Disney announced their earning yesterday after the close, and it was not pretty.
The company's profits plunged 90% with a loss of over $1 billion. This is not much of a surprise since the theme parks, cruise line, and movie studio are all closed.
A situation like this could spell a wonderful opportunity since Disney is not going out of business.
That said, how are things going to change for companies going forward? There is a lot of uncertainty which brings up the question is how will technology change what organizations are facing.
It is safe to presume that Disney's hotel, theme park, and cruise business is cooked for a while. We can also presume that, at some point, it will return. Thus we can be confident in the company, long-term, on this end.
One area that is not discussed much is the streaming business. Yes, Disney introducing Disney+ got a lot of attention and it was a great success in the early going. Here, we see where the coronavirus actually helped them.
Yet, streaming is a threat that which is worthy of greater investigation.
The movie theater industry is on life support. This was one of those that experienced challenges before this crisis. Now, we are seeing them locked down, removing all revenues. Even after things "re-open", how quickly do people return to the theaters? Might they never return?
What does this have to do with Disney?
Obviously, a lot of their movie studio's revenue comes from the theater industry. Successful new films can rake in more than $100 million. If the industry shifts, meaning that films go direct to streaming, that is going to be difficult for Disney to recoup that money.
After all, one successful film equates to a lot of monthly Disney+ subscriptions. Of course, Disney could add a surcharge for new film capabilities but what could they get, a few dollars more a month?
Streaming simply does not offer the same revenue producing opportunities on the newer films as the present system. Disney could face challenges if there is a major shift in the industry.
We already saw one Fortune 500 company eliminated due to streaming technology. Blockbuster was the giant in the video rental industry only to get wiped out by streaming services (most notably Netflix). Seemingly overnight, they were gone.
Even when movie production starts up again, are people going to rush to theaters to view films? Another issue could be the fact that theaters will have to space people out, at least in the medium term, resulting in less people per showing. Will the theaters be willing to pay the same rate as before knowing they are going to have less revenue from even the successful movies?
Obviously, none of us can answer these questions right now. This is one of the major challenges going forward. What companies are faced with technological shifts that completely upend aspects of their business?
Disney could be one of them. It might be best to tread cautiously.
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