This week, Disney's going to try and convince investors everything is ok
The company prepares for it's fourth quarter earnings
Layoffs, theme park closures, increased case numbers, more movie delays, and Disney+ — these are just some of the topics Disney is likely to address on the company’s fourth quarter earnings call this week.
Earnings season has been particularly rough for Disney over the last eight months. The slight gains and positive bumps are outweighed by the fiscal devastation the company has suffered and the uncertainty that lies ahead. This week, Disney is going to try and convince analysts and investors that things will hopefully, finally, get better but whether or not that happens over the next couple months or half a year from now is the type of specificity analysts are going to want to know.
Ahead of the call, here’s a refresher on where Disney’s major divisions stand:
Expect Disney executives to spend quite a bit of time focusing on streaming. This makes sense. It’s the first public call since Disney’s reorganization designed around a company-wide emphasis on streaming. It’s also the last public call ahead of Disney’s big special streaming day for investors, where CEO Bob Chapek and his team will outline how Disney plans to grow its streaming empire.
We should expect to see some more growth for Disney+, especially overseas as it launches in more territories. The company is projected to hit 155 million subscribers by 2024 — a wild figure considering that before Disney+ launched, former CEO Bob Iger and his team projected anywhere from 60-90 million subscribers in the same time frame. Subscriber boasting, especially internationally, is going to be one way for Disney to show its strength at a time when it really doesn’t have much. By that same logic, I would not be surprised if we got some figures for The Mandalorian’s return and Mulan. The former is something Disney can brag about, the latter is something executives know analysts will ask about.
Since streaming is clearly where Disney wants to invest its time and money, expect analysts to go on the offense. How is Disney planning to restructure its content strategy around Disney Plus, Hulu, and ESPN+. Disney laid off hundreds of employees from ESPN and some other roles in part because of the restructuring. Layoffs may have been necessary both fiscally and as part of the ongoing pivot, but now Disney executives need to explain how aggressive they’re going to actually be in an effort to pull in a significant profit.
It’s one thing for a company to say they’re all in on streaming — it’s another to do it. Disney needs to prove they’re not all talk.
Disney’s last two major films of the year, Death on the Nile and Free Guy, are officially off the calendar. My bet is one goes the premium video-on-demand route, the other gets a 2021 theatrical release. With those two movies up in the air, however, all eyes are on Disney’s 2021 plans, and how executives are feeling about the theatrical landscape heading into the new year.
Financially, Disney has been able to point to lower amortization, marketing and distribution costs because there’s simply no movies to release. Those lower costs, however, are offset by a lack of revenue coming in due to movie delays and smaller revenue portions via on-demand titles. Disney’s 2021 at the theaters kicks off on February 12th with Shang-Chi and the Legend of the Ten Rings. Will theaters be open by February 12th on a level that Disney needs? It’s impossible to tell. Cases are currently rising and, as we head into the winter months, it’s uncertain how that could affect the virus spreading.
Although Disney executives haven’t said much about their 2021 theatrical plans yet (again, I expect them to on the call), other executives at studios and theater companies in the same space have addressed it. AT&T (WarnerMedia parent company) CEO John Stankey said they aren’t optimistic about the theatrical industry bouncing back anytime soon, or theaters operating on a mass scale in the near future. AMC CEO Adam Aron told analysts on his company’s own earnings call that AMC has “sufficient liquidity to get through the beginning of 2021,” but it’s dependent on studios releasing films.
If studios like Disney and Warner Bros. don’t think the time is right, will they? The alternative option is to release movies via on-demand options and release others on streaming platforms like Disney+ and HBO Max. These will never make the type of revenue that theatrical releases for blockbusters did pre-COVID, but at some point, films just have to start being released. Because of how phenomenally shit 2020 has been for Disney’s theatrical slate, 2021 is shaping up to possibly be on par with its historic, record-breaking 2019. Whether or not that actually happens, however, is something executives need to prepare analysts and investors for.
