Disney Announces Massive Overhaul
On Monday, Disney announced that it was overhauling its media and entertainment business to focus on expanding Disney+, according to CNNBusiness.
Disney wants to "further accelerate" its streaming business. Disney stock surged more than 5 percent after the news but fell in the following days. "This is further proof that the direct to consumer model is not only well-received but more critical than ever to Disney's future," said Trip Miller, a Disney investor and managing partner at hedge fund Gullane Capital Partners.
"These moves will not only result in higher quality content, and focused distribution, but allow the company to streamline corporate complexity and hopefully lower expenses." He continued stating that Disney will be able to increase monetization of content to "make up for revenue and profit lost in other divisions this year."
The overhaul will create a new Media and Entertainment Distribution group that will be in charge of monetization. This division will also oversee Disney+, Hulu, and ESPN+. Kareem Daniel, Disney's former president of consumer products, games, and publishing, will head the division.
"Given the incredible success of Disney+ and our plans to accelerate our direct-to-consumer business, we are strategically positioning our Company to more effectively support our growth strategy and increase shareholder value," Bob Chapek, Disney's CEO, said. "Managing content creation distinct from distribution will allow us to be more effective and nimble in making the content consumers want most, delivered in the way they prefer to consume it."
The pandemic decimated Disney's other divisions but has allowed Disney+ to emerge as the company's revenue bell cow. The streaming service isn't even a year old yet and has more than 60 million subscribers. Last year, Disney projected that Disney+ would have 60 to 90 million subscribers by 2024.
The overhaul came only a week after activist investor Dan Loeb urged Disney to suspend its dividend and invest that money into Disney+. "We are confident that Disney can build a [direct to consumer] business that will meaningfully exceed its current cable TV and box office revenue streams, but only if the company leans into this opportunity and invests more aggressively," he said.