Walt Disney Co. Reshuffles Media and Entertainment Industries to Focus On Streaming, Direct-to-consumer Offerings
Oct 12, 2020
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About this Deal
Amid the economic turmoil the coronavirus pandemic has wreaked across industries including travel and entertainment, the Walt Disney Company is reorganizing its media and entertainment businesses.
The revised structure will include a new media and entertainment distribution group that handles all content Disney produces, whether it's for theaters, TV or streaming.
Capitalizing on the growing success of its streaming services, especially Disney+, the company will organize its holdings into three media and entertainment content groups – Studios, General Entertainment and Sports. Studios will include Disney, Pixar, Marvel, Lucasfilm and other theatrical and TV content for theaters and streaming services; General Entertainment handles series and long-form content on streaming services and TV networks (Fox; ABC News, Disney channels), and Sports will focus on ESPN and ABC programming.
“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,” said CEO Bob Chapek in an announcement Monday.
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Chapek was named CEO in February. Executive Chairman Bob Iger will continue to direct Disney's "creative endeavors," the company said.
This shift will streamline Disney's content pipeline "whether you are talking about linear television or studio or streaming," said CFRA Research stock analyst Tuna Amobi, who tracks Disney.
"Prior to this, you had separate units that have been focusing on different areas, sometimes giving the impression they were operating in silos," he said. "This is going to allow then ... to choose the best distribution for any given content to hopefully make it easier to maximize the lifetime value of (it)."
Disney shares rose more than 5% in after hours trading to $131.54.
Disney parks, films hurt by pandemic
The Mouse house has taken a double-whammy from the COVID-19 pandemic. Disney has been forced to layoff 28,000 workers at its theme parks in California and Florida. Disney World was first closed and then opened, but with rules on how many could attend. Disneyland's reopening plans remain on hold amid a stalemate between Disney along with some smaller theme parks and California Governor Gavin Newsom over state guidelines, though talks are continuing.
The company has also had to postpone film releases because U.S. movie theaters have been closed to prevent spread of the virus. Many theaters have reopened, but so far moviegoers have been slow to return. Earlier this month, Regal Cinemas's parent company Cineworld said it would close the 536 Regal theaters in the U.S. and 127 venues in the U.K.
After delays in its arrival in theaters, the Disney live-action film "Mulan" was made available on Disney+ for an additional $29.99. The Pixar film "Soul," will come to Disney+ on Dec. 25, for no extra charge.
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This reorganization suggests that more films could land first on Disney+, Amobi says, "I would expect more and more titles to have (that) opportunity," he said.
Disney+, which launched just a year ago in November 2019, had 57.5 million subscribers as of June 27, Disney reported. ESPN+ began operation in April 2018 and had 8.5 million.
Hulu, which Disney gained a controlling stake in as part of its Fox acquisition, had 35.5 million subscribers, the majority of which paid for the on-demand service; 3.4 million also paid for Hulu's live TV offering.
Disney's streaming strengths are bolstered by its studio acquisitions over the past decade or so. After Disney acquired Pixar for $7.6 billion in 2006, the company bought Marvel (2009) and Lucasfilm (2012), for about $4 billion each.
Subsequently, the Fox acquisition gained Disney the Fox movie and TV studios, FX and National Geographic.
New Star in Disney streaming universe
Disney is also planning to launch Star, a new international video streaming service in 2021.
With the pandemic continuing, Disney's reorganization will help it more quickly respond to how content is being consumed.
“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," Chapek said in the announcement.