Coronavirus Will Sink Media Earnings: Can Streaming Save the Day?

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Expect executives to tout performance of new services while the virus wrecks the balance sheet

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As media companies prepare for a dour earnings season, streaming figures to be the lone area where anyone can claim a win. The outlook for the next round of earnings looks gloomy as the full brunt of the pandemic will be shown on the balance sheets. Top media companies Disney, Comcast and AT&T are all expected to see revenues drop from the year-ago quarter, or in Disney’s case, plummet “Tower of Terror”-style. That’s why despite the fact that the direct-to-consumer segment is still mostly a drag on profit — launching a new service isn’t cheap, with companies like Disney and WarnerMedia spending billions on content — executives will try to make streaming the main focus. Disney+ is performing ahead of schedule. The streaming service, which launched in November, has amassed 54.5 million subscribers as of May 4, leapfrogging Hulu in subscribers and even challenging Amazon to be the No. 2 streaming service behind Netflix. Disney had projected to reach 60-90 million subscribers by 2024, the same time it also expects to turn a profit. AT&T finally launched its HBO Max streaming service during the quarter. Considering all the ways it essentially turned HBO subs into Max subs, it could have a decent, if deceptive, starting point when it reports its first subscriber count. Comcast rolled out Peacock nationwide last week, but could come armed with a few selective stats to make it look good. Expect ViacomCBS to spend some of its time touting the new, expanded version of CBS All Access that is coming at the end of this summer. But the performance of these companies’ streaming services likely can’t account for the massive hardships on the rest of their balance sheets, particularly in theme parks and theatrical. Already hit hard last quarter due to the pandemic, Disney is expected to report a 38% decline in revenue at $12.4 billion, which would mark its lowest quarterly-profit since 2014. Disney is already coming off a quarter in which it saw its profit plummet by 91%, its earnings fall to a measly 60 cents a share, and its biggest revenue driver — its parks division — take a $1 billion hit as a result of the virus. Disney has begun to reopen some theme parks, with Shanghai Disneyland becoming the first in May and, most recently, Disney World opened its doors despite a surging virus in Florida. Other parks to welcome back guests include Disneyland Paris and Tokyo Disneyland. Proving the uneven ground theme parks reside in while a vaccine is developed, Hong Kong Disneyland had to close back down less than a month into its reopening after a new cluster of cases emerged in the city. Comcast is coming off a quarter where its theme parks business took a 32% hit in revenue. While its Universal Studios Hollywood remains closed (though the CityWalk is open), other theme parks in Orlando and Japan have reopened various parts of their parks. Overall, Wall Street is projecting a 12% dip in overall revenue. This will be the first quarter that saw no major film releases, as the virus’ continued presence in the country has forced studios to delay films multiple times. “Mulan” is currently scheduled for Aug. 21, but given that Warner Bros. pushed “Tenet,” which was supposed to come out a week earlier, to an unspecified time, the Disney remake is on uneven ground. Comcast and AT&T are also in the midst of an acceleration of cord-cutting that threatens their pay-TV business. That segment is coming off its worst quarter ever, shedding more than 2 million subscribers in the first three months of 2020, or around 3% of the customer base. AT&T suffered the biggest losses in the quarter, losing more than 1 million customers between its legacy TV services like DirecTV and AT&T Now. It has already been an inauspicious start to earnings season for companies that lean on streaming. Netflix, the top dog in streaming, was pummeled last week, despite adding another 10.1 million subscribers — easily topping most analyst estimates — and beating Q2 revenue projections. The company’s share price has since dipped below $490, after trading at an all-time high of $575 per share the week leading up to its Q2 report. The reason? Netflix, even by its own conservative standards, offered what most analysts and investors considered to be tepid guidance for Q3: 2.5 million new subscribers (compared to more than 6 million for Q3 2019) and $6.3 billion in revenue. Even if Netflix only hits 2.5 million new subscribers next quarter, it’ll already have added more subscribers in 2020 than it did all of last year before the fourth quarter even starts.