Walt Disney has been hit hard by the pandemic. Shutdowns of theme parks, movie theaters and cruise lines have laid low business units that just months ago were enjoying record profits. ESPN, the sports network, faces empty stadiums, while across the industry, there are signs that advertising is slipping. Disney + is a bright spot, but as with many new streaming services, it’s focused on winning subscribers, not turning out profits.
Analysts say Disney has the financial strength to weather the downturn. The company recently announced widespread worker furloughs, and top executives have taken pay cuts. Bob Iger, who became executive chairman after the recent appointment of Bob Chapek as chief executive, will work without a salary. Barron’s recently spoke with Iger about meeting the challenge of the virus, and how the entertainment industry might be left changed. His edited comments follow.
On the mood at Disney :
We’re optimists, although we’re also obviously realists, too. Optimists, because we have faith in the long-term prospects of our businesses, and our brands, which I think are important here. We know they have always been a place for people to go, whether it’s a movie or a park or ESPN, to enjoy their lives and to distance themselves from whatever daily issues they may be facing.
So, long-term, not to make light of this, what we offer, in terms of people’s time, is and always will be, and always has been, extremely appreciated and attractive. So I don’t mean to in any way suggest a this-too-shall-pass attitude, because this is obviously the biggest business interruption we’ve faced. But we know when it ends that we will have things for the public to enjoy and to escape to, maybe in ways they will appreciate more than they ever have.
On how this challenge compares with Iger’s past ones, and how to face it:
It’s the biggest by far in terms of challenges. Although you take it on in ways that are similar to other challenges. You have to be honest with yourself, with the people who work for you, and the public. You have to be realistic about the size of this and the impact of it all. And you also have hope that it will end eventually, and that when it does, that at some point, we’ll be looking at a return to business as usual, even if we know that’s a ways away. More importantly, you have to have empathy for what everyone is experiencing, not just our customers, but certainly our people.
On reopening the parks after the virus passes:
One of the things that we’re discussing already is that in order to return to some semblance of normal, people will have to feel comfortable that they’re safe. Some of that could come in the form ultimately of a vaccine, but in the absence of that it could come from basically, more scrutiny, more restrictions. Just as we now do bag checks for everybody that goes into our parks, it could be that at some point we add a component of that that takes people’s temperatures, as a for-instance.
We’re studying very carefully what China has been trying to do in terms of their return to normalcy. And one of the things that’s obvious is they’ve conscripted a large segment of their population to monitor others in terms of their health. You can’t get on a bus or a subway or a train or enter a high-rise building there—and I’m sure this will be the case when their schools reopen—without having your temperature taken.
So we’ve asked ourselves the question, let’s prepare for a world where our customers demand that we scrutinize everybody. Even if it creates a little bit of hardship, like it takes a little bit longer for people to get in. Just as the case after 9/11 where people ultimately lived with the notion that in order for them to enter a building, if you’re in an office building you have to show a picture ID or get your picture taken and be screened. Or in order to enter a park you have to put your bags out there to be checked and you go through some kind of metal detector. Or certainly what’s going on in airports with the TSA.
On what is being done with films already in production:
There are some we’ve decided to put on Disney+. We already announced one, Artemis Fowl, that would have been released in theaters. Others we’ve simply delayed. In some cases we’ve moved things onto Disney+ faster than we would have. Frozen 2 was one of them, but Onward would be the biggest example. It was in theaters when this happened. We moved to a pay-per-view period for a couple of weeks where people could buy it and own it. And then we ended up putting it on Disney+.
In terms of movies going ahead after Artemis, there may be a few more that we end up putting directly onto Disney+, but for the most part a lot of the big tentpole Disney films, we’ll simply wait for slots. In some cases we’ve announced new ones already, but later on in the calendar.
On Disney’s financial strength, and ability to bounce back:
We’re fortunate as a company that we have access to capital that will keep us more than solvent through a prolonged period. Now when I say prolonged, I don’t necessarily mean forever. No one’s got that. That said, we’ve taken steps during this period of time—you know, the furloughs—to reduce costs out of necessity. We started with the senior executives. We felt that was necessary, not just in terms of reducing costs, but also sending a signal. Others obviously will feel the impact as well as we look to preserve the long-term health of the company financially.
In addition to that, I don’t think we’re ever going to see a return to business as usual in the sense that, I can’t speak for all companies, but Disney will take this opportunity to look for ways to run our businesses more efficiently when we come back. So what we’re doing is thinking, OK, as things start to return, one, what must we address in terms of making people feel safe, but secondly, what must we address in terms of running the company more efficiently, given what we believe business conditions will dictate.
Unfortunately, or fortunately, it’s going great. The launch in Europe has been strong. France is just launching, because we delayed them, because they had some concerns about bandwidth. India just launched. We’re going to have launches in Latin America coming up. But the bottom line is that I think Disney+ was going to be popular no matter what. In this time, it’s probably far more popular than we ever imagined it would be, in part because it’s a welcome relief and a great alternative in terms of entertainment, for people who don’t have access given all the restrictions.
On working from home:
I’m on endless [videoconference] calls. I had one today. Bob Chapek had a call this morning with his senior team that I joined, which was great. We do a lot of those. [The new work rhythm] hit me at a particularly odd time, because I was transitioning to a new job. I would have had to get used to a new rhythm regardless. This was even more different than I expected.