Streaming was always going to be a big part of Disney’s next phase, but now it’s clear that Disney Plus is truly the company’s future.
Disney announced a “strategic restructuring” of its media and entertainment divisions yesterday that position the company to more aggressively meet its audience where they are — at home, streaming shows and movies to their TV. Under the new organization, Kareem Daniel, an executive who oversaw consumer products, games, and publishing, is moving from that division to oversee all of Disney Plus. It may seem odd to place a non-streaming executive in charge of streaming, but the shift seems to signal that Disney wants a less traditional approach to its entertainment and media businesses, with a focus on “delivering and monetizing our great content in the most optimal way possible.”
The goal is to empower individual studio and network chiefs to decide where their programming should go “as opposed to somehow having it pre-determined that a movie is destined for theaters or a TV show is destined for ABC,” Disney CEO Bob Chapek told CNBC.
One of the biggest differences between Disney’s public strategy before and after this reorganization is the extra emphasis on producing exclusives for streaming services, especially Disney Plus. The company noted in a press release that with the new reorganization structure, three content groups will be responsible for producing and delivering content “with the primary focus being the company’s streaming services.” That potentially means that Disney could give studio and network heads even more power throughout the calendar year, letting them decide where they believe certain projects should live, whether that be on Disney Plus, theaters, or on television.
Disney Studios chairman Alan Horn hinted at this approach back in February. During a roundtable with The Hollywood Reporter, Horn spoke about how Studios could use Disney Plus as a zone for movies that they were proud of but were unlikely to perform as well at the box office. Smaller films like McFarland, USA ($45 million worldwide) or Queen of Katwe ($10.3 million worldwide) can potentially find a larger audience on Disney Plus, while films with huge box office potential like The Lion King, Captain Marvel, or a new Star Wars installment can get theatrical releases. As its press release pointed out, the creatives overseeing Disney’s biggest franchises “will focus on developing and producing original content for the company’s streaming services.”
This reorganization has been in the works for a while, Chapek told CNBC — the pandemic just accelerated it. Streaming is now one of the only major revenue sources for the company as parks remain closed and theatrical releases are pushed back. The shakeup is a public display of confidence in Disney’s new and rapidly growing business — one that even Netflix co-CEO Reed Hastings found himself congratulating a few months ago.
Disney essentially now has two areas of revenue that it’s focused on growing: Disney Parks (a division that also includes merchandise and other non-entertainment products) and the new Media & Entertainment Distribution division. While it’s not too difficult to imagine parks rebounding in the years to come post-COVID, it’s the company’s media and entertainment sector, and specifically streaming, that represents Disney’s opportunity for immediate growth.
The future of Disney is riding on streaming. The theatrical landscape is dire, parks in the US and other regions will remain closed for the foreseeable future, and cruises aren’t likely to be popping anytime soon. Streaming, on the other hand, is growing faster than even Disney could anticipate. Disney now has more than 100 million subscribers across its various streaming platforms, with more than 60 million of those subscribers coming from Disney Plus. Chapek called the figures “a significant milestone and a reaffirmation of our DTC (direct-to-consumer) strategy, which we view as key to the future growth of our company,” on the company’s most recent quarterly earnings call.
Disney’s biggest investors and analysts agree. Dan Loeb, an activist investor whose Third Point Capital is one of Disney’s largest shareholders, even asked Chapek to end Disney’s annual $3 billion dividend in an effort to direct more capital to creating Disney Plus content. It’s an unusual move for an activist investor to ask a company to not pay out money they’re entitled to, according to CNBC, but Loeb noted that “by reallocating a dividend of a few dollars per share, Disney could more than double its Disney+ original content budget.”
“Disney has already proven that Disney+ is a big enough lifeboat to help the company reach the other side of this media landscape upheaval in a strong position,” Michael Nathanson, senior analyst at MoffettNathanson, wrote in a note this morning.
Last week, Netflix co-CEO Ted Sarandos told Variety that while he was excited by new competitive entrants like Disney Plus, he believes “everyone’s level of commitment still needs to be defined” adding that “there’s a still a thing called Disney Plus” that’s separate from Disney as a whole. That may have been true in the months before the pandemic, but with the new public reorganization and comments from Chapek, it’s clear that Disney as a whole is very, very much Disney Plus.
