In one of the strongest signs yet for the recovery of the battered entertainment economy, Disney on Thursday announced it would soon bring back movies exclusively to theaters and is preparing to accommodate theme-park customers at pre-pandemic levels.
“As capacity limits increase we don’t think we’ll have any problem at all increasing attendance to match that capacity,” the company’s chief executive, Bob Chapek, said of its theme parks in a conference call with financial analysts. “That’s not something that keeps any of us up at night.”
Chapek says a metric Disney uses to gauge future consumer interest known as “intent to visit” at Florida’s Walt Disney World is already consistent with fiscal 2019 levels, when the company’s theme-park division took in more than $26 billion. Last year it drummed up less than $16 billion.
Chapek was speaking on a call to discuss the company’s second-quarter earnings. Those earnings were bleak: Disney’s theme-park revenue sunk 44% and overall revenue were down 13%. Its operating income was roughly flat, up just 2% to $2.47 billion, as the company’s theatrical revenue have also remained small.
But he was also optimistic about the near-future of that segment, saying Disney will begin putting movies back in theaters exclusively as early as August. That reverses a pandemic-era policy that had seen it initially release films partly or wholly on digital platforms, as theaters were closed and questions about consumer willingness to brave crowded spaces abided.
Two new films – a Ryan Reynolds action comedy titled “Free Guy” and the Marvel film “Shang-Chi and the Legend of the Ten Rings” – will come to theaters in mid-August and early September, respectively, for an exclusive period of 45 days, Chapek said.
There is a downside for Disney to Americans beginning to resume travel and public events, however: Disney Plus, which saw subscriptions soar during the pandemic, added only 8.7 million new customers in the first three months of the year. Analysts had expected about 15 million.
The service now has 103.6 million subscribers around the world, about half that of Netflix, which has seen its own 2021 slowdown as quarantine pressures have eased.
Investors did not relish the Disney Plus news, sending the stock price down 4% in after-hours trading.
Disney also raised monthly prices from $6.99 to $7.99 recently, but executives say that has not led to “churn” – financial-speak for people unsubscribing. Disney chief financial officer Christine McCarthy told analysts the company is still on track for a projected 230 million to 260 million Disney Plus subscribers by 2024.
A return to outdoor entertainment normalcy is critical for Disney, which has been hammered by quarantines and consumer caution since the pandemic began to spread in March 2020 and it saw its net profits drop from $2.1 billion to just $29 million.
Theme parks are key to that: in the first three months of 2019, parks accounted for more than 40% of the company’s total revenue.
The theme-park and theater prospects are expected to be boosted by the CDC’s announcement Thursday that inoculated Americans can remove their masks in many indoor situations. Americans continue to get vaccinated – nearly 150 million have received at least one shot.
Executives hope the summer in particular can see a burst of theme-park visitors.
Disneyland has been open for the past two weeks, but only to California residents and at a 25% maximum attendance. Those restrictions likely will be removed in mid-June.
Disney World has been open since last summer with several attractions closed and social-distancing guidelines in place.
All parks around the world except its Paris location are now open. The company has yet to give a reopening date for the European park.
On the movie front, some observers had speculated that studios could shift the model more dramatically as consumers grew accustomed to watching big-name films at home. Disney has been making movies available on Disney Plus at various prices dating back to the middle of last year.
But while several of the firm’s July 2021 films – including the much-delayed “Black Widow” and the Dwayne Johnson adventure “The Jungle Cruise” – will again arrive on Disney Plus for paid purchase simultaneously with their release in theaters, Chapek suggested Thursday that era would end with the release of “Free Guy” and “Shang-Chi.”
He left room to return to a digital-first model, but only if matters remained bleak.
“We’re continuing to watch the evolution of the recovery of the theatrical marketplace,” he said, “and we’ll use that flexibility to make that right call at the right time.”
Theaters have been eager for new product. But studios have been more cautious, waiting until much of the moviegoing territories around the world are close to full strength.