Disney Results Offer Early Snapshot of Post-Covid Behavior and the 'WandaVision' Effect
May 13 2021 - 5:59AM
Dow Jones News
By Erich Schwartzel
Will a reopened U.S. economy prove a minus for Disney+?
This is the core question facing Walt Disney Co. before its
second-quarter earnings report Thursday, which should offer Wall
Street fresh insight on how the world's largest entertainment
company is faring, as its biggest markets emerge from
quarantine.
For the past 14 months, stay-at-home orders and closed
entertainment venues lifted Disney's streaming services to new
heights. Disney+ in March passed the 100 million subscriber mark
after just 16 months of operation, cementing its status as the most
successful streaming entrant since Netflix Inc. defined the field
years ago.
But last month, Netflix reported slower-than-expected growth in
subscribers, as consumers headed out of the house -- a
vulnerability facing Disney as well. The company has provided some
notable signs that the dampening effects of the Covid-19 era are
fading. Disneyland in Southern California has been reopened at
reduced capacity since last month. And "Cruella," a delayed movie
starring Emma Stone as the dog-hating villain of "101 Dalmatians,"
is scheduled to hit theaters on May 28.
Disney's quarterly earnings have lately provided a glimpse of a
company at a crossroads. Covid-19 immediately shut down two of its
core businesses -- parks and movies -- but also accelerated focus
and investment toward streaming services seen by Wall Street as
critical to its post-pandemic future. Good news about its streaming
growth kept the stock price soaring despite steep losses seen in
other divisions. However, summer travel and pent-up demand for live
events could depress sign-ups at Disney+ and its other services in
the months ahead.
Disney shares plummeted to their lowest point since 2014 when
the pandemic hit in March 2020 but had rebounded to record highs a
year later. Shares have been on a slight downward trend since then,
hovering around $180.
In February, Disney eked out a quarterly profit after two
quarters of losses. The second-quarter earnings, which cover
roughly the first three months of the year, are likely to reflect
continued disruption in parks and studio entertainment.
Walt Disney World in Orlando and other parks around the world
were open for the quarter, though at reduced capacity, and a
majority of U.S. theaters weren't operating until the last few
weeks of March. Disney's only major theatrical release so far this
year, "Raya and the Last Dragon," made $44 million after opening in
early March. In normal times, Disney animated releases typically
gross more than $150 million at the domestic box office.
Instead, the most popular Disney products from the quarter were
streaming shows on Disney+ like "WandaVision." It brought new fans
into the Marvel fold and benefited from Friday night premieres with
little outside competition like happy hours or live music. Disney
typically updates streaming subscriber figures during quarterly
earnings calls, which should give some indication of whether the
superhero show's popularity translated into subscriber growth.
Netflix shares are down more than 12% since disclosing on its
earnings call last month that the reopening was leading to a
slowdown in sign-ups. "There's a boost in engagement that you get
when people are in a lockdown situation," Netflix operations chief
Gregory Peters said at an investor event in March.
At Disney, the streaming service has also become a key piece of
its theatrical strategy. The company has two major releases on the
docket for this summer: "Cruella" and "Black Widow," starring
Scarlett Johansson as the Marvel superhero.
Both movies will be released on the big screen but also offered
for home viewing on Disney+ for an additional $30. That hybrid-fee
model isn't the only one Disney is exploring for its coming slate,
which is expected to have some movies that premiere theatrically
and others that premiere on Disney+ for no additional charge and
with no theatrical footprint.
Write to Erich Schwartzel at erich.schwartzel@wsj.com
(END) Dow Jones Newswires
May 13, 2021 05:44 ET (09:44 GMT)
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