Could Disney survive without theme parks?

Is Disney (Disney Stock Quote, Chart, News NYSE:DIS) a media company or an entertainment business? It’s both, of course, but the role played by Disney’s theme parks in attracting investors to the stock just got a lot smaller.

That’s according to Rosenblatt Securities’ Bernie McTernan, who argues that after COVID-19 finishes taking a bite out of Disney’s theme parks, the company’s reliance on video streaming becomes the bigger deal.

Disney announced on Tuesday plans to lay off 28,000 workers in its parks divisions in California and Florida, as the company reels from the closure of its theme parks in the wake of the COVID-19 pandemic.

So far, Disney’s Florida parks have reopened in a more limited capacity but its California parks remain closed on government orders as the state attempts to rein in the spread of the virus.

Saying that the California closures have made it worse on the company , Disney chairman of Parks, Experience and Product Josh D’Amaro said, “As heartbreaking as it is to take this action, this is the only feasible option we have in light of the prolonged impact of COVID-19 on our business, including limited capacity due to physical distancing requirements and the continued uncertainty regarding the duration of the pandemic.”

The world looked a lot different to Disney less than a year ago when the company launched its streaming service Disney+ to much fanfare and predictions that it plus a new wave of streaming providers would be giving Netflix a run for its money.

And while Disney+ has been a success, it’s the reinvention of its parks business that is likely top of mind at the moment.

“What’s interesting is that it seems like the park business could be changing,” said McTernan, speaking on CNBC on Tuesday. “Comcast had plan to open up or start construction on another major gate in Orlando and it’s completely paused just because it’s uncertain what the next generation of parks should look like. Maybe it’s less people but tickets cost more and you have less people working, maybe that's how this ends up.”

McTernan says he views Disney’s recovery to be a long-term prospect and that investors should be focusing on its media business for the time being.

“The reason why you own Disney is because of the streaming and because of their content,” McTernan said. “Really, there’s so much uncertainty, whether it’s in parks or studios or people going back to theatres — even on the advertising side — the one thing that is working for media companies is streaming.”

“With Disney+ we’re looking for them announcing their Star+ platform going outside of the US, sometime maybe this year or early next year, and we think that’s going to get investors to talk about where the next hundred million subscribers for Disney are going to come from,” McTernan said.

So, could Disney actually survive without theme parks?

“Right now, they’re at close to 100 million and Netflix is at 200 million, so I think they’ll be narrowing that gap over time and increasingly we’ll be talking more and more about the profits and revenue of this company coming from streaming and not parks,” McTernan said.