Disney Parks and Resorts Update for August 10th
The other day, The Walt Disney Company finally confirmed what everyone had long suspected. Disney lost a boatload of money at the parks due to the pandemic.
Disney also managed something remarkable during what should have been one of the worst days in its history. I’ll explain why while offering several DVC tidbits in the latest Parks and Resorts update.
Disney Posted Its Coronavirus-Damaged Quarterly Results
The Walt Disney Company features four primary silos. These businesses fall into the categories of network/cable television, the movie division, the nascent Disney+ segment, and the theme parks.
Among those silos, the parks division has usually claimed the title of most significant breadwinner, although Disney’s television revenue has proven remarkably reliable over the years.
When Coronavirus reached North America, Disney effectively lost two of its core businesses overnight. Movie theaters and theme parks both closed, stopping virtually all revenue opportunities.
Interestingly, Disney’s cable and television segment faced a different challenge. Plenty of people suddenly found themselves at home and in need of entertainment. However, with all sports stopped, ESPN couldn’t make as much money, either.
Everyone knew that Disney had suffered, but we didn’t realize the depth of the setback until August 4. On that date, Disney published its fiscal third quarter earnings report, and it confirmed the worst.
During the third quarter of 2019, Disney listed total revenue of $20.3 billion. During the same period this year, the one impacted by COVID-19, earnings fell to $11.8 billion. That’s a revenue shortfall of $8.5 billion year over year.
The Parks Division Lost Nearly $2 Billion
The hardest hit segment was, of course, the theme parks. Disney rolls several of its DVC-related businesses into one division, Parks, Experiences and Products.
For the fiscal third quarter, PEP fell from $6.6 billion in 2019 down to just under $1 billion for 2020. Obviously, a lot goes into these losses, as they reflect an almost total loss of revenue streams.
Disney Cruise Line, Adventures by Disney, and every Disney theme park closed due to Coronavirus. Yes, some have returned, but the only park open for a significant portion of this quarter was Shanghai Disneyland.
Obviously, owning the parks comes with inescapable expenses. Even when the parks aren’t open, Disney still foots the bill for its property and the related operating expenses. Plus, it pays worker-related fees, too.
In other words, Disney earned less than $1 billion from its Parks division. Meanwhile, expenses piled up to the tune of just under $3 billion. For this reason, Disney lost just under $2 billion at its parks during the quarter.
Now, before you worry about Disney’s finances, let me reassure you. The company technically turned a profit during the third quarter. The movie division didn’t have to spend any money advertising its upcoming wide releases, which saved a lot.
Simultaneously, Disney+ subscription totals spiked. Also, the reliable television channels earned enough from advertising to keep Disney out of danger. Roughly 55 percent of Disney’s revenue came from Media Networks, which saved the day. Overall, Disney claimed nearly $1.1 billion in operating income.
This all sounds terrible, but I’m totally serious when I say that many analysts had braced for much worse. Disney stock actually went up substantially in the aftermath of its earnings report.
The DVC Perspective and Other News
Also, another interesting trend emerged. DVC direct sales fell off the table, recording two of the worst months ever. Meanwhile, DVC Resale Market reported the following:
“Additionally, July prices represented not only a bounce back but a bump ahead of the average selling price pre-pandemic at $121 per point.
This selling price bounce back is not entirely surprising given DVCRM Welcomed Home 959 families from May through July. This marked the highest number of sales in company history for a May through July time frame.”
So, savvy consumers explored their options while Disney struggled.
For the executive team, the primary consideration is what comes next. Currently, only half of Disney’s theme parks are open. Hong Kong Disneyland, Tokyo Disney Resort, and Disneyland Resort remain closed due to the pandemic. HKD actually returned, only to shut down again.
Everyone at Disney is scrambling to find optimal solutions during suboptimal times. The one thing we just learned is that Disney’s Grand Californian Resort & Spa will not reopen in August.
While Downtown Disney has reopened, the rest of the resort isn’t ready to return yet. If California were a country, it would currently hold a spot in the top five in COVID-19 infections, just ahead of South Africa. Even worse, a snafu prevented the state from reporting cases correctly.
We already know from the last attempt that park officials believe they would need three or four weeks to ready the park and cast members for reopening. Since we’re 10 days into August and don’t have an updated return date, it seems clear that Disneyland can’t come back until September. This news merely confirms the obvious.
More DVC Updates
Following up on a story from two weeks, Disney has taken the next logical step with Moonlight Madness. DVC officials have canceled the remaining 2020 dates.
Disney had previously scheduled July 15 as the date for booking reservations. Disney’s Hollywood Studios had planned events on September 15, September 22, and October 6.
None of those will happen due to the continued dangers of Coronavirus. I doubt this news surprises anyone, but it’s official now. By logical extension, Disney may hold off on scheduling events for early 2021 as well. We’re still several months away from knowing when all this will end.
On a more positive note, you can register for the 2021 Star Wars Rival Run. Annual passholders and DVC members can sign up as of August 6. The races will occur on April 15-18. Early registration closes tonight, so act fast! runDisney events almost always sell out quickly, giving you double the incentive to register asap.
The other news that could impact your next trip involves park hours. During the fall, Disney ordinarily reduces operating hours. However, there was some question about 2020 since Walt Disney World’s parks already have shorter days due to the pandemic.
Well, it turns out that Disney will reduce operating hours even more beginning on September 8. Park hours are:
- Disney’s Animal Kingdom – 9 AM to 5 PM
- Disney’s Hollywood Studios – 10 AM to 7 PM
- EPCOT – 11 AM to 7 PM
- Magic Kingdom – 9 AM to 6 PM
Nobody knows whether Disney will maintain these hours throughout the fall. However, given the park-related financial numbers we just discussed, nothing would surprise me.
Other Disney News
Speaking of Walt Disney World finances, I mentioned last month that Disney won a major legal victory against Orange County Property Appraiser, Rick Singh. The court not only threw out a previous ruling against Disney but went so far as to dismiss the accounting method Singh used.
Alas, a higher court has reconsidered. While Disney isn’t on the hook for the previous bout of overbilling, the accounting practice in question, the Rushmore appraisal system, is legal after all. So, this fight isn’t over yet, but it’s now trending wrong for Disney.
Finally, since the story has made so many headlines, let’s talk about Mulan. Yes, you can watch it on Disney+ starting on September 4. And yes, you will have to pay $29.99 to get it, even if you’re already a subscriber.
With movie theaters ready to reopen, Disney faced a tough call here. Industry surveys suggest that most audiences are nowhere near ready to return to theaters. AMC Theatres recognized this and just cut a lousy deal with Universal Pictures to stay afloat during this devastating event.
If Disney released Mulan in theaters exclusively, the film would underperform and possibly even bomb. After all, that’s what happened to Onward, an extremely enjoyable Pixar movie.
For this reason, Disney will try something new. The studio will release Mulan in some movie theaters domestically and internationally. However, Disney+ fans can pay $29.99 to “rent” the movie.
I say rent because you’ll lose the rights if you cancel your Disney+ subscription at a later date. As long as you keep Disney+, you’ll keep Mulan. So, it blurs the line between digital rental and ownership. The terms are more generous than several other similarly released recent titles like SCOOB! and Trolls World Tour.
The most important thing here is that you’ll get to watch Mulan in less than a month. That’s a LOT better than it could have been. Disney’s other choice here was to delay the film until early 2021.
Okay, that’s the update for this week. Have a great week, everyone!
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