By: Matthew Johnston
Date: February 15th 2021
The Walt Disney Co. (DIS) is a diversified global entertainment company that operates theme parks, resorts, a cruise line, broadcast TV networks, and related products. The company also produces live entertainment events, and produces and streams a broad array of film and TV entertainment content through its new digital-content streaming services.1
Disney faces an unusually large number of competitors including: ViacomCBS Inc. (VIAC), Comcast Corp. (CMCSA), Sony Corp. (SNE), AT&T Inc. (T), Netflix Inc. (NFLX), Apple Inc. (AAPL), and Amazon.com Inc. (AMZN); and smaller niche rivals including theme park and resort companies Six Flags Entertainment Corp. (SIX), SeaWorld Entertainment Inc. (SEAS), and Hilton Worldwide Holdings Inc. (HLT).
- Disney is a diversified global entertainment company that operates theme parks, resorts, broadcast networks and streams TV shows and movies.
- Disney’s Linear Networks currently generates the most revenue and profits as its Parks, Experiences and Products business has been hit hard by COVID-19.
- Most of Disney’s theme parks and resorts were closed during Q1 FY 2021 due to the pandemic.
- Disney plans to lay off about 32,000 employees by the end of the first half of FY 2021 due to the adverse impacts of the pandemic.
- Paid subscribers of Disney+ have risen to 94.9 million since the streaming service was first launched in November 2019.
The COVID-19 pandemic has had a major impact on Disney’s recent financial results. The company’s net income fell 99.2% to $18 million in Q1 of its 2021 fiscal year (FY), which ended January 2, 2021. Revenue for the quarter fell 22.2% to $16.2 billion.2
Disney said that the adverse impact of the pandemic was mostly felt in its Parks, Experiences and Products segment. Most of the company’s theme parks and resorts were closed or operating at significantly reduced capacity during the quarter, while cruise ship sailings and guided tours were suspended. Disney has also had to delay, shorten, or cancel theatrical releases and stage play performances.3
Disney’s Business Segments
Starting in Q1 FY 2021, Disney reorganized its reportable business segments. The company now operates through two main business segments: Disney Media and Entertainment Distribution (DMED) and Disney Parks, Experiences and Products (DPEP). The first of these segments, which is comprised of Disney’s media and entertainment businesses, is further separated into three components: Linear Networks; Direct-to-Consumer; and Content Sales/Licensing and Other. Disney provides a breakdown of revenue and operating income for each of these segments.4 Prior to this change, the company operated through four primary business segments: Media Networks; Parks, Experiences and Products; Studio Entertainment; and Direct-to-Consumer & International.5
DMED: Linear Networks
Disney’s Linear Networks segment operates a long list of properties, including: domestic and international cable networks such as Disney, ESPN, and National Geographic; ABC broadcast television network and eight domestic television stations; and a 50% equity investment in A+E Television Networks.6 The Linear Networks segment posted revenue of $7.7 billion in Q1 FY 2021, up 2.1% compared to the year-ago quarter. Operating income fell 4.4% to $1.7 billion. The segment accounts for about 47% of total revenue and 90% of total operating income.7
Disney’s Direct-to-Consumer (DTC) segment is comprised of its various streaming services, including: Disney+; Disney+Hotstar; ESPN+; Hulu; and Star+.8 The DTC segment posted revenue of $3.5 billion in Q1 FY 2021, up 73.0% from the the same three-month period a year ago. The segment reported an operating loss of $466 million, a significant improvement from the operating loss of $1.1 billion reported in the year-ago quarter. The DTC segment accounts for more than 21% of total revenue.7
DMED: Content Sales/Licensing and Other
Disney’s Content Sales/Licensing and Other segment sells film and television content to third-party TV and subscription video-on-demand services. The segment also includes the following operations: theatrical distribution; home entertainment distribution, such as DVD and Blu-ray; music distribution; staging and licensing of live entertainment events on Broadway and around the world; post-production services through Industrial Light & Magic and Skywalker Sound; and a 30% ownership interest Tata Sky Ltd., an India-based operator of a direct-to-home satellite distribution platform.6 The Content Sales/Licensing and Other segment posted revenue of $1.7 billion in Q1 FY 2021, down 56.5% from the year-ago quarter. Operating income fell 75.8% to $188 million. The segment accounts for more than 10% of Disney’s total revenue and just under 10% of its total operating income.7
Disney Parks, Experiences and Products (DPEP)
Disney’s Parks, Experiences and Products segment is comprised of theme parks and resorts in Florida, California, Hawaii, Paris, Hong Kong, and Shanghai. It also includes a cruise line and vacation club. Revenue comes mainly from selling theme park admissions, food, beverages, various merchandise, resort and vacation stays, and royalties from licensing intellectual properties.9 The Parks, Experiences and Products segment reported revenue of $3.6 billion in Q1 FY 2021, falling 52.7% from the year-ago quarter. The segment posted an operating loss of $119 million, a significant change from the operating income of $2.5 billion in Q1 FY 2020. The segment accounts for about 22% of Disney’s total revenue.3
A note to readers that the segment revenue and operating-income figures in the breakdowns above and in the pie charts do include inter-segment transactions.7
Disney’s Recent Developments
In its annual financial report issued on November 25, 2020, Disney indicated that due to the impact of the pandemic, it plans to lay off about 32,000 employees by the end of the first half of FY 2021. Most of those employees work in the Parks, Experiences and Products segment.10
Disney indicated in its Q1 FY 2021 earnings report that Disney+ has reached 94.9 million paid subscribers as of January 2, 2021.11 The direct-to-consumer online streaming service was first launched in November 2019.
How Disney Reports Diversity & Inclusiveness
As part of our effort to improve the awareness of the importance of diversity in companies, we offer investors a glimpse into the transparency of Disney and its commitment to diversity, inclusiveness, and social responsibility. We examined the data Disney releases to show you how it reports the diversity of its board and workforce to help readers make educated purchasing and investing decisions.
Below is a table of potential diversity measurements. It shows whether Disney discloses its data about the diversity of its board of directors, C-Suite, general management, and employees overall, as is marked with a ✔. It also shows whether Disney breaks down those reports to reveal the diversity of itself by race, gender, ability, veteran status, and LGBTQ+ identity.
Comment: This article primarily discusses the financials of the Disney conglomerate, but I think the biggest points to emphasize are how their financials have changed in the last two years. It is no secret that the Covid-19 pandemic has affected theme parks dramatically. For example Disney’s parks and experiences revenue is down 52.7% from pre-pandemic times. Being forced to close down the Disney parks during the peak of the Corona virus is the obvious explanation for this case, but it is quite illustrative of the potential problems companies focused on immersive experiences could face. With lack of regulation on mask wearing, in the event of another pandemic, attractions like the ones I am interested in working on will very likely once again be shut down. The drop in revenue has also ended with plans to lay off 32,000 employees that work in the parks affecting a dramatic number of lives.