disney shakes up streaming approach after losing nearly 5 billion due to pandemic 1024x576 1

Streaming was about the only thing working for Walt Disney Co. amid a pandemic that has all but paralyzed its theme parks, live productions and cruise line, so Disney is going to rely on that direct-to-consumers pipeline even more.

Disney (DIS) reported a depressing financial performance Tuesday that included a quarterly loss of nearly $5 billion due to COVID-19 and long-term depreciation of its European linear television channels. The only segment in the media empire to grow amid the pandemic included Disney+, the company’s streaming service that launched late last year and has already grown to more than 60 million subscribers.

After detailing those numbers, new Disney Chief Executive Bob Chapek outlined a plan Tuesday that will leverage Disney+ and attempt to replicate its success. Disney will slightly unclog the studio’s pandemic-paused movie pipeline by premiering its long-delayed “Mulan” live-action feature on Disney+ as a pay-per-view option for $30 on Sept. 4 and launch a new streaming service overseas. Disney will release the big-budget feature in theaters in countries where the facilities are open, and charge a similar price in other countries that are sheltered in place due to COVID-19.

“We see this as an opportunity to bring this incredible film to a broad audience currently unable to go to movie theaters, while also further enhancing the value and attractiveness of a Disney+ subscription,” Chapek said in a conference call.

Chapek also said that Disney now expects to launch a new international streaming service under its Star brand in 2021. Disney owns most of Hulu, a streaming service in the U.S. that packages its own content and licensed shows, and seems to be creating something similar for an international audience that will be paired with Disney+.

“The offering will be rooted in content we own from the prolific and critically acclaimed production engines and libraries of ABC Studios, Fox Television, FX, Freeform, 20th Century Studios and Searchlight,” Chapek said. “In many markets, the offering will be fully integrated into our 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.”

Disney shares initially dropped 2% after the results hit but they rose about 10% in morning trading Wednesday following the twin streaming announcements. Disney’s shares are down 19% this year, while the broader S&P 500 index (SPX)  is up 2% in 2020.

The “Mulan” move could help Disney drive revenue in a fallow period, and is another nail in the coffin of “window” periods, which have allowed new films to only be shown in theaters for roughly three months. Last week, AMC Entertainment Holdings Inc. (AMC) and Comcast Corp.’s (CMCSA) Universal Filmed Entertainment Group announced a deal that severely shortened that window to less than three weeks, and now Disney will completely surpass theaters in most of the world with one of the most anticipated releases of the year.

Disney could use the revenue help. Sales plunged 42% to $11.78 billion in the third quarter from a record $20.25 billion a year ago, the company reported Tuesday, while the bottom line crashed to a loss of nearly $5 billion. Disney reported a loss of $2.61 a share, compared with net income of 79 cents a share a year ago, largely due to a $4.95 billion impairment charge that “reflected the impacts of COVID-19 and of the ongoing shift of film and television distribution from licensing of linear channels to a direct-to-consumer business model on the International Channel businesses.”

After adjusting for that charge and other factors, Disney reported net income of 8 cents a share, compared with $1.34 a share a year ago. Analysts surveyed by FactSet had expected an adjusted loss of 64 cents a share on sales of $12.4 billion.


By Ian Dei

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