Will Disney’s July Restart Fall Apart Before It Begins?

Here’s how fast things can change in the middle of a pandemic. Just three weeks ago, it looked like Disney was poised to begin its slow crawl back up the mountain in July, with the release of its first movie in three months and the reopening of both Disney World in Florida and Disneyland in California. But now that the calendar is ready to flip over to the back half of 2020, the outlook is grimmer. During the coronavirus era, three weeks can seem like three years. The past few weeks have seen the coronavirus come roaring back to life with record spikes in infections and hospitalizations in multiple states — including Florida and California — following a brief period of slow, but steady, progress to combat the pandemic. That has led Disney to delay the release of its $200 million tentpole “Mulan” for a second time, as well as abandon at least one of its theme park reopenings. “Mulan,” which was initially supposed to get released back in March, will now hit theaters no earlier than Aug. 21, as other July releases like Warner Bros. “Tenet” got pushed back as well since national movie theater chains have put the brakes on their own reopening plans. Disney has not put out a new movie in theaters since the March 6 release of Pixar’s “Onward,” which amassed only $103.2 million during its short-circuited box office run. Since then, Disney has made more news for its delayed films, moving Scarlett Johansson’s “Black Widow” to November and creating a domino effect on the next phase of the studio’s Marvel Cinematic Universe. Disney’s filmed version of Lin-Manuel Miranda’s Broadway smash “Hamilton” debuts on Disney+ this weekend. That film was originally expected to get a theatrical release. “Artemis Fowl” and “The One and Only Ivan” also got rerouted from theaters to streaming because of the pandemic. Disney’s theme parks, which along with consumer products account for the biggest chunk of the media giant’s revenue, have also stalled their comeback plan. While the company has not yet moved off a July 11 reopening of Disney World, albeit at reduced capacity and with new safety precautions in place, the plan to reopen Disneyland the following week has been postponed indefinitely. “The State of California has now indicated that it will not issue theme park reopening guidelines until sometime after July 4. Given the time required for us to bring thousands of cast members back to work and restart our business, we have no choice but to delay the reopening of our theme parks and resort hotels until we receive approval from government officials,” the company said last week. Disney’s parks, experiences and products division — which includes all of the company’s theme parks, resorts, and cruise lines — brought $26.2 billion to Disney’s overall revenue of $69.6 billion in 2019. During its most recent quarterly conference call with Wall Street, the company estimated that its parks business took a roughly $1 billion hit to operating income as a result of the pandemic. Both Florida and California are experiencing rising case counts that have forced both states (along with Texas) to slam the brakes on their reopening plans. The two states have also seen a surge in positivity rates, considered a more accurate metric for detecting how widespread the infection is, since it accounts for increases in testing. Florida’s Department of Health on Monday confirmed 5,266 new cases of COVID-19, bringing the state’s total to 146,341. It reached a new record for daily cases with nearly 10,000 on Saturday. On Sunday, California reported 5,307 new cases, and added nearly 3,000 in Los Angeles County on Monday, which far outpaced the prior daily record. One analyst, Needham’s Laura Martin, lowered her full-year revenue and Q3 forecast. For the fiscal 2020 year, Martin estimated Disney will now see its overall revenue drop by 3% to $68.1 billion. That is 5% lower than her last forecast. In the current quarter, which will incorporate the full brunt of the pandemic, she dropped her revenue estimate by 13% to $13.2 billion, a decline of 35% from a year ago. And those projections include a 81% decline from a year ago for Disney’s Parks, Experiences and Products division. But it’s not all doom and gloom for Disney.  The performance of Disney+ has surpassed expectations in its first seven months, and could get an influx of new subscribers with Friday’s release of “Hamilton.” Meanwhile, the NBA and Major League Baseball remain on track to return next month. The NBA even put out its reopening schedule last week, which will give Disney-owned ESPN and ABC a combined 20 “seeding games” over a two-week span — each of the 22 teams will get eight games to determine playoff seeding. MLB’s season is set to begin July 23, and will be a 60-game blitz through September. After months of airing old games and Korean baseball games after midnight, that should more than fill ESPN’s sports-starved lineup. Disney would have been looking at a nearly $500 million loss in ad revenue if the rest of the NBA season were called off, and while it won’t recoup all of the lost revenue, ESPN will be in a better position than it was a few months ago. But July 23 is more than three weeks away. We’ve seen just how much of a difference that amount of time can make.