Disney (NYSE: DIS) has been through one of its most turbulent years ever in 2020. Theme parks were closed, movies were canceled or released directly to customers, and the legendary CEO Bob Iger resigned, although the company still holds the position of executive chairman.
But there were clear places for Disney as well, and by mid – 2021 it is very likely that the pandemic will begin to cost the world over. And that could change what we should expect from Disney next year.
Baby Yoda from Am Mandalorian. Image source: Disney.
Parks and experiences come back
The biggest change to be found in 2021 is a potential revival for Disney’s parks, experiences and products industry. In fiscal 2020, revenue from this sector was down 37% to $ 16.5 billion, and operating loss was $ 81 million, compared to $ 6.8 billion in operating profit a year ago. But that doesn’t even show the depth of the impact of the pandemic. In the third fiscal quarter, which ended June 27, parks revenue fell 85% to $ 983 million, and operating losses to $ 2 billion.
We don’t know how soon parks and revenue experiences will return, but I think buyers seem to be camping at the rate to make up for lost time at planting centers. -delivery as Disney’s. If the COVID-19 vaccine is as effective and widely available as hoped, by the end of 2021, the parks industry could return to pre-pandemic income and employment levels, which icing on the cake considering Disney’s relatively new streaming industry.
Disney + is maturing in real business
By any measure, Disney + has been a huge success in the world of streaming. Just over a year after its launch, the service has 86.8 million subscribers, and that’s before a flood of content was announced to investors last week. In the next few years, dozens of original series will be added to the service, and this is expected to be one of the largest streaming services in the world.
As original new content is added, I see Disney + evolving into an optimized streaming service from its starting point as a library waste of the Disney catalog (how strong that was) .
Let ‘s just do a few calculations on the back of the napkin on what the impact of Disney + might be. According to the recent Disney show for investors, regulators expect between 230 million and 260 million Disney + subscribers by the end of 2024. The price of the service will rise to $ 7.99 per month in March 2021, translates to around $ 22.1 billion in annual revenue at the lower end of that target range – and that doesn’t include Hulu, ESPN +, international services, or senders any income Disney has brought in. Remember, this is a modern business, so it is possible that it is almost entirely contributing to the $ 65.4 billion of Disney revenues generated in fiscal 2020.
The ESPN transition must be apprehended
ESPN is one area where I expect major changes in 2021. The company’s sports arm has long been a silver lining, but that has changed in recent years as consumers cutting the cord and the cost for ESPN of signing major sports licenses. In 2020, registrant losses continued to rise and regulation has agreed to cut costs, but that is just the beginning of changes at ESPN.
The success of Disney + paves the way for ESPN and the appropriately named ESPN + in 2021. The sports streaming service is currently a unique addition to ESPN with UFC pay-per-view combat, 30 for 30 content, and some live events. But the future of sport is almost bleak, and I think that will start to change in 2021.
We’ve seen that Disney can attract tens of millions of viewers to streaming, and with 11.5 million subscribers, ESPN + has a strong start. But as cable and licensing contracts expire, I think we’ll see streaming services like this start collecting their own content, and no sports network is getting as much incentive to perform streaming work with ESPN. I could also see it moving some high-profile chat shows to the streaming service and off ESPN channels, another way to attract customers.
Disney needs to figure out what the future holds for ESPN and do so before someone else builds a streaming sports giant. I think we will see that transition happen in 2021 with ESPN + getting a lot more investment and attention than it did in 2020.
Disney’s digital future
This year has shown that Disney ‘s future is a more digital, direct – to – consumer business, and a legacy media company is less prepared to make that transition. Next year, I think that trend will accelerate with Disney + maturing and likely changes at ESPN and ESPN + as well. But back parks, too, provide another highly profitable source of income. And that’s the kind of full recovery that will help the stock in 2021 and beyond.