The enormous scale of the global health crisis has Disney accountants rounding to the nearest million to calculate the economic impact of the catastrophe. Survival of the company may rely upon a similar method millions of Americans are turning to in the absence of an income . . .
How Does Disney Weather the Storm?
How long can Disney survive an extended closure of its 12 theme parks around the globe and the recession projected to follow?
Only Disney’s financial experts know for sure —and estimates continue to change on a daily basis as the crisis stretches deeper into the calendar year.
The Disneyland, Walt Disney World and Disneyland Paris resorts have been closed for a month now. Disney’s theme parks in Shanghai and Hong Kong have been closed for three months while Disney parks in Japan have been closed for two months.
Disney has raised $7 billion in debt offerings and entered into $17 billion in credit agreements to weather the “black swan” crisis, according to the Hollywood Reporter.
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Financial analysts who study the company have estimated the impact of Disney’s theme park closures and the numbers are staggering. . .
How Much is Disney Losing?
Media industry analyst Hal Vogel estimates Disney is losing $30 million or more a day amid the COVID-19 pandemic, according to the New York Times. UBS financial analysts estimate Disney parks and resorts in the U.S. are losing $13 million per day during the coronavirus closures, according to Forbes.
The losses are steep. But with $24 billion in debt and credit, Disney should have the cash reserves necessary to manage the current coronavirus crisis and the potential recession to follow. At $30 million a day, it would take Disney just over two years to burn through $24 billion.
To put the massive numbers into perspective, Disney had $69.6 billion in revenue during the 2019 fiscal year, according to the company’s annual report. A little more than a third of that revenue — $26.2 billion — came from Disney’s parks, experiences and products division.
An analyst report from the research firm MoffettNathanson paints a grimmer picture of the financial impact of shuttering Disney theme parks amid the COVID-19 pandemic.
A one-month shutdown of Disney’s six U.S. theme parks due to the coronavirus outbreak could result in a $1.4 billion loss in revenue, according to the MoffettNathanson report. That works out to about $45 million a day — more than three times the UBS estimate.
A post-COVID-19 recession could deliver a $2 billion blow to Disney’s U.S. parks, according to the MoffettNathanson report. The closure of Disney’s six international parks could cost the company $900 million in lost revenue, the MoffettNathanson report estimates. The grim grand total for Disney’s theme parks: $4.3 billion in global revenue losses.
Disney began tabulating the cost of the COVID-19 pandemic before its parks in Tokyo, France and U.S. closed due to the global crisis.
The temporary closure of Shanghai Disneyland and Hong Kong Disneyland alone could result in a $175 million loss in Disney’s upcoming second quarter assuming a two-month closure of the parks, according to Disney chief financial officer Christine McCarthy.
Disney has taken steps to reduce costs at its theme parks. The company has furloughed most of the 77,000 cast members at the Disney World resort and the 31,000 cast members at the Disneyland resort.
Disney continued to pay cast members at the Disneyland and Disney World resorts for a month following the coronavirus closures of the U.S. parks in mid-March.
Disneyland paid cast members approximately $118 million during the unprecedented closure of the Anaheim theme park due to the coronavirus outbreak, according to data from a Cal State Fullerton economic impact study commissioned by Disney.
A month-long furlough of Disney theme park employees along with other measures could save the company $500 million, according to a J.P.Morgan analysts report.
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Let’s Hear From You
Surviving on credit in the short term is a means of survival that millions of companies and average Americans have also resorted to in these challenging times. But, eventually, the bill comes due.
What do you think the impact of a potentially months-long Disney Park closure spells for the future of The Walt Disney Company? How long will it take for Disney to recover and what sorts of cuts do you foresee in the future? Let us know in the comments below.
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