Disney Is Restructuring Its Business Around Streaming

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announced on Monday that it’s restructuring its media and entertainment segments to place a greater emphasis on its growing streaming business. The company is in the midst of a transformation from a television and movie theater-driven distribution model to a direct-to-consumer business that would rival


Disney stock (ticker: DIS) was up 5.5% in after-hours trading on Monday.

Disney is creating a new unit that will be focused on commercialization and distribution of its movies, TV shows, and sports content: the Media and Entertainment Distribution group. Meanwhile the company’s studios will continue to churn out content, without a bias toward any one form of distribution.

Essentially, rather than making TV content, movie theater content, and streaming service content, Disney’s creators will just make shows and films, with a separate team deciding how to monetize them. The new distribution group will be led by Kareem Daniel, a 14-year Disney veteran who most recently served as head of games and publishing in the company’s consumer products business.

Disney will have three distinct content-production groups. First is studios, which includes Walt Disney Studios, Pixar, Marvel, and Lucasfilm, and will make movies and series for theaters and streaming. Second is general entertainment, composed of ABC, Disney Channels, FX, National Geographic, and others. Its focus will be on content for Disney’s streaming services like Disney+ and Hulu and its cable networks. Last will be sports, responsible for content for broadcast on ABC and ESPN and for streaming on ESPN+.

It will be up to Daniel and the distribution group to determine which path to consumers is best for each piece of content. That could mean skipping a theatrical debut for a film and bringing it directly to Disney+. Or it could mean an advertising and affiliate fee-supported run for a show on ABC first, then later a streaming window on Hulu—with an international streaming debut from the get go. It should give Disney more flexibility in how it monetizes content and place a greater organization emphasis on its fast-growing streaming platforms.

“Our creative teams will concentrate on what they do best—making world-class, franchise-based content—while our newly centralized global distribution team will focus on delivering and monetizing that content in the most optimal way across all platforms,” said Disney CEO Bob Chapek in a statement on Monday.

Disney+ has been the bright spot in Disney’s portfolio in 2020, as its theme parks remain closed or operating at lower capacity, movie theaters are shut, and advertising revenues at TV networks have slumped. Since launching last November, Disney+ had reached 60.5 million subscribers worldwide by August, beating analysts’ and Disney’s own forecasts. Hulu, ESPN+, and an upcoming international streaming service—to be called Star—make up the rest of the company’s direct-to-consumer offerings.


(T) WarnerMedia and


(CMCSA) NBCUniversal are each undergoing their own streaming-focused reorganizations this year, around HBO Max and Peacock, respectively. Each is trying to be more like Netflix (NFLX), which doesn’t have legacy distribution models to defend—100% of its content lands on its streaming service right away.

Disney will begin reporting its financials under the new structure in the first quarter of its fiscal 2021, which corresponds to the calendar fourth quarter. The company reports its fiscal fourth quarter earnings on Nov. 12 after the market closes. It will also host an investor day on Dec. 10 to elaborate on its streaming strategy.

Last week, activist investor Dan Loeb of Third Point wrote a letter to Disney’s board suggesting the company double down on its streaming strategy and up its investment in content for Disney+.

Disney stock has lost about 14% this year, versus a 9% return including dividends for the

S&P 500

and a 2% gain for the

Dow Jones Industrial Average.

Write to Nicholas Jasinski at nicholas.jasinski@barrons.com

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