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Just when Americans thought it was safe to return to fun and games, the Delta variant abruptly changed the situation, and no company can feel the pinch more than Walt Disney Co.
DIS Disney,
which is due to release its third quarter results Thursday afternoon, depends largely on face-to-face entertainment – whether in theaters, at theme parks or at sporting events. All of those ventures are on hold, however, as Disney navigates through the variant and possibly more.
With masks now mandatory for everyone indoors in California, New York and other states – regardless of vaccination status – Disney could take a financial hit at theme parks, theaters and theaters. live productions. And this is in addition to the difficult changes that Disney has already started.
Start with theaters, the cornerstone of Disney’s film division. The debut of “Jungle Book” simultaneously on Disney + (for a fee) and in theaters on July 30 underscores the uncertainty. The comedy adventure grossed $ 34 million in North America and $ 30 million on Disney + worldwide. Last week, Scarlett Johannson, who played super assassin Black Widow, sued Disney, claiming the double opening of “Black Widow” on Disney + and in theaters on July 9 “dramatically” slashed box office revenue. , which cost him millions of dollars in compensation. Disney replied that the lawsuit had “no merit.”
See Also: Scarlett Johansson Sues Disney Over ‘Black Widow’ Streaming Release
Before the pandemic and before Disney + launched in November 2019, Disney’s Marvel movie roster was killing her in theaters. “Avengers: Endgame” (April 2019) and “Captain Marvel” grossed $ 357 million and $ 153 million respectively in their 2019 national opening weekends.
Bowing to an increase in COVID cases and hospitalizations in Florida and California, homes at Walt Disney World Resort and Disneyland Park, the company has reintroduced mask requirements for attractions and indoor locations. The immediate impact, if any, on footfall is difficult to assess, but should show up in company forecasts.
Then there’s the sports programming, the centerpiece of the Mickey Mouse empire thanks to ESPN. More than a few TV executives may have experienced heart palpitations from the ratings carnage of NBCUniversal’s presentation of the Tokyo Olympics – down 42% from 2016 – and what that could mean on demand for live sports even as ESPN provides billions in rights for sports events.
In the end, that leaves Disney in a situation similar to what it has been in for the past year and a half: relying on its young streaming service to clear up doubts about the rest of its offerings.
Read more: Your streaming subscriptions have reshaped Disney and turbocharged Netflix – now you’re making more money
Despite a momentary return to some normality due to vaccinations, Americans’ appetite for video streaming services remains high: nearly four in five said they watched as much or more content than six months ago , were using more providers (4.5, up from 3.9 in a previous survey) and spending more on services ($ 55 versus $ 47), according to a JD Power survey of 1,209 people in June.
The list of streaming competitors is stupendous and deep: Netflix Inc. NFLX,
AAPL from Apple Inc.,
Apple TV +, T from AT&T Inc.,
HBO Max, AMZN from Amazon.com Inc.,
Prime Video, the CMCSA of Comcast Corp.,
Peacock, among others. But there are significant cracks at Netflix, where the net growth in paid subscriptions has slowed after the dizzying heights of video streaming audiences during the Great Lockdown of 2020.
Read more: After worst quarter for new subscribers, Netflix says rebound won’t be as fast as Wall Street expects
Maintaining a conservation rating on Disney shares, Needham analyst Laura Martin says consensus estimates for Disney are “too high due to high near-term investment in [direct-to-consumer] in 2021, and another year of unclear profit contributions from theme parks, ESPNs, and movie releases as vaccines slowly roll out around the world.
“We are concerned that theme parks, cruise ships or movie theater attendance may not return to pre-COVID levels in 2021, which current assessments anticipate,” Martin said in a July 1 memo. “We believe Disney has a sufficiently strong balance sheet to withstand a longer decline in profits induced by COVID. “
What to expect
Earnings: Analysts on average expect Disney to report earnings of 55 cents per share, down from 8 cents per share a year ago. Analysts had expected 73 cents per share at the end of March.
Contributors to Estimize – a crowdsourcing platform that brings together estimates from Wall Street analysts as well as buy-side analysts, fund managers, business executives, academics and others – are planning to earnings of 55 cents per share on average.
Income: Analysts on average expect Disney to bring in $ 16.77 billion in third-quarter revenue. Contributors estimate predict $ 16.77 billion on average.
Movement of stock: Disney stock fell during the trading session after its last two quarterly earnings reports and after seven of its last 10. Disney shares have fallen 2% so far this year, while the Dow Jones Industrial Average DJIA,
which counts Disney as a component, gained 14.7% and the S&P 500 SPX index,
climbed 18%.
What analysts say
Disney analysts were uniformly surprised by a sharp drop in domestic box office sales for Black Widow, which premiered on Disney + at the same time. The superhero movie starring Scarlett Johansson plunged 67% in its second weekend, the worst of any Marvel movie from the Disney era.
“We believe a hot topic for management will be windowing tent content after Disney + Premier Access [DPA] ‘Black Widow’ debut (in addition to hitting theaters), ”Wells Fargo analyst Steven Cahall said in a note to clients on July 20. “DPA certainly cannibalizes the box office, but with Disney’s much higher turnout compared to theatrical divisions, its impact on revenue and profits is less clear, especially if that means less marketing spend. “
MoffettNathanson’s Michael Nathanson believes the Olympics audience should not reflect badly on Disney and suspects his sports offerings will show a rebound in Thursday’s results.
“These conglomerates with the return of flagship sporting events like Disney and ViacomCBS VIAC or rapid scale-up [adversting-based video on demand] platforms (again) like Disney and ViacomCBS should be able to report aggregate advertising revenue in 2Q 2021 close to 2Q 2019, ”Nathanson wrote in an August 2 note.
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