The Walt Disney Company had its Q2 earnings call yesterday, and as expected there wasn’t much good news for the Mouse House. Earnings were down 90%, and the worst is yet to come, says the New York Times.

Disney is effectively dead in the water, thanks to the coronavirus crisis. Its U.S. theme parks have been closed since mid-March, and there is no firm reopening date in sight. And when the parks finally do reopen, analysts are predicting a long road to 100% recovery.

And that’s not taking into account that most Hollywood productions have ground to a halt, as have sporting events — leaving little for ESPN to cover. And with no new sports coverage, there’s no incentive for advertisers to throw money at the beleaguered channel.

Disney is getting hit worse than most other media companies because its business model depends almost exclusively on large gatherings of people, and theme parks and travel make up a lopsided portion of the company’s revenue stream.

The thing is, Q2 only reflects a couple of weeks of shutdown. The real pain will begin with Q3, which could see the parks shut down for the entirety of the quarter.

From the New York Times…

Disney’s theme parks have long been watched as a bellwether for the broader economy. It is unclear whether the masses — now reeling from widespread pay cuts and job losses — will be able to afford Disney vacations when the gates do reopen. It took two years for Disney’s parks and cruise ship division to fully recover from the last recession.

The company must also navigate other troubling media trends. TV advertising (Disney owns ESPN, ABC, FX and other channels) is plummeting. Newly cost-conscious consumers are also canceling their cable service in larger numbers. At least 1.6 million people cut the cord between January and April, about 20 percent more than analysts had expected.

Profit in the most recent quarter, the second in Disney’s fiscal year, totaled $475 million, down 91 percent from $5.43 billion in the same period a year earlier. Excluding one-time items, per-share profit fell 63 percent, to 60 cents from $1.61.

Ouch.

And again, Q2 only reflects the very beginning of the Disney’s theme park, cruise line and Hollywood shutdown.

Q3 will likely be catastrophic for the Walt Disney Company.

To quote a certain animated lion, be prepared.

“Unprecedented times.”

The future for Disney beyond Q3 is murky. Even if the parks open mid-summer or fall, will people feel comfortable enough to travel this quickly? Will they even be in a financial position to do so?

While there will undoubtedly be Disney diehards who would visit the parks if they were open during World War III — even as bombs were raining down on us — the general public will likely prioritize health and financial well-being over Mickey Mouse for the immediate future.

According to some experts, only 21% of sports fans will feel comfortable going to a public sporting event in January 2021 with safety measures in place. We can only imagine it will be the same for theme park fans.

In yesterday’s call, Bob Iger kept citing “pent up demand” as a reason for why the parks will return to normal sooner rather than later. But that might just be wishing upon a star.

Disney can’t just flip a switch and roll everything back to February 2020. Nobody can.

Getting back to “normal” is going to take a while. Many feel there won’t be a “normal” again until there’s a vaccine. And even then, consumers might be so shell shocked from these “unprecedented times” that Mickey will just have to wait a little while longer.

[Source: New York Times]