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Disney restructures company to focus more on streaming

The Walt Disney Company will reorganize its media and entertainment businesses to focus on streaming. Yahoo Finance’s Dan Roberts discusses.

Video Transcript

JULIE HYMAN: Shares in Disney are up more than 4% today, and that's after the company announced a fairly dramatic restructuring of its various business lines. It seems to be sort of realignment and refocus on streaming, which, of course, it's already been focusing on a lot already. Dan Roberts, you've been looking into this. So what's sort of behind it, and what are the moves that Disney is making?

DAN ROBERTS: Well, Julie, as you mentioned, I mean, we're saying that Bob Iger already almost two years ago had said on a call that DTC is now the company's number one priority-- DTC, direct-to-consumer, meaning streaming. And of course, amid the pandemic, Disney+ has become even more of a focus than I think Disney would have thought it would become, or at least it has accelerated the idea of focusing on Disney+.

And in a way this reorg is being painted by some as a win for Dan Loeb, the activist investor who just recently had said Disney should put even more investment in streaming. He also said Disney should put the dividend on hold. It is not doing that, but basically reorganizing the company so that streaming and distribution are all-- and media business-- are all under the same umbrella, which really puts a focus on creation of content for streaming but also puts the creation and the distribution side separate.

So really, the point there being, you know, telling content creators, the people at Disney who are making, you know, original shows, whether it's Marvel and Star Wars series, movies, Pixar, all that-- you just make your content, and you don't actually know or worry about where it's going to be. So you might be working on a Marvel movie, and you don't know whether it's going to come out in theaters, whether it's going to go straight to Disney+.

Separate is the distribution side making those business decisions. And I think what's unsaid in all of this is that we're going to see a lot more marquee products that might have gone to theaters or might have gone somewhere else go straight to Disney+. It's all about really feeding the funnel and prioritizing that content creation.

And one more very relevant piece of recent Disney history I'd mention is that when Bob Iger stepped back as CEO, and they said, OK, Bob Chapek is now CEO, Iger said that he was now going to focus on the content-creation side and the original-content side, and that was really his passion. Well surprise, surprise, that that is now more overtly, explicitly being made the priority in terms of the reorg.

JULIE HYMAN: Dan, I guess the term DTC has evolved into so many different iterations, right, because you can talk about it from the commerce play where you don't need a middle man. There are, you know, Instagram-native brands that basically reach their customer. When you think about the other ways that DTC can manifest at Disney, do you imagine perhaps a YouTube-like structure? Will there be more creator-driven content because right now a lot of their content, which is, you know, premium, high-quality, amazing to watch? It's very costly, right? There's so much investment that needs to be made upfront. I'm curious how you envision the empire, the Magic Kingdom, sort of growing and ebbing.

DAN ROBERTS: Well, I think you're totally right to point that out that it's only going to grow from here. I mean, right now there's kind of three primo Disney DTC products, right? There's Disney+, which has been a big hit in reaping new subscribers, but it's going to take a while for that to be actually profitable. As you said, so much cost goes into that.

There's ESPN+, which has grown a little more modestly, and that's the sports side. And by the way, included in this reorg is what looks to me like an apparent promotion for Jimmy Pitaro, the head of ESPN. He's now sort of head of all sports content at Disney, so that also includes ABC Sports, and that's also part of the reorg-- sports under media under distribution.

But also the third product-- Hulu, which Disney is now the majority owner of. And Hulu has seen some success moving all the FX shows to Hulu. But the real point here, and I think you're getting to this, I think soon there will be something else, an additional product, because let's say you have one-off videos. Let's say you have things like Disney during the pandemic has done sing-alongs, where they put on Disney+.

Well what if they want to be able to offer that to people who aren't ready to pay for a Disney+ description? Maybe there's a YouTube like product. Maybe it's just YouTube, the official Disney YouTube page. But maybe Disney creates a whole new streaming outlet for more piecemeal videos. I'm with you. I think more is to come, and I think, again, you're going to see things-- you're going to see theaters be deemphasize.

I do think eventually-- as you all know, I'm a believer in movie theaters. I think they'll come back, and I think big huge blockbusters will still go to movie theaters. But I think they're going to start putting a lot more projects directly on one of their streaming platforms.