Walt Disney (DIS 0.92%) is coming off another big year with its studios segment. In fiscal 2019, Disney made $11.1 billion in revenue from its movie releases. While 2020 wasn't expected to match that performance, especially with no Star Wars film scheduled for release this year, the outbreak of COVID-19 is bringing Disney's momentum to a screeching halt.
The release of Mulan in China this month was expected to be one of Disney's biggest releases of the year, but with theaters closed all over China, the studios segment may see a slump in the short term. Mulan is scheduled to be released on March 27 in the U.S.
Image source: Walt Disney.
Disney is feeling some pain
Mulan had a budget of $200 million and was specifically aimed at a Chinese audience. Disney relies on international markets to pad its studios revenue. Last year's release of The Lion King made $543 million at the box office domestically but generated $1.1 billion in ticket sales overseas.
The spread of COVID-19 seems to have slowed down in China, with over 80,000 cases reported to date in mainland China. Apple has already reopened its factories and some stores there, so the situation in China may be stabilizing, which would limit the impact on Disney.
Disney is certainly vulnerable to a worldwide outbreak. Combined, its theme parks and studios segment make up roughly half of the company's annual revenue. Disney has already temporarily shut down its parks in Shanghai and Hong Kong.
Disney said during its fiscal first-quarter conference call that the park closures would cut $145 million from operating income, and this assumes the parks are closed for just two months. Investing in China is never smooth sailing.
