What to Know
- Disney is restructuring its media and entertainment divisions.
- In order to further accelerate its direct-to-consumer strategy, the company will be centralizing its media businesses into a single organization that will be responsible for content distribution, ad sales and Disney+.
- The change comes as the global coronavirus pandemic has crippled its theatrical business and ushered more customers toward its streaming options.
Disney is restructuring its media and entertainment divisions, as streaming becomes the most important facet of the company’s media business.
On Monday, the company revealed that in order to further accelerate its direct-to-consumer strategy, it would be centralizing its media businesses into a single organization that will be responsible for content distribution, ad sales and Disney+.
Shares of the company jumped more than 5% during after-hours trading following the announcement.
The move by Disney comes as the global coronavirus pandemic has crippled its theatrical business and ushered more customers toward its streaming options. As of August, Disney has 100 million paid subscribers across its streaming offerings, more than half of whom are subscribers to Disney+.
“I would not characterize it as a response to COVID,” CEO Bob Chapek told CNBC’s Julia Boorstin on “Closing Bell” on Monday. “I would say COVID accelerated the rate at which we made this transition, but this transition was going to happen anyway.”
Only last week, activist investor Dan Loeb called on Chapek to end the company’s annual $3 billion dividend to divert more capital to new Disney+ content.
Loeb’s Third Point Capital is one of Disney’s largest shareholders and bought more shares earlier this year in support of Disney’s repositioning around Disney+, its flagship subscription streaming service.
“We are tilting the scale pretty dramatically [toward streaming],” Chapek said on “Closing Bell,” noting that the company is looking at all investments, including dividends, as it seeks to increase its spend on new content. Chapek said the board of directors will have the final say on Disney’s dividend payouts.
Additionally, Chapek said the reorganization could result in some reduction of staff, but not likely at the same scale as was seen at the company’s parks division last month. Disney was forced to lay off around 28,000 workers after it became clear that its Disneyland parks in California would not be reopening soon.
As part of this reorganization, Disney has promoted Kareem Daniel, the former president of consumer products, games and publishing. He will now oversee the new media and entertainment distribution group.
He’ll be in charge of making sure streaming becomes profitable, as the company continues to invest heavily in its various streaming products. Daniel will hold the reins to all of the company’s streaming services and domestic television networks, including all content distribution, sales and advertising.
Disney is becoming more reliant on Disney+ as movie theaters have been unable to recover after being shuttered in March due to the outbreak. Ticket sales have been particularly lackluster at domestic cinemas since the industry attempted a large-scale reopening in late August.
In recent months, the company pushed back a number of its theatrical releases including its Marvel blockbuster “Black Widow.” The much anticipated Pixar film “Soul” has also been postponed. It will now arrive on Disney+ in December.
Analysts are still awaiting word from Disney about how “Mulan” fared after Disney removed it from theatrical release and sold it through Disney+ for $30. It is expected the company will share more details about its performance during its next earnings report in November.
Daniel will be responsible, in part, for making big decisions about Disney’s theatrical and streaming release schedules going forward.
″[Consumers] are going to lead us,” Chapek said on “Closing Bell.” “Right now they are voting with their pocketbooks, and they are voting very heavily toward Disney+. We want to make sure that we are going the way the consumers want us to go.”
Reorganizing Disney’s media business
Alan Horn and Alan Bergman will remain in charge of the company’s studios, Peter Rice will continue to head the company’s general entertainment group, and James Pitaro will stay as head of the company’s sports content.
All will report directly to CEO Bob Chapek. The company’s parks, experiences and products segment will remain under the leadership of Josh D’Amaro, and Rebecca Campbell will remain on as the chairman of direct-to-consumer and international operations. Campbell will report directly to Chapek for all things related to international operations but will report to Daniel when it comes to Disney+, Hulu and ESPN+.
“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.”
Under Horn and Bergman, the studios segment will focus on creating content for theatrical release, Disney+ and Hulu. Walt Disney Studios, Marvel Studios, Pixar Animation Studios, Walt Disney Animation Studios, Lucasfilm, 20th Century Studios and Searchlight Pictures all fall under their purview.
Rice’s general entertainment segment includes 20th Television, ABC Signature and Touchstone Television, ABC News, Disney Channels, Freeform, FX and National Geographic.
As for Pitaro’s sports segment, that will focus on live sports programming, sports news and original and nonscripted sports-related content across ESPN, ESPN+ and ABC.
Daniel’s media and entertainment distribution group will manage all distribution, operations, sales and advertising across the three content groups. Daniel has spent 14 years with the 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.
“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,” said Chapek.
This new structure is effective immediately. The company currently expects to transition its financial reporting to reflect these changes beginning in the first quarter of fiscal 2021.
Additionally, Disney announced that it will hold a virtual investor day on Dec. 10.
This story first appeared on CNBC.com. More from CNBC: