Breakingviews: Disney business risks getting frozen

The risks to Walt Disney’s business are multiplying. Most of its theme parks and movie theaters are empty thanks to Covid-19. Though Disney has some more virus-resistant properties, that’s just the start. Former Chief Executive Bob Iger has left his successor with serious headaches.

Global social distancing is causing chaos. The $171 billion Disney late last week slammed the doors shut on its amusement parks in California, Florida and Paris and suspended its cruises after making similar moves with its resorts in Shanghai and Hong Kong.

The movie outlook is darkening too, if China is a leading indicator. Box office ticket sales in the People’s Republic plummeted 90% year-over-year in January and February, according to Comscore. Theaters in the United States and Canada are just getting a taste of what’s to come: The past weekend was the worst in over two decades.

Also, the cancellation of major American sports including the National Basketball Association, National Hockey League and the college-level basketball tournament known as March Madness presents challenges to Disney’s lucrative cable sports network ESPN.

On the plus side, the Magic Kingdom will likely benefit from an uptick in subscribers to its direct-to-consumer product, which has nearly 30 million customers. Disney made “Frozen 2” available on the streaming service on Sunday, three months ahead of schedule.

But Disney+ is still a nascent, money-losing product and its growth may not be enough to offset losses elsewhere. Together, the company’s theme parks and studio divisions made up a bit more than half its $70 billion revenue for the fiscal year ending September. Three months of no public gatherings could therefore put some $10 billion of the top line at risk. That’s before considering lost ESPN revenue – or a longer period of coronavirus lockdown.

Iger oversaw an amazing run at Disney, but recently stepped down from the CEO’s job. He may have timed his handover to Bob Chapek perfectly.

_____________________________________________________________________

Request a free trial of Breakingviews here