What if Disney doesn't pull out?

[Brad Bishop]

I hate to even raise this but it's been on my mind:

Disney bought a bunch of IPs / studios before COVID-19 hit. Now everything they do is effectively closed except for Disney+ which still needs a return on investment. They've since borrowed more money ($Billions). They're not seeing a return on FOX, yet.

There's a good chance that Disney may not pull out of this. We may be left with them selling off, at a loss:
- Lucas / Star Wars
- Marvel
- FOX

They may even sell off the parks (This isn't a rumor or anything - It's just something I'm thinking in my head). Eventually they have to pay back all of that money and they're in a bit of a bad spot both with the money they spent becoming an IP holding company AND the unfortunate results of the virus.

It's possible that "Disney" may still exist but be under some other company's umbrella (Like "Verizon's Disney").

I'm not predicting the future. I'm just saying it's not looking good for Disney and each day makes it that much worse for them.

Just wondering if anyone else has had similar thoughts. I don't like it, but it's hard not to see it.

 

[seascape]

I hate to even raise this but it's been on my mind:

Disney bought a bunch of IPs / studios before COVID-19 hit. Now everything they do is effectively closed except for Disney+ which still needs a return on investment. They've since borrowed more money ($Billions). They're not seeing a return on FOX, yet.

There's a good chance that Disney may not pull out of this. We may be left with them selling off, at a loss:
- Lucas / Star Wars
- Marvel
- FOX

They may even sell off the parks (This isn't a rumor or anything - It's just something I'm thinking in my head). Eventually they have to pay back all of that money and they're in a bit of a bad spot both with the money they spent becoming an IP holding company AND the unfortunate results of the virus.

It's possible that "Disney" may still exist but be under some other company's umbrella (Like "Verizon's Disney").

I'm not predicting the future. I'm just saying it's not looking good for Disney and each day makes it that much worse for them.

Just wondering if anyone else has had similar thoughts. I don't like it, but it's hard not to see it.

Don't worry. Disney+ is actually going to be profitable in the second half of 2020. Hotstar is expanding in Asia in the second half of the year and is in good financial condition. Hulu is continuing to grow and will reach profitability sooner than expected. Walt Disney World and Disneyland will receive tax breaks if needed because Florida and Anaheim need them to survive. Now, that does not mean The Walt Disney Company is in great financial shape because they aren't. However? people ignore the fact that the Cable Companies have an even bigger problem. If you add up what they pay for each channel they carry? you will gind it's more than what you or I pay them. The Cable Companies make this up and their profits by selling advertising. The problem is advertising money is drying up. What does that mean? NBC Universal and Disney's media divisions are losing advertising revenue too but at least they get paid extra money from the Cable Companies.

 

[celluloid]

Well the parks would not be of much value if they can't have the IPS the company is famous for utilizing.

If the IPs are sold off, whoever is left running the parks loses.

If things are bad enough and grim enough to sell off the parks off, there is not another company likely in good standing who could afford them because they were hurt the same way.

 

[Slpy3270]

I doubt the borrowing is indication that the company is actually "suffering" and is just preparing, not expecting, for the worst. Bear in mind that they're still expecting to turn a decent profit for the year despite the Covid-19 crisis. We'll only figure out the true picture once they report earnings.

So no, asset sales are less likely than some fans are predicting.

 

[SteamboatJoe]

Intentional or not, there is this underlying assumption in the Disney doom and gloom crowd that Disney is the only entity in entertainment that is really suffering. Every entertainment conglomerate, titan of tourism, studio, and production company is suffering to one degree or another. If anything, Disney's diversified portfolio and credit will likely help it to whether the storm much better than some of its peers. Now if this was the 70's or 80's or even 2004, it is probably a different story. Even if Disney was interested in selling some assets, who is in position to be expending a lot of cash on acquisitions at the moment?

