Disney reports slight Q3 profit despite pandemic, makes big 'Mulan' announcement

Despite facing pressure from the COVID-19 pandemic, Disney reported third quarter EPS that topped estimates. In addition, Disney’s streaming servers reported over 100 million subscribers, giving a big boost to the entertainment giant. The Final Round panel breaks down the latest.

Video Transcript

MYLES UDLAND: All right. Let's turn our attention now to the stock that is leading the way in the Dow, and that is Disney. The stock here is up 9% following their results last night. And the stock really popped during the conference call.

Dan Roberts joins us now for, I guess, Dan, your view on the big story for Disney today that is really juicing the stock.

DAN ROBERTS: Well, you have to think that it's the streaming plans. And there are a few things within that.

Now by the way, I'm not going to pretend I was the only one who said this, but here we sat yesterday, before the earnings came out, and I said that even though it was obviously a brutal quarter, because of the virus, and even though Wall Street expected a loss-- and by the way, with GAAP adjusted earnings, it was a surprise slight profit-- but I said, despite all the bad news, I could foresee the stock responding very well-- didn't I say this-- if the streaming news was good and the Disney+ subscriber number was big, and if you heard Bob Chapek say, we think the worst of the virus impact is behind us.

So here we are. The number initially given in the press release, by the way, for Disney+, was 57.5 million. And that appeared, at first, like it fell short of Wall Street expectations. Then on the call, Chapek gave an update since the quarter actually ended-- so as of, I guess, yesterday-- and said the number is now 60.5 million. So compare that to Disney's originally stated goal of 60 to 90 million subscribers by 2024, way ahead of schedule. But of course, we did always know that stated public goal was very conservative intentionally, and they were always going to do better than that.

That said, let's see how long it takes to get the next 30 million, to get to that 90 million number. But 60.5 million paying subscribers for Disney+. I'm sure "Hamilton" helped a lot with that. 100 million subscribers total across the various Disney-owned streaming platforms, so that includes Hulu, that includes ESPN+. That's an impressive thing.

And then also announced today that they'll be launching yet another streaming service-- my goodness, although it sounds like it's mostly outside the US-- using the Star brand that it acquired in the Fox deal. And it sounds like that will be mostly for some Fox content.

But look, Bob Iger said, maybe two years ago, direct-to-consumer is now our number one priority at the company. And that is becoming clear. I mean, that said, let's not ignore a lot that is very, very bad here. The parks, you know, revenue down 85%. But of course it was, because of the pandemic.

And then also, the reason for the surprise profit, deferred payments, which you could consider just a kind of accounting trick. But deferred payments to the leagues for all those games that were canceled or postponed. Those payments are going to come through next quarter, I guess, the quarter currently underway.

So really, a loss, but GAAP adjusted, a slight profit. But the Disney+ thing is big. And then of course, to me, the most interesting news, the "Mulan" step. Because there were people, me included, who said, no way are they going to release "Mulan" straight to streaming. That's a movie that they know will do huge numbers in movie theaters and they're going to wait until theaters open.

Well, it's been long enough now and they're sick of delaying it enough that they're going to put it on Disney+. Although interestingly, $30, and that's on top of having to pay to be a Disney+ subscriber. Now at least that's not just for a one-time rental. You then have the movie in your Disney+ account and you could re-watch it.

Now I know at first blush, everyone saw this headline, $30, they said, oh, my god, that's ridiculous. But I think a lot of families are going to be happy to pay that. I mean, you spend more if you bring two parents and three kids to the movie theater. $30 basically to own it, within your Disney+ account, I think it'll do very well. And I think if it does well, it could be a litmus test, not just for Disney, but for the whole movie industry.

I'm not saying, oh, it's a movie theater killer. I think that's going too far. But it's certainly going to be a major litmus test if people will pay $30.

MYLES UDLAND: Well, and on that "Mulan" news, I mean, I think that there had been just this sense that-- and we've talked about this too-- anything with theaters, this, that, the other, the answer was going to be the over. Oh, you think theaters will reopen in September? Well, it'll be October, so on and so forth.

And I guess Disney is essentially telling us here that not only is that true, it might be into the middle of next year before they feel like they can release a tentpole movie into the kind of environment where the investment would pay off.

DAN ROBERTS: Well, and as a result, the next question is, what do they do with "Black Widow," which is a Marvel movie starring Scarlett Johansson. And of course, the minute they said, we're going to do this with "Mulan," a lot of people said, oh, great, will they do it with "Black Widow." And there was actually a tweet from a Disney+ parody account that is very much, you know, intentionally made to look like it's real, that a lot of people retweeted, and it was the trailer to "Black Widow." And it said, it's hitting Disney+ in November. Everyone said, hooray. But that was fake.

But once "Mulan" comes in September and they see how well it does, I'm with you, if movie theaters, if it's another six months, eight months, it's another year before they're open across the country, then you could see "Black Widow" go the same route. I'd be interested Melody's thoughts.

MELODY HAHM: Yeah, Dan. I think it's really interesting because Bob Chapek on the call said this is a one-off, right? He tried to convince investors, families, communities, the media that this is not the ongoing blueprint or strategy for its existing pipeline.

I want to point out that "Mulan," I was so excited for. My heart did drop a little bit when I heard that it wasn't going to have the theatrical debut that it so deserves. However, it is existing IP, right? I understand it's rejiggering the cartoon version. There are going to be obviously so many novel elements. But the storyline is a classic.

My question, and as we saw with the tenets of the world, they're doing a staggered release, right, where they're going to be releasing it in a limited sort of capacity, and then eventually there will be this streaming component. I do imagine that original films that are completely novel perhaps, a new Pixar film, I would be a little bit skeptical to think that they would just go the DTC route or the over-the-top route from the get-go.

DAN ROBERTS: Yeah. And just one more note there on being disappointed that it won't have a wide theatrical release. First of all, A, we should mention that Disney claims that "Mulan" will go in theaters in markets where Disney+ isn't widely available. That sounds to me like mostly outside the US, but maybe there are areas of the US that would also get it, or, let's see where theaters are at that point. To me, that's also a hedge. Like, if a lot of theaters have reopened in September, maybe they do both. They can't walk back the date it's going to go on Disney+ now. But maybe if things are better by September, it goes in theaters also.

And that just leads me to one other point, Melody, that I've thought about a lot. During this time, a lot of people-- Myles, I'm not accusing you of this, but I think you're close, because you don't go see movies in the theater-- but a lot of people have, it seems to me, been rooting for the death of movie theaters. Like, good, good, good, every movie, let's go straight to streaming. Movie theaters are dead.

And I haven't quite understood that, even if you're someone who doesn't love to go to movies. Now I'm biased, because I do love to see movies in the theater. But I'm with you, Melody, that there are some movies that I'm always going to hope get the big screen theatrical release they deserve. And I still think that that's going to happen usually.

But I'm with you. You know, Bob Chapek said it's a one-off. It's a one-off until it isn't, right? Until it works really well and they do it with more movies.

MYLES UDLAND: I think you just end up sounding, Dan, like one of these sports reporters who claims that people pointing out the issues in sports actually want sports to fail, with that whole movie theater routine. But we can discuss that. We can discuss that off--