Disney World Tops the Bobs' List of Headaches

(Bloomberg Opinion) -- Due to circumstances that would have been unthinkable a year ago, Walt Disney Co.'s streaming-TV business is becoming its most valuable resource, while its previously unshakable theme parks are becoming a new problem area.

On Tuesday, the company reported results for what will be remembered as the coronavirus quarter: a period during which it closed all of its theme parks around the world and halted its cruise lines, while movie theaters shut their doors, sports leagues postponed their seasons and TV-advertising demand dried up, with knock-on effects for Disney's ESPN and ABC networks and film studios. Net income from continuing operations fell 91% from a year ago. It wasn't surprising, but it was momentous. And it will probably get worse before it gets better.

So much of Disney's business model is dependent upon large numbers of people doing things together, something most people — until recently — hadn't given a second thought to since the attacks on 9/11. But the Covid-19 threat, or at least fears of it, may stay with us well beyond this current lockdown period, and that could permanently change how we think about getting on an airplane or cruise ship, being at an amusement park or going to the movies again. The only thing that does seem to be certain is that we'll all be streaming more television.

That's why Bob Iger's decision to make Disney+ and Hulu the new focus of the company's future couldn't have had better timing. Iger stepped aside as CEO in February, though his presence still looms large at Disney as executive chairman. He even kicked off Tuesday's earnings call before his successor Bob Chapek took over for the rest of the time. Disney+ is a long way from ever replacing the kind of profits generated by the traditional media business, but its prospects are now so much more certain than any of Disney's other divisions.

Disney+ reached 54.5 million subscribers as of May 4, which is fast approaching a goal it didn't expect to hit until 2024 of having 60-90 million subscribers. It's at that point Disney predicts the service can begin turning a profit. Iger may be sticking around in a more hands-on role than the chairman title would imply in order to ensure Disney's content and streaming strategy doesn't get knocked off course by the pandemic. Chapek's experience has predominantly been on the theme-parks side of Disney, which will continue to consume a lot of the CEO's attention for the time being.

Disney announced its Shanghai park will start accepting visitors again on May 11, though only a fraction of the 80,000 it normally welcomes on a given day. The company doesn't know when exactly it will be able to open the U.S. parks, but when it does, that will entail everyone wearing masks, except for characters in costume, who will keep a distance from visitors. It certainly detracts from the vacation experience.

Chapek was asked on the call about the “Pandora's Box” of safety issues that come with reopening the theme parks and whether he's ready to wade into that debate. Unfortunately, the new CEO dodged the question, instead pivoting to an explanation on how the parks will likely date their tickets to control crowds and not leave any customers disappointed that they can't get in. With shelter-in-place orders and masks becoming divisive topics, perhaps Disney doesn't want to get into it. Chapek did, however, talk about the pent-up demand for its parks and movies, and it would have been nice to hear more of his thinking on the inherent safety challenges.

It shows just how difficult and even controversial it may be for Disney to get its attractions up and running while so much about the virus situation is still uncertain. And even a return to “normal” might mean something different for those types of businesses. It's time to keep investing in Disney+ and Hulu to ensure the company thrives in a stay-at-home world, too.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Tara Lachapelle is a Bloomberg Opinion columnist covering the business of entertainment and telecommunications, as well as broader deals. She previously wrote an M&A column for Bloomberg News.