, an UBS analyst who estimates that competitors like NBCUniversal and Fox rely on sports for about a third of their income with cable TV. The NFL could go on to do its entire season [normalmente comienza a principios de septiembre]But the universities are beginning to propose that the matches of the last quarter of the year be postponed if necessary, since the universities would not be willing to force their students, who play ad honorem, to compete.
This is the only positive aspect for Disney. Last week, the company announced that Disney + already had more than 50 million subscribers, a brand Netflix took a decade to achieve. Disney will be able to use the service to release Artemis Fowl: The Underworld, which was to hit theaters in May, and Iger stated that the company would evaluate releasing more movies on the platform, according to Forbes Argentina.
But there is a downside. Movies don’t generate as much revenue uploaded to a service that comes out $ 5.99 a month, and tanks like Mulan are not going to be released in any way on Disney +. “The dynamics of the income flow make it necessary to recover the money invested by far,” says Dergarabedian. “To win $ 1 billion worldwide, you have to wait for theaters to reopen.”
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