Disney Could Lose $500 Million-Plus From Closure of Theme Parks

Disney’s decision on Thursday to close its theme parks and resorts in California, Florida and Paris — coming weeks after the coronavirus shuttered its parks in Hong Kong, Shanghai and Tokyo — will cost the Magic Kingdom hundreds of millions of dollars, experts told TheWrap. Still, the exact toll on the media giant remains unclear. Lightshed media analyst Rich Greenfield, who’s often been an outspoken critic of Disney, estimated that Disney could lose, on average, $35 million each day from its six theme parks — and that’s not counting losses from Disney experiences and cruise lines, which have also been halted by the threat of the pandemic. By Greenfield’s calculation, Disney could be looking at $510 million in losses (on the low end) and upwards of $680 million (on the high end) — assuming the parks reopen as currently planned at the end of March and everything is back to business as usual. “That number could easily balloon,” CFRA analyst Tuna Amobi said. “It’s difficult for a number of reasons. For one, the duration of the closures isn’t up to them.” During the same quarter a year ago, Disney reported that the parks division generated revenue of $6.2 billion, which was up 5% from the $5.9 billion the division had reported during the same quarter in 2018. “Theme parks are high-fixed costs businesses,” Amobi said. “There’s bound to be some expense burn from paying employees and keeping certain facilities operational.” Disney on Thursday said it plans to continue to pay park cast members — the company’s name for staffers — through the duration of the closures. “There’s a bunch of uncertainties in terms of how long this actually lasts. Parks is a business that could feel the impact for several months; it’s something that could last throughout the year,” Amobi continued. “The more I think about it, the more dramatic it could be. The advantage that Disney has is they are fairly diversified, and if they’re somehow able to pull it off and reopen in a month, I would think they dodge the worst of it.” However, just because the parks reopen doesn’t necessarily mean the crowds will immediately flock back. Analysts and industry experts have wondered what the long-term impact of the pandemic might be and how it might change consumer behavior after the initial viral threat subsides. The last time Disney made such an unprecedented decision to temporarily shut down its Disneyland parks was after the terrorist attacks on September 11, 2001. Before that, the JFK assassination and the 1994 Northridge Earthquake, one of the most powerful ever recorded in North America, also disrupted the beloved tourist attractions. Before the historic move on Thursday to shut down its domestic parks, Disney had already made the decision overseas in January, closing its parks in Hong Kong, Shanghai and Japan (though many shops and restaurants at Shanghai Disneyland have since reopened). At the time, the full global impact and the hit pocket books would take was unclear. Disney said during the company’s first-quarter earnings call that it expected the closure of its two Chinese parks alone to cost the company at least $175 million. “The precise magnitude of the financial impact is highly dependent on the duration of the closures and how quickly we can resume normal operations,” Disney CFO Christine McCarthy told analysts. That number is bound to be larger now that the coronavirus has forced closures in the U.S. as well. Disney’s parks, experiences and products division is the company’s largest revenue and profit generator. In 2019, the division that houses Disney’s theme parks, resorts, concerts and cruise lines, generated $26.2 billion of Disney’s overall $69.6 billion in revenue. Of the parks and experiences division’s $26.2 billion in revenue last year, Disney’s international parks and experiences made up $4.2 billion. Disney’s domestic parks and experiences generated $17.4 billion. Theme parks are not the only Disney business threatened by the outbreak. Needham analyst Laura Martin wrote in a note to clients on Friday that COVID-19 is having a disproportionately negative impact on Disney’s three largest profit centers: parks, the film studio and media networks. She lowered quarterly expectations for revenue and earnings based on the impact, but based her predictions on the expectation of a successful COVID-19 containment by the end of June.