Disney reported strong growth in streaming service subscribers in its fourth quarter earnings report Thursday. The company exceeded expectations on revenue and showed less drastic losses than anticipated. Here are the results.
Disney said its streaming service, Disney+, now has more than 73 million paid subscribers as of the end of the fourth quarter.
Shares rose as much as 6% after hours but pared gains during the executives' call with analysts when CFO Christine McCarthy said Disney would forgo its semi-annual dividend in January. She said the company would continue with dividends in the long term. The decision to pause the dividend came after activist investor Dan Loeb said the company end the dividend in order to fund Disney+ content. Shares were still up more than 3% during the call.
The Covid-19 pandemic has most significantly impacted Disney's parks division due to local restrictions that have forced temporary closures or limited capacity. Disneyland Resorts has remained closed as California restrictions prevent it from operating due to the level of Covid-19 cases in the surrounding county. It has been able to reopen its theme parks in Florida, Shanghai, Japan and Hong Kong with limited capacity. However, Paris Disneyland was forced to close in late October and will not reopen until 2021. Disney estimated that the net adverse impact of Covid-19 on the parks division operating income was about $2.4 billion in the fourth quarter.
CEO Bob Chapek said on a call with analysts Thursday that Disney is "extremely disappointed" in California's decision to keep parks closed despite the measures they've taken to keep visitors and staff safe.
"Our health and safety protocols are all science-based and have the support of labor unions representing 99% of our hourly cast members," Chapek said. "Frankly, as we and other civic leaders have stated before, we believe state leadership should look objectively at what we've achieved successfully at our Parks around the world, all based on science, as opposed to setting an arbitrary standard that is precluding our cast members from getting back to work."
Disney estimated in its earnings release that costs related to the pandemic will total roughly $1 billion in fiscal year 2021, though it said changes to local restrictions could alter that figure.
Here's how Disney's segments did in the fourth quarter in terms of revenue compared to the same quarter last year:
Revenues in Disney's studio entertainment segment fell 52% to $1.6 billion, due to lower theatrical and home entertainment results.
The company had no significant worldwide theatrical release during the quarter and faced tough comparisons to hits like "The Lion King" and "Toy Story 4," which were released in the same quarter last year.
Disney's home entertainment sales also suffered during the quarter as it had few titles to offer consumers. Last year during this period the company had "Avengers: Endgame," "Aladdin" and "Captain Marvel" all going to the home market.
Disney executives did not offer insight into how well "Mulan" performed after it was released as a premium product on Disney+. Chapek said the release was "met with some controversy," a reference to the movie's credits that thanked Chinese groups that have been linked to detention camps in the country. Chapek said Disney would discuss the company's theatrical release strategy more at the investor day in December.
Cable networks operating income fell 7% year over year to $1.2 billion. Disney blamed the decline on lower results at ESPN because of higher programming and production costs related to securing rights for NBA and MLB programming rescheduled from the previous quarter due to the pandemic. ESPN did see growth in ad revenue, however, due to the shifted programming and the additional week in the quarter.
McCarthy said Disney will no longer break out results for 21st Century Fox moving forward.
Disclosure: NBCUniversal is the parent company of Universal Studios and CNBC.