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Disney’s theme park division has long been one of its most lucrative businesses. Now, after years of reliably generating huge profits, it has been wiped out in the span of a few months by the coronavirus pandemic.
Yesterday, the company announced it was laying off 28,000 employees at its theme parks in the US Nearly a third of Disney park workers, many of whom had been on leave since April, are affected. Disney World in Florida reopened at limited capacity in July, while Disneyland in California remains closed indefinitely due to state mandates.
Disney blamed the decision in part on “California’s unwillingness to lift restrictions that would allow Disneyland to reopen.” But even if it were to reopen this year, it may not substantially improve the brutal accounting the company faces.
In August, Disney reported its first quarterly loss since 2001, losing nearly $ 5 billion. (It made $ 1.4 billion in the same quarter of 2019). Its theme parks were the main culprits: They lost $ 2 billion in operating income that quarter, while all other segments posted profits, including the company’s movie studio, which has also been hit hard by the pandemic.
While Disney parks continue to struggle due to closures and low demand, its other businesses are doing well (relatively). Its television segment, the company’s other top profit generator, boasted more than $ 3 billion in operating revenue last quarter, thanks to the return of live sports to ESPN and subsequently higher ad revenue. His movie studio generated nearly $ 700 million in profit, slightly more than the previous quarter as more theaters reopen. And its streaming service, Disney +, is growing rapidly, although it continues to operate at a loss, as most new streaming services initially do.
At least with its movie business, Disney has some recourse when theaters are closed. You can release some movies on Disney + for an additional fee (such as Mulan) or free for existing subscribers (such as Hamilton adaptation). And while movies often make headlines, they are a much smaller part of Disney’s business than its theme parks.
There is no real substitute for an enclosed theme park. Disney cannot recoup those lost profits. In a normal quarter, Disney theme parks make between $ 1 billion and $ 2 billion in revenue. This year to date, they have lost money. When the company files its financial reports in November, the outlook could look even bleaker.
Even when Disneyland reopens and Disney World returns to normal operations, consumers may feel uncomfortable traveling to the Magic Kingdom to line up and bump into other tourists. It may not be necessary until a vaccine is deemed effective and widely used, until the parks look like they were before the pandemic. The Disney theme park problem was caused by the virus, but it could also last longer.
