Disney Plus has reached 54.5 million subscribers worldwide, the company said Tuesday as it unveiled quarterly earnings that reflect the huge hit to the bottom line caused by the shutdown of Disney’s theme parks and other businesses.
The subscriber update for Disney Plus marks a gain of 4.5 million since April 8, when Disney disclosed it had topped 50 million subscribers. Bob Chapek, who was named CEO of Disney in February just as the outbreak began to make headlines overseas, said the lockdown conditions for millions have only heightened the value of Disney Plus to consumers.
“Our company’s top priority and the key to our growth is our direct to consumer (assets),” Chapek said in his first earnings call with Wall Street since becoming CEO. Despite the pandemic disruptions, Disney Plus made its debut in Western Europe in late March followed by India. The Nordic countries, Belgium, Luxembourg and Portugal are next up for expansion, Chapek said.
Losses for Disney’s direct to consumer and international unit grew to $812 million, driven by Disney Plus and the costs of consolidating Hulu. Disney chief financial officer Christine McCarthy said the DTCI unit would generate $1.1 billion in losses in the current quarter, which is Disney’s fiscal second quarter. Disney’s ongoing investment in programming for Disney Plus and ESPN Plus will mean a $420 million year-over-year hit to operating income.
ESPN, ABC and the rest of Disney’s traditional TV businesses have been forced to scramble in the face of pandemic shutdowns. ESPN has enjoyed big crowds for the Chicago Bulls docuseries “The Last Dance” and generated three big nights last month with the NFL Draft telecast that commissioner Roger Goodell hosted from his bedroom.
Chapek praised the ESPN team for being creative and resourceful in the face of an unprecedented sports blackout, leaving the cabler with hours and hours to fill. ABC worked fast to salvage the season of “American Idol” with an elaborate remote production effort featuring contenders singing from remote locations.
“They can be nimble and very creative in being nimble,” Chapek said. “It speaks volumes to the fact that our executives at those networks do a phenomenal job of being able to adjust on the fly.”
ESPN has taken the biggest hit in advertising with an 8% decline year-over-year given the lack of live sports and pullback in ad spending by sectors most immediately affected by COVID-19 disruptions: movie studios, restaurants, travel and tourism, retail and domestic autos. The picture will only get worse in the current quarter.
“We are expecting a significant decline in advertising sales” in the current quarter, McCarthy said. “We’ll see it more at ESPN because of the lack of live sporting events than we will at the broadcast network.”
McCarthy noted that last year’s 21st Century Fox acquisition, which cost Disney north of $70 billion, contributed about $200 million in operating income, when netted out for the losses that also came with those businesses, to Disney’s studio entertainment division.
Also Tuesday, Disney confirmed that it will skip its scheduled July dividend payment. The company is focused on preserving ample liquidity amid the coronavirus shutdown that has cost the company $1.4 billion through the end of the quarter ended March 28.
McCarthy said the company would take the rare step of skipping the payment for the first half of the company’s 2020 fiscal year, which ends Sept. 30. That will save Disney about $1.6 billion if the dividend payment was in keeping with its most recent payout in January of 88 cents a share.
Disney shares fell 2.7% in after-hours trading following the after-market earnings release.