Disney — and its new CEO — face a major challenge from the coronavirus pandemic

Analysis: When Bob Chapek was named CEO of Disney last month, he was thought to be inheriting one of the best jobs in media. Weeks later, it looks like one of the hardest.
Bob Chapek during the dedication ceremony for the "Rise of the Resistance" attraction opening in Orlando, Fla.
Bob Chapek during the dedication ceremony for the "Rise of the Resistance" attraction opening on Dec. 4, 2019 in Orlando, Fla.Gerardo Mora / Getty Images

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By Dylan Byers

When Bob Chapek was named chief executive of Disney last month, he was thought to be inheriting one of the best jobs in the media business.

Weeks later, it now looks like one of the hardest.

The coronavirus pandemic is already wreaking havoc on a wide variety of industries and companies. Economists are drastically revising gross national product estimates for the U.S. and many European countries, with some saying a recession is almost inevitable — and a depression is possible.

Few major conglomerates are as vulnerable as Disney. The pandemic threatens to damage every sector of Disney's business.

"Every part of Disney is exposed to COVID," said Matthew Ball, a media analyst and former head of strategy at Amazon Studios.

Disney has acknowledged as much. On Thursday, the company issued a filing to the Securities and Exchange Commission that detailed its response to the pandemic.

"We have closed our theme parks; suspended our cruises and theatrical shows; delayed theatrical distribution of films both domestically and internationally; and experienced supply chain disruption and ad sales impacts," Disney said Thursday in a filing with the Securities and Exchange Commission.

"In addition there has been a disruption in creation and availability of content we rely on for our various distribution paths, including most significantly the cancellation of certain sports events and the shutting down of production of most film and television content," the company said.

Disney has also filed with the SEC to raise money by selling debt. The move came after Fitch Ratings put the company on credit watch, with a negative outlook — an indication that the company was about to endure serious, short-term shocks to its business.

The coronavirus pandemic has hurt every media business. Some, like NBCUniversal, the parent company of NBC News, have had to weather similar damage to their parks, theatrical and film and TV divisions. Streaming services including Netflix have put a freeze on content production, which could affect their ability to retain subscribers later on.

But Disney is in a unique position because nearly every aspect of its business is exposed — from the parks division, which brings in more than a third of Disney’s revenue, to television, where ESPN may soon face an existential crisis due to the suspension of live sports. And unlike NBCUniversal, Disney doesn't have the shelter of a telecommunications conglomerate like Comcast, NBCUniversal’s parent company, to help it weather the storm.

Media analyst Rich Greenfield referred to it as the “perfect storm.”

“With Film/TV production shut down they cannot ramp up content for newly launched Disney+, which was already short on fresh programming," Greenfield said. "Not to mention, they have a new CEO who is less than a month into the job after Iger's abrupt exit."

Disney has tried to bolster its streaming servicewith the early release of movies like Pixar’s “Onward,” which was originally slated to show in theaters. It is expected to do the same with “Mulan,” which it had been marketing heavily before the outbreak.

"The shutdowns hammer every pillar of the business," according to one veteran Hollywood executive who asked to remain anonymous out of fear of jeopardizing professional relationships. “No part of the business is untouched, except for streaming, which may enjoy a spike as confined families watch more — but the content pipeline is frozen and cannot be replenished."

The good news for Chapek is that Disney's reversal of fortunes comes after 15 years in which his predecessor, Bob Iger, grew the company's profits by more than 300 percent and its share value by more than 400 percent.

Disney can endure — for a time.

"Every entertainment company is in trouble," the executive said. "Disney is very exposed, but it also has the strongest global entertainment brands — and a lot of cash — and it has the best chance of rebounding when it’s safe to go outside again."

The question is, how long will that be? Because Disney will be forced to endure this pain so long as families avoid parks and theaters and cruises due to the fear of contagion. That fear may last even beyond the arrival of a vaccine, which current estimates say is still 12 to 18 months away.

Representatives from Disney declined a request for an interview or comment.