Disney forced to adjust strategy as COVID plans falter

Global media and entertainment giant Walt Disney Co (NYSE: DIS) is a textbook example of how a management team needs to react quickly after initial plans are faltering, The Wall Street Journal reported.

The big July that wasn’t

July was supposed to be a very busy month for Disney as theaters across the U.S. were supposed to open. Disneyland was supposed to welcome guests in Anaheim, and ESPN is void of live sports. Meanwhile, the reopening of Walt Disney World in Florida coincided with a record number of coronavirus cases across any state, according to WSJ.

The company’s strategy of integrating one part of its business into another (think movies into theme-park rides) implies Disney is more vulnerable to the COVID-19 pandemic compared to its rivals. In fact, Cowen analysts aren’t modeling Disney’s domestic parks to return to pre-COVID levels until 2025. Gone are the days of parks at full capacity and people waiting outside for hours. Instead, Disney’s management team will be lucky if guests show up at all, WSJ noted.

Decent at best options

Disney’s hands are tied and its options available are less than perfect. Sure, management deserves credit for not sitting back, but the results speak for themselves.

ESPN, for example, aired on two occasions a 2018 concert by the Eagles and justified the show as music and sports go hand in hand. Both shows averaged less than 1 million viewers which would be horrible in normal times and is just “decent” in the current environment, according to WSJ. Investors have reason to be concerned as ESPN is counted on to reliably and consistently bring in big ad dollars.

Meanwhile, Disney was forced to furlough many employees across all divisions to help stop the bleeding. Other workers were asked to continue working from home at reduced salaries.

The end result is a stock that is down nearly 20% in the past six months. Shares recently dipped below the $100 per share mark for the first time since mid-2018 as Disney’s stock along with nearly every other was hard hit with the rest of the market in March. Here is a guide on how to buy Disney shares.

Signs Of Hope

Disney’s streaming unit called Disney+ is showing better signs of momentum and some analysts are predicting it will become profitable two years earlier than previously expected in 2021. The company’s decision to release “Hamilton” over the July 4 weekend attracted new subscribers and serves a testament to the power of the business.

Despite the complete shutdown of Disney’s studio, the platform has attracted 50 million users since November and churn rates are quite low. The company is working on new content, including a Beyonce special titled “Black is King” and a deal with former NFL star Colin Kaepernick to develop content.