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I’m expecting to see a drop in Disney earnings revenue due to the virus: Fmr. Disney Sr. Analyst

Kelly O'Grady, dot.LA Chief Correspondent and Former Disney Senior Analyst, Corporate Strategy and Business Development joins the Yahoo Finance Live panel to discuss Disney’s Earnings Preview.

Video Transcript

ZACK GUZMAN: I want to shift from one tech company to another, and I do say tech company with a little bit of an emphasis here, as we're going to be waiting for Disney's earnings after the bell. Obviously, a lot of the focus, as our own Emily McCormick highlighted, is going to be on the streaming side in Disney+ numbers, but also a key question remains as to what kind of impact we're expecting to see on the park front. And here to break down what investors should be watching for us is Kelly O'Grady, DotLA Chief Correspondent and former Disney Senior Analyst in Corporate Strategy and Business Development.

Kelly, it's good to be chatting with you again. Last time you were on, we were talking about how big that hit to the park side was going to be, as California still has not let Disneyland reopened. So talk to me about how big of an issue it's going to be for Disney this time around.

KELLY O'GRADY: Yeah, absolutely. Thanks for having me back on. This is a huge issue with the parks, right? I mean, Walt Disney World is open, but you are seeing average daily attendance suppressed already by the fact that there social distancing rules, but the fact that we're seeing a surge in cases. Out in California, we're closed indefinitely. That was a huge part of the layoffs in massive numbers that we saw over the past couple of weeks.

So I'm expecting to see certainly a drop in revenue. That's going to impact a lot of things there. But there's a couple of factors that I think that play into this in terms of context. So one, of course, we saw Disney's stock price rebound in a huge way on Monday with Pfizer's vaccine news potentially being at 90% effective. And that brought them back into single-digits losses versus the beginning of the year. So they definitely want to keep that momentum coming out of the earnings call today. So I'm expecting there to be a lot of optimism around that.

But I saw your interview yesterday with President-elect Biden's member of the coronavirus task force. And he mentioned that there could be a four to six-week lockdown nationally, which would, of course, just completely ravage any momentum that Disney has had with parks. So I expect there to be some optimism around this as they talk about the parks during the earnings call. But I'm looking for an action plan for them to be very specific about. They did mention rapid testing, potentially, that they're going to implement for park attendees rather than just sort of optimism with no zest behind it-- just to kind of keep that momentum going with the stock price.

AKIKO FUJITA: Kelly, the streaming side for Disney has really been their strength, especially during this time. And Emily pointed to the restructuring that we've seen on that front since the last earnings call. How do you expect that to affect their revenue? I mean, if we're talking about-- I mean, same question I asked Emily earlier-- if we're talking about these movies going direct to streaming instead of being released in theaters, sure, that's borne out of need right now, but ultimately, that's going to be a hit for Disney, right?

KELLY O'GRADY: In some respects, yes. So you know, in this quarter alone, you're certainly going to see a hit when it comes to the studio. I do think, though, that's going to be offset in a big way by subscriber growth on Disney+. I mean, overall, I expect revenue to be down-- you know, analysts are converging around 25% versus last quarter. But Disney+ subscriber growth is going to offset that-- so, potentially, is media networks' advertising revenue.

We saw Comcast kind of have a big swing back, especially with sports and such getting back. ESPN has "Monday Night Football," which has been huge for them. But you know, we had, what, 60.5 million subscriber number, that was what they quoted during the last earnings call. So that was before the "Mulan" release. And over that weekend alone, there was a 68% increase in app downloads and 193% increase in consumer spending with Disney+. So I'm expecting some really big numbers.

And to your point on the streaming reorganization, I personally don't think they would have announced that prior to the earnings call. They announced that last month if they didn't expect to be able to come to investors with really big subscriber numbers. So, of course, it's not going to be the thing that offsets this. We're not going to see an increase in revenue from Disney by any means overall. But it's certainly going to be helpful.

And I would also look out-- they do have an investor day on December 10 where they're going to address this more specifically, but I'd be looking out-- are there going to be any films that were already delayed, besides "Soul," which they're planning to release in December? Are they going to push any of those movies to Disney+? And how are they going to feed the Disney+ content engine with COVID impacting filming?

ZACK GUZMAN: Kelly, I mean, when you think about how big that subscriber number is going to need to be, that is a big question, because they've already moved past their own guidance into where they were when they started here. So it's tough to kind of gauge where the market might be in trying to see how far above that 60 million number they're going to go. So in your mind, I mean, what would be something that you'd be saying would be a good checkpoint to keep an eye on?

KELLY O'GRADY: Yeah, right, I mean, the fact that they've already blown past their own predictions is kind of, like, gravy at this point. How do we figure that? Frankly, I mean, you and I talked about how many subscribers they would need to actually purchase "Mulan" to make it viable a couple of weeks ago. So if I saw maybe 10 million an increase-- I mean, Netflix this past quarter, I think, added 2.2 million subscribers. But of course, that's off a much higher base. I think they're around 190 or so. So I would say around 5 to 10 million from that "Mulan" bump I think would be pretty good. But like we said, it's all gravy at this point because the pandemic has just so meaningfully changed those subscriber numbers that they didn't expect to hit until 2024.

AKIKO FUJITA: Kelly, really quickly, another platform we're watching is, of course, TikTok. November 12, that was the deadline for the company to divest its US operations. That deadline has come and gone. And we saw TikTok come out and say, look, we're looking for a little more clarity from the government. Where do things stand? And ultimately, how do you think this gets resolved?

KELLY O'GRADY: Yeah, I feel like my favorite TikTok soap opera took a hiatus. We had no juice over the past couple of weeks. So the deadline, as you said, is today. So I think there's a couple of factors playing out. We actually don't know what the repercussions are going to be if they don't hit the deadline. So that's one thing-- they filed a petition with the Court of Appeals to question the CFIUS deadline of today and also ask for a 30-day extension.

So there's a couple of factors playing out here. The courts did push back Trump's ban originally, that other executive order that he made August 3. So there's some momentum going into this that potentially the Court of Appeals could actually rule in favor of TikTok here on the extension. Trump himself also gave an approval of this at the highest levels of this deal with Walmart and Oracle. And of course, US investors that are invested in ByteDance, altogether, they would have a 52% ownership in this new TikTok global stake.

But the things that I'm looking at, there's, three possibilities-- maybe CFIUS comes back and rules today. So keep an eye on that by the end of the day. Maybe the Court of Appeals comes back and says, hey, you have your 30-day extension. Go for it. Or maybe the deadline is missed and Barr decides to take them to court. Wouldn't that be a fun way to end 2020-- very juicy. I think this is all playing out in the fact that we do have a new president coming in, we aren't sure what his stance is going to be on China as a whole and TikTok specifically.

He did have his staffers take TikTok off of their phones during the campaign, so that might be an indication, and that this also has had bipartisan support, being hard on China and TikTok in this case. But if that deadline does extend 30, 60 days or so once he's in office, perhaps there will be a new approach, at least, versus the Trump administration's.

ZACK GUZMAN: Yeah, that's a good reminder in terms of Biden. I had totally forgotten about that. There's been so much in the news here, and a lot of us, you know, might have overlooked all the drama on a TikTok front, but very important to keep in mind. Kelly O'Grady, DotLA Chief Correspondent, always love having you on, thanks again, to chat.