 

[Slpy3270]

Intentional or not, there is this underlying assumption in the Disney doom and gloom crowd that Disney is the only entity in entertainment that is really suffering. Every entertainment conglomerate, titan of tourism, studio, and production company is suffering to one degree or another. If anything, Disney's diversified portfolio and credit will likely help it to whether the storm much better than some of its peers. Now if this was the 70's or 80's or even 2004, it is probably a different story. Even if Disney was interested in selling some assets, who is in position to be expending a lot of cash on acquisitions at the moment?

As I have said before, the only asset I can see them selling in the future is the 50% interest in A&E Networks. Nat Geo has filled the lifestyle/educational void in Disney's cable networks so A&E is no longer viable to them.

ABC, Fox/FX, Marvel, Lucasfilm, Freeform and ESPN aren't going anywhere.

 

[The Grand Inquisitor]

Not going to lie the title of this made me spit out my drink

 

[seascape]

The truth is if Disney can't make it, no one in Orlando can. Now, Disney will not fail but those rooting for it because they care more about Universal miss the facts that Orlando and Florida depend of WDW for tax revenue and jobs. Disney is by far the largest employer in the state. In fact WDW is the largest single site employer in the country. The 77k they employ is actually just the tip of the iceberg because they have contracts with businesses the employ thousands of others. Then there are the offsite hotels and restaurants that would fail if it were not for WDW. In fact, if WDW failed Universal likely would too. That is why both WDW and Universal are represented on the reopen Florida Commission. They both need to succeed for Florida and Orlando to succeed.

 

[SteamboatJoe]

As I have said before, the only asset I can see them selling in the future is the 50% interest in A&E Networks. Nat Geo has filled the lifestyle/educational void in Disney's cable networks so A&E is no longer viable to them.

ABC, Fox/FX, Marvel, Lucasfilm, Freeform and ESPN aren't going anywhere.

Agreed. I don't see A&E adding anything of value to them. It's a shell of its once respectable self. National Geographic is a lot more of an esteemed, prestigious, and respected brand. I just hope Disney keeps it that way.

 

[Disney Irish]

Basically Disney has so much land in Florida that could sell some if they need to raise capital. Or better yet they could lease it and make bank quarterly.

They have so many assets there is likely not a chance for Disney to ever go under.

 

[Mouse Trap]

I hate to even raise this but it's been on my mind:

Disney bought a bunch of IPs / studios before COVID-19 hit. Now everything they do is effectively closed except for Disney+ which still needs a return on investment. They've since borrowed more money ($Billions). They're not seeing a return on FOX, yet.

There's a good chance that Disney may not pull out of this. We may be left with them selling off, at a loss:
- Lucas / Star Wars
- Marvel
- FOX

They may even sell off the parks (This isn't a rumor or anything - It's just something I'm thinking in my head). Eventually they have to pay back all of that money and they're in a bit of a bad spot both with the money they spent becoming an IP holding company AND the unfortunate results of the virus.

It's possible that "Disney" may still exist but be under some other company's umbrella (Like "Verizon's Disney").

I'm not predicting the future. I'm just saying it's not looking good for Disney and each day makes it that much worse for them.

Just wondering if anyone else has had similar thoughts. I don't like it, but it's hard not to see it.

Disney can file bankruptcy and still continue to exist for decades. For whatever reason there's this assumption that when corporations are bankrupt = done and closed for business.

For Disney to cease to exist they'd need to hit the liquidation stage. Which means Disney basically has to roll over twice and cannot find a sound way to restructure debt or raise cash. In 2019 Disney had $5.5B in cash on hand and since then has been able to raise additional capital in the form of bonds without issue. If they needed more cash they could either sell more bonds or possibly issue more stock before ever needing to sell any assets. One strength Disney has when it comes to raising debt is all of the physical assets it posses which can serve as collateral.

Take a look at Delta, Six Flags, American Airlines, Kodak for examples of companies that went bankrupt years ago and are still around.

To be honest because of the economic importance of Disney to the cities of Anaheim and Orlando I wouldn't be surprised to see a gov't bailout before the company would cease operations (this assumes no buyers during liquidation).