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June 24, 2022
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Disney announced today that their separate media businesses are now being restructured into one subsidiary, focused on Disney+ content.
Garrett H.
Announced just today, Disney will officially restructure their entertainment subsidiaries to focus on their streaming services. This is due to the company’s need to consolidate their direct-to-consumer services and grow their market power. Focusing all of their media businesses into one major subsidiary allows Disney to focus on content, ads and their now three streaming services. (Disney+, Hulu, Star)
As many of you may know, the Walt Disney Company has been heavily impacted by the recent COVID pandemic. Their multi-billion dollar theme parks are closed (excluding Walt Disney World), the ESPN subsidiary doesn’t have much content to stream or many people to watch, Disney’s movie business is struggling with theater closures, and so much more.
The only shining star has been Disney’s 11 month baby streaming service, Disney+. While having only been around for 11 months, Disney+ has gained over 60 million subscribers. According to Disney’s own quarterly report in August, the company has 100 million paying subscribers across all of their offerings.
These changed focuses haven’t been Disney exclusive either. Many companies, such as AT&T, ViacomCBS and Comcast have all launched or are focused on streaming options.
While the transition to streaming hasn’t been necessarily very sudden, with the longterm benefits of cable TV slowly declining, the pandemic has done everything in its power to accelerate this change. The cheaper price for streaming combined with vast libraries of content have been very supportive towards its growth.
As expected, the Walt Disney Company has become more reliant on their streaming ventures, including Star, Disney+, and Hulu, simply due to the fact that their cable losses are increasing, and they can’t obtain any revenue from movies either.
With these issues resulting from lost cable revenue and movie revenue, the company has started to either push back major releases or bring them to streaming services. Mulan is a great example, becoming a $30 VOD along the way. Even TV channels, like Fox or the History Channel are coming to Hulu a day after mainstream release.
This method that Disney is using to move towards streaming is allowing the platforms to become the default location for not only movies and TV, but also cable exclusives and cinema exclusives.
A big part of this major restructure is the promotion of Kareem Daniel, the former president of publishing and games within the consumer products division of the Disney Company. Daniel will now be the lead of the new “media and entertainment” distribution group, focusing on growing Disney’s offerings.
Daniel’s new media and entertainment distribution group will also, according to a report by CNBC, “manage all distribution, operations, sales and advertising across the three content groups. Daniel has spent 14 years at with company in a variety of positions. He helped transform Disney’s Star Wars property into the two Star Wars: Galaxy’s Edge lands in Disney World and Disneyland as well as aided in bringing Toy Story Land, Pixar Pier and Avengers Campus to the parks.”
Under Daniel’s leadership, he’ll be responsible for many changes within Disney’s streaming, cable, sports, and theater divisions moving forward.
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,” Chapek said in a statement announcing the reorganization. “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.”
This quote shows that while the restructuring is significant, much of the Walt Disney Company’s revenue streams will be unaffected, such as with parks, experiences, and products. While much of Disney’s revenue won’t be impacted, it was also mentioned that focusing more investments onto Disney+ and Disney’s DTC business will happen.
This coincides with news, which, just released weeks ago, stated that the company was exploring different price points for Disney+, after “pric(ing) the service at a reasonable and accessible price point.”
This possible price increase would work extremely well with a higher focus on DTC, though with the pandemic, the pricing change might not be great for those struggling.
All in all, the restructuring is happening immediately, and Disney announced that they plan on holding a virtual investor day on the 10th of December, to not only answer new questions about the restructuring, but also for general investor news.
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