The coronavirus pandemic has crippled the theatrical business, disrupted distribution and killed ticket sales at movie theaters, which have been shut down since March.
People sheltering at home consume content online more than ever and Disney is restructuring its media and entertainment divisions with a direct-to-consumer strategy aimed at getting more streaming revenue.
On Monday, the company announced that it would centralize its media businesses into a single organization responsible for content distribution, advertising sales and Disney+ — its flagship video-on-demand streaming service — CNBC reported.
“Under the new structure, the company’s three content groups will be responsible and accountable for producing and delivering content for theatrical, linear and streaming, with the primary focus being the Company’s streaming services,” the company said in a press release.
Disney laid off around 28,000 workers when it became clear that its California Disneyland parks would not be reopening anytime soon. The reorganization could result more staff reductions, CEO Bob Chapek said.
Disney company shares rose by more than 5 percent in after-hours trading on the news that it was putting more of its eggs in the streaming basket.
As part of the reorganization, Disney has promoted Kareem Daniel, the former president of consumer products, games and publishing to oversee the new media and entertainment distribution group.
Daniel’s job includes making sure streaming becomes profitable as the company continues to invest in streaming products. Daniel will hold the reins on all of the company’s streaming services and domestic TV networks, including all content distribution, sales and advertising.
“Kareem is an exceptionally talented, innovative and forward-looking leader, with a strong track record for developing and implementing successful global content distribution and commercialization strategies,” Chapek said.
As of August, Chapek said Disney has 100 million streaming subscribers. That includes more than 60 million for Disney+, which was launched less than a year ago in November 2019. Disney+ reached its 60 million-subscriber goal four years early.
“I would not characterize it as a response to covid,” Chapek told CNBC. “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 the company is looking at all investments, including dividends, as it seeks to increase spending on new content.
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Media executives predict there will be three-to-six big winners among the streaming services, CNBC reported.
“With 193 million paying subscribers, barring catastrophe, Netflix will be one of them. And I’m ready to call Disney+ a second winner,” Alex Sherman wrote for CNBC.
Investing heavily in the direct-to-consumer business will position Disney “to thrive in the next era of entertainment,” said activist investor Dan Loeb, whose Third Point Capital is one of Disney’s largest shareholders.
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