As the COVID 19 pandemic rages on, Disney has announced that it is restructuring its media and entertainment divisions, as streaming becomes the most important facet of the company’s media business.
On Monday, the company revealed that in order to further accelerate its direct-to-consumer strategy, it would be centralizing its media businesses into a single organization that will be responsible for content distribution, ad sales and Disney+.
DIS shares jumped 5% following the announcement.
As of August, Disney has 100 million paid subscribers across its streaming offerings, more than half of whom are subscribers to Disney+.
However, the move was not deemed as a result of the pandemic.
“I would not characterize it as a response to Covid,” CEO Bob Chapek told CNBC’s Julia Boorstin on “Closing Bell” on Monday. “I would say Covid accelerated the rate at which we made this transition, but this transition was going to happen anyway.”
“We are tilting the scale pretty dramatically [toward streaming],” Chapek said on “Closing Bell,” noting that the company is looking at all investments, including dividends, as it seeks to increase its spend on new content. Chapek said the board of directors will have the final say on Disney’s dividend payouts.
Chapek said the reorganization could result in some reduction of staff, but not likely at the same scale as was seen at the company’s parks division last month. Disney was forced to lay off around 28,000 workers after it became clear that its Disneyland parks in California would not be reopening soon.
Disney has become more reliant on Disney+ as movie theaters have been unable to resume operations since being forced to close down in March. In recent months, the company pushed back a number of its theatrical releases including its Marvel blockbuster “Black Widow.” The much anticipated Pixar film “Soul” has also been postponed. It will now arrive on Disney+ in December.
Analysts are still awaiting word from Disney about how “Mulan” fared after Disney removed it from theatrical release and sold it through Disney+ for $30. It is expected that the company will share more details about its performance during its next earnings report in November.
It seems as if Disney is ahead of the curve once again. If Disney is fully committed to streaming, this is a strong indication for where the theater industry is headed (AMC).
Works Cited:
https://www.cnbc.com/2020/10/12/disney-reorganizes-to-focus-on-streaming-direct-to-consumer.html