Disney to overhaul its entertainment business with focus on streaming

If there was any question that Disney+ is the center of Disney’s media empire, the company took away all doubt on Monday.

Disney announced a major reorganization of its media and entertainment business on Monday to “further accelerate” its streaming strategy.

The company’s stock was up about 5% in after hours trading following the news.

“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.”

Miller also said that this move will allow Disney to further monetize in demand content and possibly “make up for revenue and profit lost in other divisions this year.”

Under the reorganization, Disney will create a new Media and Entertainment Distribution group that will be in charge of monetizing content via distribution and ad sales. The group will also oversee the operations of the company’s streaming services like Disney+, Hulu and ESPN+.

The group will be led by Kareem Daniel, who was formerly the president of Disney’s consumer products, games and publishing 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 in a statement. “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.”

While the reorganization is a major announcement, it’s not necessarily a surprising one. Disney+ has quickly become the focal point and a saving grace of Disney’s business this year as the coronavirus pandemic has ravaged its bottom line.

The global health crisis has delayed Disney’s films, stalled productions and has shuttered parks and resorts for months, which led to massive layoffs.

Guests take a spin on "Dumbo, the Flying Elephant" at Magic Kingdom Park. With an unprecedented two Dumbos aloft, guests get to their flights faster aboard one of the park's most iconic attractions. Connecting the two Dumbos, a new "big top" area allows guests to immerse themselves in circus lore in a series of fun, interactive experiences before a spin with their favorite circus elephant. The double Dumbos help anchor the Storybook Circus area of New Fantasyland at Magic Kingdom Park — part of the largest expansion in Magic Kingdom history. (Disney)

Related article Disney is laying off 28,000 employees as pandemic hammers its theme parks

However, Disney+ has thrived.

The streaming service, which isn’t even a year old yet, now has more than 60 million subscribers. The company told investors last year that it projected Disney+ would have 60 million to 90 million global subscribers by 2024.

The news of the reorganization comes just a week after activist investor Dan Loeb said that Disney should permanently suspend its $3 billion in annual dividend payments and invest that money back 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.