There's no denying that the outbreak of the coronavirus has taken a hefty toll on entertainment giant Walt Disney (NYSE:DIS). Not only are all of its theme parks closed -- presumably until further notice -- movie theater chains are closing their doors as well. Professional sports leagues are suspending play, and the NCAA canceled this year's college basketball tournaments. That leaves Disney's ESPN with little to air or even talk about. Never mind how fear of traveling has stifled demand at Disney's hotels and resorts not attached to its theme parks.
The global panic, however, has prompted some investors to jump to conclusions before gathering all the facts. Namely, investors may not fully understand Walt Disney's revenue breakdown. It matters, because the business it's losing on the sports, amusement parks, and travel fronts may actually be offset in other ways ... if not fully, then perhaps at least partially.
To that end, here's a look at exactly where Disney's revenue comes from. Movies and theme parks are just two pieces of the big picture, and with people stuck at home, subscriptions to its Disney+ streaming service may quietly be soaring.
Breaking down the top line
The pie chart below uses data from Disney's fiscal first-quarter report to illustrate what makes up the company's top line. However, there are a few footnotes worth mentioning first about the graphic.
Chief among them? While its media networks, parks and products, and studio entertainment numbers are clearly spelled out, its direct-to-consumer and international numbers are not. Instead, the figures behind each sliver of direct-to-consumer pie below are estimates based on the number of subscribers each streaming service Disney boasted as of the end of December (which the quarterly report disclosed), and the average monthly revenue per user for each streaming service (which Disney also disclosed in its quarterly report).
Also note that while the revenue for Disney+ looks surprisingly small, bear in mind the service only launched in November, and as such didn't generate a full three months' of revenue. Hulu and ESPN+, conversely, were up and running at the beginning of the quarter in October. In other words, look for Disney+ to have a bigger effect on the entertainment giant's top line going forward.
One variable that couldn't be accounted for in the estimates: The effect of changing subscriber numbers as the fiscal first quarter progressed. Still, for our purposes, the graphic paints a fairly clear picture. Movies aren't the company's primary breadwinner. Media networks are, and streaming is more than just a pet project. That's actually good news for Walt Disney as long as consumers are too afraid to leave their homes for any sort of entertainment.
Not quite as vulnerable as it may seem
The one real red flag on the pie chart is the size of its parks and hotels business. While the $7.4 billion in revenue they generated a quarter ago only accounts for about one-third of its total business, that whole third is now in jeopardy with some calls for the entire hotel industry to shutter operations until COVID-19 is contained.
That liability may not be quite as extreme as it seems on the graphic, however. Investors who have followed Walt Disney long enough may recall the company's quarterly revenue breakdown didn't previously look like this. Prior to fiscal 2019, product revenue was reported as part of a division called consumer products and interactive media, which included licensed toys and video games. It was never a huge segment, making up less than 10% of the top line. But it's one part of the parks and products division that should emerge relatively unscathed from the coronavirus that's keeping kids at home (and bored out of their minds).
Bent but not broken
None of this is to suggest Disney won't feel near-term pain from the park and cinema closures. It certainly will, and anything that makes consumers uncertain also makes them more likely to keep their purse strings closed.
It is encouraging, though, that a sizable swath of Walt Disney's operations may actually benefit from families being trapped at home until further notice. The company is even capitalizing on the situation, adding Frozen 2 to the Disney+ library of content this past week, three months ahead of the originally scheduled release date. There's no telling how many new signups that initiative alone drove to the service. Meanwhile, bored kids are apt to be tuning into The Disney Channel more than they have in the recent past, while ABC's The Bachelor finale that aired earlier this month crushed other primetime competition. ABC's new show Station 19 dominated in ratings as well.
In other words, it's not all bad.