Several industries have been severely impacted by the coronavirus pandemic. One very familiar company has many of those same industries under one umbrella.
Prior to the pandemic, there was much optimism surrounding Walt Disney (DIS 0.56%) and its various segments. But with the vacation, cruise, sports, and movie industries virtually coming to a standstill, that sentiment changed. The Disney+ streaming service, however, has people talking about the company again.
Image source: Walt Disney.
What's working
With many of its businesses still early in recovery mode, the streaming service is what bullish investors are focusing on. Besides being the one shining portion of the business during the pandemic, there's another good reason for the attention. Since 2018, the direct-to-consumer and international business segment that includes streaming services has become much more important.
The addition of Hulu streaming TV and the initial success of the ESPN+ and Disney+ streaming services emphasized the focus on these segments. As of June 27, 2020, paid subscribers for these combined services totaled 101.5 million. And the revenue share for the segment has been growing, as the table below shows.
| Segment | 9 Months Ending 6/27/20 | Full Year Ending 9/28/19 |
Full Year Ending 9/29/18 |
|---|---|---|---|
| Media networks | 41.8% | 35.7% | 36.9% |
| Parks, experiences, and products | 27.5% | 37.7% | 41.6% |
| Direct-to-consumer and international | 23.9% | 13.4% | 5.7% |
|
Studio entertainment | 15.9% |
16% | 16.9% |
Data source: Disney financial filings. Note: Columns add up to more than 100% due to inclusion of intersegment content transactions.
What's recovering
Disney's other businesses are in various stages of recovery. Theme parks are reopening, albeit with limited capacity. Hong Kong Disneyland will be reopening for the second time on Sept. 25, for example, after the original reopening was halted due to a resurgence in local coronavirus cases in July. This will leave its California Disneyland as the only remaining theme park still closed.
Professional sports are also back in various forms, and the NBA playoff "bubble" at Disney's Orlando, Florida, Wide World of Sports complex has been a success. The ESPN sports network has recently announced partnerships with both DraftKings (DKNG 1.37%) and Caesars Entertainment (CZR +0.00%) in the growing sports betting segment, too.
What investors are watching
One thing that investors paid close attention to was Disney's anticipated hit film Mulan. After several delays in releasing the film as theaters remained shuttered, the inventive company decided to go right to its new streaming service with the release. It also charged subscribers an additional $29.99 to see the movie.
Audiences apparently thought that was a good deal. Reports said that downloads for the Disney+ app increased 68% over Labor Day weekend, which coincided with the film's release. We may not see the detailed numbers broken out, but Disney chief financial officer Christine McCarthy said, "We are very pleased with what we saw over the four-day weekend," referring to the holiday release weekend.
Even with some positive operational news, along with the potential for more to come as economies around the globe continue to recover, Disney's share price remains below the recovery levels that much of the rest of the market has seen.
Disney suspended its semi-annual dividend in May 2020 to conserve cash during the early peak of the pandemic. A reinstatement will likely come as recoveries progress and the hampered business segments begin to reaccelerate.
All of these factors combine to make it a good time to be talking about investing in Disney.
