Disney (DIS) swung to a fourth-quarter loss and saw revenue slide over last year, as the still-raging coronavirus pandemic continued to weigh on its theme parks, studio and media businesses.
However, the results still came in better-than-feared, and the company’s nascent streaming service saw subscribers jump more than anticipated. Shares jumped 5.9% in after-hours trading.
Here were the main results from Disney’s fiscal fourth-quarter report, compared to consensus estimates compiled by Bloomberg:
Q4 revenue: $14.71 billion vs. $14.20 billion expected and $19.1 billion year-over-year
Q4 adjusted loss per share: 20 cents vs. 73 cents expected versus earnings of $1.07 per share year-over-year
Given the impact of the pandemic on many of Disney’s legacy businesses, investors were poised to focus closely on growth at Disney+, the company’s one-year-old streaming service. Disney reported that Disney+ had brought on 73.7 million subscribers as of the end of the fourth quarter, topping estimates for 65.5 million.
“Even with the disruption caused by COVID-19, we’ve been able to effectively manage our businesses while also taking bold, deliberate steps to position our company for greater long-term growth,” Disney CEO Bob Chapek said in a statement. “The real bright spot has been our direct-to-consumer business, which is key to the future of our company, and on this anniversary of the launch of Disney+ we’re pleased to report that, as of the end of the fourth quarter, the service had more than 73 million paid subscribers – far surpassing our expectations in just its first year.”
Stay-in-place orders during the pandemic have helped boost engagement on Disney’s and other media company’s streaming platforms. While still trailing Netflix’s (NFLX) global subscriber base of nearly 200 million, Disney+’s breakneck growth in part led Disney to announce a major reorganization in October to help get more premium content straight to consumers through streaming.
The new structure put Disney’s creators together under one unit to generate studio, general entertainment and sports content, while leaving another unit to focus on distribution to determine which platform to use to release the content, whether on Disney+ or another of the company’s streaming platforms, on TV or in theaters.
The restructuring was announced after the end of Disney’s fiscal fourth quarter, so any tangible results of these changes will come in the report for the current quarter. However, Disney did release its live-action Mulan during the September quarter directly to Disney+ at $30 per month, circumventing the issue of pandemic-induced theater closures and presaging Disney’s latest strategic direction.
Still, Disney+ remains a money-losing operation. Disney’s direct-to-consumer and international segment, which houses the streaming service, posted operating losses of $580 million during the quarter, while revenue jumped 41% to nearly $4.9 billion.
While Disney+ continues to grow, Disney’s other units have suffered considerably during the pandemic.
Disney’s parks, experiences and products segment has been the hardest-hit by the pandemic. Disney’s parks unit swung to an operating loss of $1.1 billion as revenue dropped 61% over last year, amid ongoing closures at Disney’s theme parks in California and Paris and still-weak attendance even at locations that have reopened. Still, the loss narrowed from the nearly $2 billion deficit the business unit posted during the Disney’s fiscal third quarter through June.
Disney’s recent wave of job cuts underscored the ongoing strain. The company said at the end of September it planned to eliminate 28,000 workers, mostly across its U.S. resorts in California and Florida, for one of the largest announced corporate layoffs during the ongoing coronavirus pandemic. And according to a recent report from Deadline, more job cuts across Disney’s studio entertainment division and ESPN are also forthcoming.
The company’s studio entertainment division also suffered again during the quarter, with sales more than halving and operating income slumping by more than 60%. A pick-up in sports programming and advertising growth during the quarter helped boost Disney’s media networks division, however, which grew sales 11% and income 5% over last year.
“Since March 2020, we have experienced significant disruptions in the production and availability of content, including the shift of key live sports programming from our third quarter to the fourth quarter and into fiscal 2021 as well as the suspension of production of most film and television content since late in the second quarter, although some film and television production resumed in the fourth quarter,” the company said in a statement.
Across its businesses, Disney said it expects to incur additional costs of about $1 billion in the new fiscal year related to COVID-19, as the company rolls out extra safety measures for guests and talent. The company also announced it will not declare a semi-annual cash dividend for the second half of 2020, “in light of the ongoing impact of COVID-19 and the company’s decision to prioritize investment in its direct-to-consumer initiatives,” it said in a statement.
With most of Disney’s businesses pressured throughout the balance of the pandemic period, Disney’s stock has underperformed the broader market for the year-to-date. Shares of Disney have fallen 7% in 2020 through Thursday’s close, versus a gain of 9% in the S&P 500.
Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter: @emily_mcck
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