Streaming Soars At Disney

Walt Disney Co.’s Disney+ streaming service turned one year old on Thursday, as the compoany posted its second consecutive quarterly loss from the effects of the pandemic which continued to ravage core businesses like theme parks and movie distribution that aren’t expected to return to normal in the foreseeable future, reports The Wall Street Journal. 

But the quarantine life has accelerated a pivot in the way Disney casts itself to Wall Street, and increasingly how investors see the world’s largest entertainment company. With movie theaters closed and TV production stalled, Disney’s streaming efforts have become the focus—and promise—of a company otherwise marked by layoffs and unprecedented losses. On Thursday, the streaming business delivered.

Subscriptions to Disney+ hit 73.7 million as of Oct. 3, the company said, up from more than 60 million reported in August.

“The real bright spot has been our direct-to-consumer business,” said Disney Chief Executive Bob Chapek, referring to the division that includes the company’s streaming operations.

Analysts and investors have accepted that Disney faces some bruising quarters before it returns to full operations, putting an even brighter spotlight on Disney+ and prompting some on Wall Street to treat the company less like an entertainment stock and more like a tech one. That has helped Disney shares weather quarterly reports that would have seemed unlikely—if not impossible—at the company a year ago. When the company reported a nearly $5 billion loss for the three months ended June 27, it was the first quarterly loss since 2001.

Still, the three months ended Oct. 3 deprived Disney of critical summer months of tourism and moviegoing. Operating income in the company’s studio-entertainment division fell 61% as thousands of theaters remain closed.

The theme-park business was even more severely hit. Disney said it estimated the spread of Covid-19 had caused a $2.4 billion hit to its parks division.

At Disney and other major Hollywood studios, the pandemic has accelerated a shift toward streaming services that count on subscriptions, rather than box-office grosses, to boost the bottom line. Major releases such as Pixar Entertainment’s forthcoming “Soul” are skipping a theatrical release and premiering on Disney+, an approach Mr. Chapek said the company will continue to take as theaters remain closed.

Disney’s sports-oriented ESPN+ streaming service registered 10.3 million subscribers at the end of the quarter, and its Hulu service had 36.6 million subscribers. Of the three, Disney+ continues to yield the lowest average monthly revenue per paid subscriber, at $4.52, owing in part to a $6.99 monthly subscription fee that is lower than most competitors.

Behind the scenes, Disney has reorganized its corporate structure to make streaming an even bigger priority than it was before the pandemic closed movie theaters. Under a plan unveiled last month, Disney created programming divisions for movies, general entertainment and sports. Executives in charge of greenlighting movies and TV shows will be centralized in a distribution arm that determines where a given project premieres—on a streaming service, a TV network or in movie theaters.

The past several months have seen Disney take drastic measures to stanch revenue declines. Earlier this month, Disney’s ESPN cut about 10% of its workforce—or about 500 jobs—through layoffs and attrition.

That was minimal compared with the job cuts announced in late September, when the company laid off approximately 28,000 workers from its domestic theme parks. These employees had been furloughed since April, collecting health benefits but not paychecks. The job losses could mount, since Disney World continues to operate at partial capacity and Disneyland remains closed.