Disney Restructures Entertainment Businesses to Boost Disney+, Other Streaming Services

Disney will separate the development and production of programming from distribution to be more responsive to consumer demands.

By Reuters | Updated: 13 October 2020 10:27 IST

Photo Credit: Akhil Arora/Gadgets 360

Disney's studios, general entertainment and sports business would come under one division

Highlights

Disney shares rose nearly 5 percent in after-hours
Disney launched the Disney+ streaming service in November 2019
Disney CEO said company is planning to increase investments in content

Walt Disney said on Monday it had restructured its media and entertainment businesses to accelerate growth of Disney+ and other streaming services as consumers increasingly gravitate to digital viewing.

Under the reorganisation, Disney will separate the development and production of programming from distribution to be more responsive to consumer demands.

The move came days after activist investor Daniel Loeb of hedge fund Third Point urged Disney to forgo a dividend payment and double its programming investment in streaming.

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Disney shares rose nearly 5 percent in after-hours trading to $130.76 (roughly Rs. 9,600).

The media and theme parks company launched the Disney+ streaming service in November 2019. It has exceeded its own targets by drawing more than 100 million streaming customers worldwide to Disney+, Hulu and ESPN+.

Streaming pioneer Netflix boasts 193 million, but has built that customer base over the 13 years.

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Loeb had argued that Disney needed to cut its dividend to increase spending on new TV shows and movies to sign up new customers more quickly.

Disney Chief Executive Bob Chapek, in an interview with CNBC, said the company is planning to increase investments in content but he did not say if it was prepared to cut its dividend to finance the strategy.

"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, who took the company's top job in February, said in a separate statement.

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In a statement on Monday, Loeb welcomed Disney's revamp of its media and entertainment structure.

"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.

Under the changes, Disney's studios, general entertainment and sports business would come under one division while distribution and commercialisation would fall under a separate global unit.

Disney said its creative teams would develop and produce programming for streaming and traditional platforms, and the distribution group would decide where customers would see it.

Chapek told CNBC there would be layoffs as a result of "centralisation" of functions but did not say how many.

Kareem Daniel, formerly president of consumer products, games and publishing, will oversee Disney's new media and entertainment distribution group, the company said.

Alan Horn and Alan Bergman will continue to head Disney's studio operations, which will manage programming from big franchises including Marvel, Star Wars, Disney animation, and Pixar. Peter Rice will run general entertainment programming and Jimmy Pitaro will oversee sports.

AT&T, which debuted the HBO Max streaming service in May, reorganised in August to combine its film and TV operations under one studio head to better compete in the streaming media wars.

Disney said it would hold an investor day on December 10 to provide more information about its strategy.

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