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Disney’s parks and live entertainment businesses took a $1 billion hit after the coronavirus pandemic forced widespread closures, the entertainment giant disclosed alongside a mixed second-quarter earnings report Tuesday.
The company reported quarterly revenue grew 21 percent to $18 billion, slightly outpacing expectations. But adjusted earnings per share came in at 60 cents, which fell short of the 89 cents per share expected by analysts.
The pandemic caused major interruptions at Disney’s lucrative theme parks and cruise lines in the United States and abroad. Revenue in the key segment dropped 10 percent to $5.5 billion, while segment operating income fell 59 percent to $639 million.
“We estimate the total impact of COVID-19 on segment operating income in the quarter was approximately $1.0 billion,” Disney said in its earnings release. “Prior to the closure of our domestic parks and resorts, volumes and guest spending were higher compared to the prior-year quarter. Costs for the quarter were higher.”
Disney’s domestic parks shut down in mid-March to adhere to shelter-in-place orders and bans on mass gatherings. The company enacted a slew of cost-cutting measures since the pandemic began, including furloughs for more than 100,000 employees in its park and hotel businesses. Disney also took out a $5 billion line of credit to address short-term financial challenges.
The results are a partial view of the pandemic’s effect on Disney’s business since the domestic closures took place near the end of the second quarter. Nearly every aspect of Disney’s operations were affected, including its upcoming slate of film releases and cable sports network ESPN.
“While the COVID-19 pandemic has had an appreciable financial impact on a number of our businesses, we are confident in our ability to withstand this disruption and emerge from it in a strong position,” said Disney CEO Bob Chapek said in a statement. “Disney has repeatedly shown that it is exceptionally resilient, bolstered by the quality of our storytelling and the strong affinity consumers have for our brands, which is evident in the extraordinary response to Disney+ since its launch last November.”
The earnings report was Chapek’s first since he replaced Bob Iger, who stayed with Disney as executive chairman. Iger is forgoing his base salary, while Chapek took a 50 percent pay cut.
With U.S. sports leagues on indefinite hold due to COVID-19 and few live sporting events on the calendar, ESPN has scrambled to fill out its programming slate. A number of ESPN’s highest-paid on-air personalities agreed to take pay cuts during the slowdown.
“The Last Dance,” an ESPN documentary on Michael Jordan and the Chicago Bulls’ 1997-98 season, has proven to be a highlight in recent days. The series debuted in April as the most-watched documentary in ESPN’s history.
The Disney+ streaming service has benefitted in recent weeks as viewers stuck in lockdown in the U.S. and other countries turn to digital options for entertainment. The platform hit 50 million paid global subscribers in the five months after its launch, Disney disclosed on April 8.
This is a breaking story. Check back for updates.