With most businesses of The Walt Disney Company (NYSE: DIS) drastically affected by the COVID-19 pandemic, the questions of how and when various units will return to operation are vital for the company, its bottom line and its stock price.

The theme parks are reopening in July. Walt Disney World in Lake Buena Vista, Florida, will begin phasing in its operations July 11. The company shut down its parks in March, and the bottom line took a huge hit.

The Parks and Experiences unit of the company saw its operating profit fall 58% in the first quarter this year, compared with the same period last year. That amounted to a billion dollars in profit just a few weeks into the pandemic lockdown.

“Until you have a vaccine, you’re going to have the parks run very cautiously,” Wall Street analyst Michael Nathanson said in a conference call.

Without a vaccine, he said, the parks will operate at 25% capacity through the end of this year, 50% capacity in 2021 and 75% in 2022.

The closing of movie theaters across the country upended plans for The Walt Disney Studios, with some films going straight to video on demand and streaming, and others waiting to see when the theaters reopen.

Questions About ‘Mulan’

One of the most important movies of the summer for Disney is “Mulan,” a live-action remake of the popular animated film. “Mulan” is still officially slated for a movie theater debut on July 24. Even though major theater chains are expected to reopen at the end of June, Nathanson sees a strong possibility that the $200 million film will go straight to video on demand and streaming.

In a recent conference call, Nathanson said that “it will be a freakin’ home run” if “Mulan” takes in even half of the $1 billion many of Disney’s blockbusters made in 2019.

But with concerns about the pandemic continuing, some major cities, including New York, Los Angeles, Chicago and San Francisco, may push the reopening of theaters back until August.

With racial unrest erupting across the country, whether people will be willing to gather in theaters is also a major question. That is especially true for movies that parents would be talking their children to see.

Nathanson points out that a theatrical release would require the house that Mickey Mouse built to bring back a lot of distribution and marketing employees from furlough. It may be easier for Disney to follow the course that Universal Studios says it will take with its movies, releasing them to premium video on demand and movie theaters at the same time.

Universal’s move came after it had what was termed a successful digital-first release of “Trolls World Tour.” But AMC Theatres (NYSE: AMC) has said it will no longer show Universal films.

“Effectively immediately, AMC will no longer play any Universal movies in any of our theatres in the United States, Europe or the Middle East,” AMC chief executive Adam Aron said in April.

Regal Cinemas has also said it will not carry films that “fail to respect theatrical windows.”

The Future of Movie Theaters

If Disney follows Universal’s lead, it could create upheaval across the entire movie theater landscape. It remains unclear who would emerge with the advantage.

In April, the National Association of Theatre Owners (NATO) acknowledged that “Trolls World Tour” grossed about $95 million in three weeks by charging $20 for a 48-hour rental.

“This performance is indicative of hundreds of millions of people isolated in their homes seeking entertainment, not a shift in consumer movie viewing preferences,” NATO said in a statement. “It is not surprising that people under shelter-in-home ordinances for weeks on end with increasingly limited entertainment options would take advantage of the movie’s direct-to-VOD move to keep children entertained, even at a premium price.”

NATO president and CEO John Fithian said, “Theaters provide a beloved immersive, shared experience that cannot be replicated.”

He said that when theaters reopen, studios will benefit from the global theatrical box office.

With Disney+ off to a strong start in terms of subscriptions, it’s possible that the Mouse House will adjust its strategy. Executives have made statements citing the value of theatrical releases, but if “Mulan” is pulled back from theaters in favor of VOD and Disney streaming services, that may signal a long-term change.

The Disney stock price was on the upswing late last week after receding somewhat earlier in the week. The blue chip shares closed at $116.75 on Friday. The 52-week range was $79.07 to $153.41.

At the beginning of the year, Disney was close to its 52-week high, but it suffered a plunge in March as the COVID-19 pandemic shut many of its businesses, including theme parks and cruise ships. The closing of movie theaters and the suspension of live sporting events also affected the bottom line.

The wider stock market experienced the same drastic drop, with the S&P 500 seeing a steep plunge.

Disney Speaks Out on Racism

Over the weekend, Disney joined a growing corporate chorus decrying the killing of George Floyd by a Minneapolis police officer and calling for constructive action on the U.S. racial divide.

In a letter to employees, Disney’s chief executive Bob Chapek, executive chairman Bob Iger and senior vice president, chief diversity officer Lantondra Newton promised “real change.”

“The recent killing of George Floyd as well as other instances of lethal attacks and harassment of unarmed black citizens in our nation continue to drive outrage and calls for action by people of all cultural backgrounds, including many of our employees,” the Disney executives said. “Feelings of grief and anger cause us to confront the inscrutable idea that the lives of some are deemed less valuable – and less worthy of dignity, care and protection – than the lives of others.”

The Disney executives said, “We intend to keep the conversation going, not just today, but for as long as it takes to bring about real change.”

Disney joins other companies in speaking out against racism and the killing of Floyd. Others include JPMorgan Chase & Co. (NYSE: JPM), Wells Fargo & Co. (NYSE: WFC), Target (NYSE: TGT), BlackRock Inc. (NYSE: BLK) and Netflix (NASDAQ: NFLX).

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