The House of Mouse was devastated at the pandemic's onset when it was forced to deny entry to visitors to its theme parks. The Walt Disney Company (DIS 0.95%) relies, to a large degree, on bringing groups of people together to generate revenue. That sort of business was not a lucrative one when the world's fear of contracting a potentially deadly virus was at a high level. Fortunately, Disney had launched its flagship streaming service, Disney+, and it thrived while billions of people were spending most of their time at home.
Unsurprisingly, the trend is reversing as the world progresses in its battle against COVID-19. Demand for in-home entertainment is falling, and folks crave outdoor experiences after being cooped up inside. So, while Disney's streaming services may be challenged in the near term, its parks could drive profits in 2022.
Image source: Getty Images.
Streaming slowdown
After surging at the pandemic's onset, subscriber growth has slowed for Disney's streaming segment. Overall, it added 17.4 million subscribers in its second quarter, which ended Jan. 1. The company now boasts 196.4 million streaming subscribers across its three services (Disney+, Hulu, and ESPN+). That is second only to Netflix (NFLX 2.11%), which claims 222 million subs.
However, Netflix reported first-quarter earnings on April 19 and revealed that it shed 200,000 subs. That was the first time it had lost subs in nearly 10 years. What's worse, it is forecasting a loss of 2 million subs in Q2.
DIS NFLX PS Ratio data by YCharts
Investors are worried that Netflix's woes will spill over to Disney, and it will report much slower sub growth when it updates investors in mid-May.
Disney's theme parks save the day
Fortunately, Disney's theme parks are thriving. In its first quarter ended January, the segment that includes theme parks posted $7.2 billion in revenue. That was more than double the amount from the same quarter last year and generated $2.45 billion in operating income. Keep in mind that this was during a quarter when the parks were still not at full capacity.
DIS Operating Income (Quarterly) data by YCharts
Fueling this resurgence is pent-up consumer demand. Per capita guest spending at Disney's theme parks in Q1 was a whopping 40% higher than in the comparable quarter in 2019. Some of the boost is because Disney has raised prices on tickets, parking, and concessions. More still can be attributed to new premium experiences at Disney that allow guests to pay for the privilege of skipping lines. Additionally, it has implemented mobile ordering throughout the theme park, which improves the consumer experience and reduces operating expenses, a win-win for Disney's bottom line.
It's all working together to put the parks on pace for better revenue and operating income than in 2019. The achievement is impressive considering the world is still in a pandemic, the parks are not at full capacity, and international travelers have yet to return in large numbers. So if Disney's streaming services fail to regain momentum, its theme parks can carry the load in 2022.
