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November 13, 2020

Disney suffers first annual loss in 40 years but optimism remains

By MarketLine

On 12 November, Disney reported earnings for its fourth quarter and fiscal year ended 3 October 2020. Despite closing the year with another quarterly loss, a better than expected performance pushed shares to rise as much as 6% after hours.

The company reported strong subscriber growth for its streaming services, while losses were less drastic than expected. Revenue also exceeded expectations.

Despite a difficult year for Disney, the company is adapting well to the pandemic.

Covid pandemic results in first annual loss for Disney in 40 years

Disney has been hit hard by the Covid-19 pandemic. Movie production and releases have been postponed, theme parks closed, and sporting events scheduled to be shown on ESPN cancelled.

The company reported a net loss of $710m in its fourth quarter, while losses for the year amounted to $2,832m. Revenue fell by 23% in Q4 and by 6% overall for the year.

The parks, experiences and products segment has been most severely hit due to widespread closures. Revenue from this segment tumbled by 61% in Q4 and by 37% for the year.

The box office around the world has stalled amid the pandemic, leading to 13% yearly loss in Disney’s studio entertainment division.

Streaming remains strong

While Disney is losing out from its loss in box office revenues, it is currently seeing its streaming revenues surge.

Disney+ in particular has seen huge growth. By October 3, 2020, Disney+ subscribers had reached 73.7 million subscribers. Disney has continued to strengthen its streaming service through early movie releases and swerving the box office.

The Direct-to-Consumer segment was the only part of the business to see growth, with a 41% increase in revenues in Q4 and 81% annual growth.

Investors remain optimistic

While there’s no denying that 2020 has been a difficult year for Disney, investors remain optimistic. Despite closing the year with another quarterly loss, a better than expected performance pushed shares to rise as much as 6% after hours.

Talk of a Covid-19 vaccine has fueled optimism amongst investors in general.

For Disney, there has already been talk of again being able to reopen its theme parks with social distancing measures. Meanwhile, the company has adapted to the unusual situation by driving growth within its streaming segment.

As the world continues to adapt, Disney is too adapting, which should help to secure growth in the future.