Disney Swings to Profit as Reopened Parks Bolster Revenue

The Walt Disney Co. swung to a profit in its most recent quarter as reopened parks provided a revenue bounce.

Revenue in the parks and products division surged to $4.3 billion from $1.1 billion a year ago, as theme parks closed last year were open for part or all of this year's quarter. Disney World in Florida has been open since last summer; California's Disneyland only came back at the end of April.

The effect of the pandemic lingers at the parks, many of which are operating at reduced capacities, the company says. Disney is among the country's largest employers to require worker vaccinations. It also announced in July that visitors to its U.S. theme parks must again wear masks indoors.

Asked about concerns about the infectious delta variant affecting the park business, Disney CEO Bob Chapek said on a call with analysts that the company sees "strong demand" at the parks continuing, although there have been group and convention cancellations.

Disney's ability to keep its parks and resorts open "is clearly of the utmost importance to their bottom line," said Third Bridge analyst Joe McCormack.

Disney on Thursday reported that its net income was $918 million in the three months through July 3, compared with a loss of $4.72 billion in its fiscal third quarter a year ago. Earnings per share came to 50 cents, or 80 cents excluding one-time items, while revenue climbed 45% to $17.02 billion. 

Analysts polled by FactSet predicted earnings of 55 cents per share on revenue of $16.76 billion. Disney shares jumped more than 5% to $188.72 in after-hours trading.

As the traditional TV networks business shrinks, entertainment companies like Disney are hoping it can win the viewers of the future with streaming services. "Our direct-to-consumer business is the company's top priority," Chapek said. The company expects 230 to 260 million Disney+ subscribers by 2024. 

Disney ended the quarter with 116 million Disney+ subscribers, about double the number from a year ago, and nearly 174 million streaming subscribers including Disney+, ESPN+ and Hulu. 

Disney's kid-friendly back catalog and original hit series like Marvel's "WandaVision" and the Star Wars spinoff "The Mandalorian" have helped drive sign-ups as people stuck at home during the pandemic needed something to do. 

While subscribers are growing, the company is making less from each one as it expands its significantly cheaper Disney+ Hotstar service in countries like Indonesia, Malaysia and Thailand. The average amount of money it pulled from each customer fell 10% in the quarter, to $4.16; without Hotstar, which makes up about 40% of the subscriber base, it would have been $6.12.

The streaming industry leader, Netflix, has had some growing pains this year after 2020's record-setting subscriber gains and as competition increases.

Revenue at Disney's media and entertainment distribution division, which includes the streaming services, the TV networks and the company's huge movie business, rose 18% to $12.68 billion. 

During the pandemic, with many theaters closed and even when reopened, attendance down, Disney has sent some movies to theaters, others to streaming services, and sometimes a mix, like it did with Marvel's "Black Widow." That came out in July and brought in the biggest domestic box-office haul this year, but Disney's pandemic strategy of releasing it simultaneously on Disney+, for $30 a pop, led to Hollywood drama. Its star, Scarlett Johansson, sued Disney, saying it deprived her of potential earnings from the theater screenings. Her pay is based in part on the film's box office.

Chapek defended how Disney had delivered films to the public and said the company will use all available options going forward. He alluded to the Johansson suit, saying the company has "figured out ways to fairly compensate our talent, so that no matter what the business model is that we have to go to market with, everybody feels satisfied."


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