Disney faces Avengers: Endgame-sized hole as revenues plummet

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Disney continues to face financial hardship in just about every aspect of its business, but a year later Avengers: Endgame out, it’s clear how much the pandemic has affected its studios division.

Disney didn’t release any major movies in the last quarter, and the third quarter earnings report shows how much of an impact this has had on the business. Overall, revenue reached $ 11.78 billion, up from $ 20.2 billion the year before, but most of it came from streaming. Studio revenues fell 55% in the quarter to $ 1.7 billion, the company said. That means Disney made $ 1.7 billion this quarter and $ 3.8 billion in the same period last year. What this shows is that there is a large Avengers: Endgame hole in the calendar, and it’s a perfect example of the impact of the pandemic on one of Disney’s core businesses.

“Theatrical distribution during the quarter was negatively affected by COVID-19, as theaters were generally closed nationally and internationally,” the report said. “No significant title was published during the current quarter compared to the exit of Avengers: Endgame, Aladdin and Dark phoenix during the quarter of the previous year. “

Last year, third-quarter revenue from Disney studios business reached $ 3.8 billion, a 33 percent increase from the previous quarter. This is an impressive sum, aided by Avengers: Endgame, the greatest film in history. This is even more impressive considering that Disney has also suffered substantial losses in its film division ($ 170 million in operating revenue) due to the disappointing 20th Century Fox films, in particular. Dark phoenix. Even with those losses, Disney had enough blockbusters to generate significant revenue, leaving executives to congratulate themselves on a job well done.

Now, Disney’s theatrical arm is in the air. Mulan has been removed from the theatrical calendar, and questions are already being raised about what that means for Black Widow, which is due out on November 6. What will happen over the next few months is crucial. Could Disney release their biggest movies of the year (Mulan and Black Widow) as a phased version? Warner Bros. explore the way out with Christopher Nolan’s Principe, which will premiere in 70 international territories on August 26 before airing in select cities across the United States on September 3. Could Mulan to make his international debut before hitting US theaters?

Or could Disney use a combination of digital rentals and its booming streaming business in the meantime until theaters can safely reopen and people can return to the movies? Seems unlikely considering the amount Mulan and Black Widow could do in theaters, but it was in the Before Times. Things may not be going so well for the Mouse House, but the company’s streaming division continues to grow at an incredible rate. Disney Plus now offers 57.5 million subscribers. Disney’s streaming division also saw revenue rise 2% in the quarter to $ 4 billion. A single point of light for the company.

“Despite the ongoing challenges of the pandemic, we have continued to build on the incredible success of Disney Plus as we expand our direct-to-consumer business globally,” CEO Bob Chapek said in the report on results. “The global reach of our comprehensive direct-to-consumer services portfolio now exceeds 100 million paid subscriptions, an important milestone and a reaffirmation of our DTC strategy, which we see as key to the future growth of our business.”

Disney Plus, Hulu, and even ESPN Plus all saw growth in the last quarter, but it was Disney Plus that continued to shine. Part of it comes from Hamilton landing on the streamer – a high-profile film that has attracted a bunch of new subscribers for Disney Plus. While Disney faces the same production issues as its competitors, the company can bring older titles into its platform until new shows – like The Mandalorianthe second season in October – debut.

Disney is already doing this; the company turned boring licensing deals into a ‘Summer Movie Nights’ festival, marking each week with an X-Men movie or the arrival of Pixar The Incredibles 2. While Disney owns Pixar and the X-Men franchise after its acquisition from 21st Century Fox, the films were tied to previous licensing agreements and not available until now. These aren’t new movies by any means, but the marketing makes it seem like Disney Plus has some exciting new additions, and that may be enough to convince some people to re-engage with the platform or sign up.

The big question is whether Disney Plus and Hulu are enough to weather the storm. Disney parks and the cruise industry faced total closures or limited reopenings in countries like China for the quarter, and like Comcast, Google and Twitter, advertising revenue from networks like ESPN and ABC have declined year over year.

Disney’s ability to bounce back quickly is far from certain. The company’s advertising revenue in June alone fell 36% from 2019 due to lack of sports, according to Variety. His media networks division is hoping things improve with the sport’s return, but it could also go wrong if games are called off. Disney reported that its media division fell 2% to $ 6.6 billion. Parks face a similar problem. The gradual reopening appears to be going well for Disney so far, but cases in Florida and California continue to grow. These parks could see closures again if cases continue to climb. Park revenues for the quarter fell 85%, according to the report.

Disney’s earnings aren’t great, but they’re not unexpected. As streaming remains the only bright spot, it will be interesting to see how much Disney builds on it in the months to come, as executives figure out how to bring things back to some semblance of normalcy.

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