Walt Disney Tweaks Entertainment Business Model to Improve Streaming

On Monday, Walt Disney Co stated that it had revamped its businesses related to media and entertainment to amplify the growth of Disney+ and other streaming services. The company is doing this considering consumers’ increasing inclination towards digital streaming.

The New Plan

According to the restructuring plan, Disney is going to divide the development and production of programming from distribution to make it more coherent to consumer demands.

The move has surfaced days after activist investor Daniel Loeb of hedge fund Third Point asked Disney to abdicate a dividend payment and amplify its programming investment in streaming.

Disney shares rose about 5% in after-hours trading to reach $130.76.

The theme and media company rolled out the Disney+ streaming service in November 2019. It has surpassed its targets by attracting more than 100 million streaming customers globally to Disney+, Hulu, and ESPN+.

Netflix Inc, the streaming pioneer flaunts 193 million; however, the company has structured that customer base over the 13 years.

Loeb had argued that Disney required slashing its dividend to boost spending on the latest TV shows and movies to attract new customers more quickly.

Disney Chief Executive Bob Chapek said in an interview that the company is planning to boost investments in the content. However, he did not say if the company was poised to slash its dividend to finance the strategy.

Making Consumer-Centric Content

“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 a different statement.

On Monday, Loeb welcomed Disney’s tweak of its media and entertainment model, in a statement.

“We are pleased to see that Disney is focused on the same opportunity that makes us such enthusiastic shareholders: investing heavily in the (direct-to-consumer) business, positioning Disney to thrive in the next era of entertainment,” Loeb said.

According to the changes, Disney’s studios, sports business, and general entertainment would move under one division while distribution and commercialization would be put under a different global unit.

Disney stated that its creative teams are going to develop and produce programming for streaming and traditional platforms, and the distribution group would make the decision where customers would watch it.

Possible Layoffs due to Revamp

Chapek also warned that there might be layoffs as a result of the “centralization” of functions; however, did not disclose the numbers.

Kareem Daniel, the former president of consumer products, games, and publishing, is going to monitor Disney’s latest media and entertainment distribution group, according to the company.

Alan Horn and Alan Bergman will persist to lead studio operations of the company. They will manage programming from big franchises such as Marvel, Star Wars, Disney Animation, and Pixar. Peter Rice is going to run general entertainment programming and Jimmy Pitaro will monitor sports.

Disney also stated that it would organize an investor day on December 10 to offer more information about its strategy.