Parks and Experiences
Disney’s parks will be a key conversation during this week’s earnings. Last week, I wrote about Disney’s massive Parks issue. Executives can’t control state and federal governments; they can’t control the virus; they can’t control people’s fears about being in parks with hundreds and hundreds of other people.
How does Disney solve those issues? Disney’s Parks industry is seeing billions upon billions of dollars in losses. The company has laid off nearly 30,000 employees in an attempt to try and control losses. Disneyland executives are publicly fighting with the state of California. Even if Disneyland opened (and I don’t think it should), or even if Disney World were able to open even under less restrictive options, Disney can’t control whether people will actually show up. They can’t predict consumer behavior. As I wrote last week:
I’m sure executives would have loved to boast about Disneyland opening to try and soothe concerns, even if Disney World’s reopening hasn’t shaped up the way executives hoped. A reopened Disneyland — the park that started it all, a big part of why Disney executives are gathered around a virtual table today — would do wonders for morale, I’m sure.
Analysts and investors want to know how Disney is going to turn its multi-billion dollar industry into something that starts to generate revenue again. Disney can point to cruises being allowed to take off again in the coming months as a way that its Parks and Experiences division can move forward, but the reality is that things will continue to be a fight for the House of Mouse as governments look at rising cases and decide to keep things closed or close them again.
ESPN, ESPN, ESPN. What happens to Disney’s most important cable network?
Disney has laid off hundreds of people from its sports network as it pivots toward streaming. Some of this is consolidation, but some of it is a clear focus on the future. Is the future of ESPN linear or a harder pivot to digital-first? Is it streaming focused? How are the leagues feeling about this? These are questions that Chapek and his team will have to address. It’s no secret that people are cutting cable at an increasingly fast rate. But will the pivot work the way that Disney needs it too? These are all questions for Chapek and his team.
Aside from ESPN, expect some comments on the fall and winter programming slates. There’s less TV shows than normal this year, and that might continue into 2021 as production picks up and pauses. What does this mean for advertising? Advertising came back up in the last quarter, which Disney executives pointed to as a sign of healthiness in the industry. Expect that to continue in the most recent quarter, but with questions about whether that’s enough to stave off heavy losses in other sectors. Spoiler alert: nope.
Disney’s earnings season once again is about trying to put on a good face, nod, and pretend like everything is going to be okay. Will it? Time will tell.
Disney’s earnings will be reported on November 12th after the bell, with the earnings call not long after.
Free Guy and Death on the Nile taken off 2020 calendar
It sure does look like Free Guy and Death on the Nile are moving to 2021. Both films were set to open on December 11th and December 18th respectively, but now are unset. These were Disney’s last movies of the year set for theaters. Now, one of Disney’s last movies of 2020 will be Soul on Disney+. (Deadline)
Watch the Star Wars Holiday special return in Lego form
The first trailer for the Lego Star Wars Holiday Special has arrived and it’s adorable. The movie takes place right after Star Wars: The Rise of Skywalker, and follows Rey and her pals as they try to prepare for Life Day (Christmas in the Galaxy). Something goes wrong and timelines start to interweave. Prepare for young Luke Skywalker, old Luke Skywalker, and Chancellor Palpatine dunking on a topless Kylo Ren. (YouTube)
Buena Vista Street opens up in Disney’s California Adventure
Disneyland is still closed, but Downtown Disney has remained open. This allows people to do some shopping and eat, not actually go on rides. To try and extend Downtown Disney, the company is reopening Buena Vista Street. It will reopen on November 19th. (The DisInsider)
ABC sees north of six million viewers on election night
While viewership on election night was down for just about everyone (save Fox News), ABC did see 6.1 million people tune in. It was the first time in 12 years that ABC was the most watched broadcast network on election night, according to Deadline. (Deadline)
I wonder if they are going to address the expectations for Disney+ in Latin America. They are coming down pretty agressively in Brazil, teaming up with Rede Globo and even The Mandalorian will be exhibited on TV to attract people to Disney+ before its launching.