Disney Preps For Q1 Report With Streaming, Parks, Exec Shuffle The Key Themes – Deadline

Posted 2020/02/04 0

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Disney will report its fiscal first-quarter earnings on Tuesday afternoon after the close of trading, with the company’s streaming progress, executive turnover and response to the coronavirus outbreak all likely to be major themes.

The consensus from analysts is for Disney to report $20.8 billion in total revenue and earnings per share of $1.46. Comparisons with the year-earlier quarter are still not exact, as the $71.3 billion acquisition of most of 21st Century Fox closed last March.

The quarter ending December 31 was one of the most eventful in company history. Long-awaited new installments in the Frozen and Star Wars franchises arrived and piled up considerable box office receipts, even though Star Wars: Rise of Skywalker has turned out to be the lowest-grossing of the three main Star Wars films released by Disney.

Disney launched streaming service Disney+ on November 12, gaining immediate traction with Star Wars spinoff series The Mandalorian. The company said the day after launch that 10 million people had signed up for the $7-a-month service, including some via a free offer to Verizon customers. Disney has said it will only divulge subscriber data when it reveals quarterly numbers.

Analysts have said Disney is likely to report a figure in the range of 20 million to 25 million subscribers, which would put the company one-third of the way to its five-year goal of 60 million to 90 million global subscribers.

Wall Street, and the rest of the media world, has been impressed by the sign-ups. Cowen analyst Doug Creutz and others are interested in knowing how many subscribers churned off after the end of The Mandalorian’s first season on December 27. The final installment of The Clone Wars will air starting February 21, offering a chance to re-engage lapsed Star Wars fans, he noted, and Disney+ will launch in U.K., France, Germany, Italy, Spain and other Western Europe markets in March, giving the service another meaningful subscriber boost at the end of the current second quarter and into the third. (Disney’s fiscal year ends in September.)

Changes in the company’s executive ranks are also likely to generate questions from analysts. In an announcement late Friday, the company said Hulu CEO Randy Freer would exit the streaming service as Hulu’s operations are more closely integrated with those of Disney+ and other parts of Direct-to-Consumer & International. The other major departure was Emma Watts, who left her role as president of production at 20th Century Studios. The direction and leadership of the former Fox operation appear to still be in flux, and there is a significant question mark given Watts’ stewardship of James Cameron’s Avatar sequels, the Deadpool and X-men franchises and prominent adult one-offs like the Oscar-nominated Ford v. Ferrari.

Disney dominated the box office last quarter forcing rivals to navigate around its large tentpoles. The studio (Disney and Fox) racked up at $1.1 billion at the domestic box office for the period, up 67% from the year before, with a 39% share, according to analyst Michael Nathanson of MoffettNathanson.

Creutz said management expects first-quarter studio results to be partially offset by an operating loss of about $60 million from 20th Century Fox – recently renamed 20th Century Studios.

On the television front, total domestic national television advertising at ABC nosed down by 1.5% last quarter to an estimated $775 million, Nathanson said. At cable networks, he ad revenue was up 2.4% to an estimated $1.1 billion.

Domestic affiliate fees for Disney’s cable network group rose 2.4% to an estimated $3.2 billion in the quarter as the impact of cord cutting was offset by carriage renewal agreements. Disney renewed deals with Charter in August and AT&T in September. And Disney led the big cable network group in ratings, which declined by 5% in the quarter, a narrower loss than other programmers, on positive growth by ESPN and FXX, said Nathanson.

At ABC, ratings fell 11% year over year, trailing Fox and NBC but beating CBS.

Retrans revenue was up 6.8% to an estimated $395 million, the analyst said..

The theme park business, already rattled by ongoing unrest in Hong Kong protests, is taking a hit in China in the current quarter on the coronavirus outbreak. The epidemic, which temporarily shuttered Shanghai Disneyland and Hong Kong Disneyland – along with movie theaters, film production and businesses across pretty much every industry – has Wall Street revising projections.

Creutz anticipates a peak drag on operating earnings from the two parks of $200 million in the fiscal second quarter slowly declining from that level through the remainder of the year and into fiscal 2021. “Even when the parks are reopened, we expect a gradual return to normal attendance levels as fears of the virus are likely to linger; additionally, there is no end in sight to the Hong Kong civil disruption,” he said.

Chinese authorities said late Monday there were a total of 425 deaths and 20,438 confirmed cases in the country.


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