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Disney's Revamp Is Dan Loeb's Dream Come True

Tae Kim
·2 min read

(Bloomberg Opinion) -- Walt Disney Co. has a new message to Wall Street: We hear you. We’re a streaming-first company now.

Late Monday, the entertainment conglomerate announced it will restructure its business to make Disney+ and its other direct-to-consumer platforms the company’s main priority. Under the new structure, effective immediately, the three content groups — studios, general entertainment and sports — will now be required to create programming for Disney’s video-streaming services as their “primary focus,” a switch from traditional film and television production. Disney also established a new distribution arm which will have the sole responsibility for managing its profits from content created across the entire company, lowering the possibility of internal dissension on any key decision-making.

The revamp comes less than week after Third Point LLC’s Dan Loeb urged Disney CEO Bob Chapek in a letter to make significant increases in funding for its streaming efforts. The activist investor also said Disney should permanently suspend its $3 billion annual dividend to free up funds to produce or acquire content for Disney+ as well as Hulu and ESPN+.

For its part, Disney said the changes announced Monday were in the works for months. But whether or not Loeb’s nudge helped spur things along, investors should be pleased. This is Chapek’s biggest move since taking over leadership of the company from Bob Iger in February, and it’s a good one.

It’s been a tumultuous year for the Magic Kingdom and its investors. Covid-19 dealt a big blow to Disney’s tourism-related businesses, prompting the company to slash 28,000 jobs at its theme-park, cruise-line and retail operations. The company’s shares have slumped 14% this year, compared with streaming pure-play Netflix Inc.’s 67% surge in the same period.Disney isn’t the only traditional media company having issues amid the global pandemic. A slump in branded advertising in areas such as travel has hurt TV network revenue. At the same time, consumers have shifted spending away from outdoor activities such as movies, concerts and theme parks, and exacerbated the cord-cutting trend away from cable-TV subscriptions toward video streaming. Comcast Corp.’s NBCUniversal has made job cuts across its entertainment-related operations, while AT&T’s WarnerMedia is reportedly considering significant cost cuts and layoffs as well.

Even if some type of normal returns, a big part of Disney’s future is in streaming. The company and its new CEO get it.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Tae Kim is a Bloomberg Opinion columnist covering technology. He previously covered technology for Barron's, following an earlier career as an equity analyst.

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