Monday’s announcement from the Walt Disney Company that it was undertaking a major reorganization of its film and television teams with the aim of strengthening its streaming services was a hit with investors. Shares of the entertainment giant rose on news that the company would redirect its operations to produce movies and shows and decide later whether they would debut on the big screen, via cable or stream on Hulu and Disney Plus.
If Disney hoped the news would focus Wall Street’s attention on streaming growth rather than the significant discomfort plaguing its theme parks, the plan has worked wonders. Instead of dwelling on the fact that COVID-19 has depressed participation in parks it has been able to open in Asia, Europe and Florida, and has left other places like Disneyland closed indefinitely, the narrative that heads into the next call of Disney̵
“They want to be seen as Netflix’s challenger,” said Hal Vogel, a veteran media analyst. “This signals how heavily they are investing in taking Netflix.”
Disney shares gained 3.2% to $ 128.96 in trading Tuesday in the wake of the reorganization. The stock is down about 13% for the current year, a better performance than most of its competitors in the media, but far from its 52-week high of $ 153.41. Clearly, investors bought the field and the stock responded accordingly.
But internally, employees across the board were baffled by both the timing and the content of the ad. Various power hubs were announced with great fanfare, but it wasn’t immediately clear whether the likes of Alan Horn and Alan Bergman, who rule the company’s film effort; TV chief Peter Rice, who has been named president of general entertainment content; and sports chief James Pitaro, president of ESPN and Sports Content, had either been promoted or simply played similar roles with a slightly greater mandate to think more in terms of what is worthy of binge.
The indisputable star of the day was Kareem Daniel, who was named head of the newly coined entertainment and media distribution group, a universal division charged with monetizing all content. Daniel’s promotion fills some of the void left by Kevin Mayer’s departure in May as president of Disney’s Direct to Consumer and International division. Daniel’s distribution group, including Rebecca Campbell, who directly oversees Disney’s streaming services and international operations, will play an important role in determining content spending strategy and priorities for Disney’s DTC expansion.
Daniel was previously president of consumer products, games and publishing. The promotion significantly raises his profile. Daniel will report to Chapek, as will Horn and Bergman, Rice and Pitaro.
“This is weird,” said one senior film executive simply, puzzled by the news.
With the emphasis on streaming and the reorientation of the company’s focus on content creation, many in the industry were surprised by the lack of mention of major creative executives in the reorganization, most notably Dana Walden, president of Disney Television Studios and ABC Entertainment. , and head of FX Networks John Landgraf.
The reorganization reaffirms the structure that requires Marvel’s Kevin Feige and Lucasfilm’s Kathleen Kennedy to oversee feature and TV series content related to films produced through Horn and Bergman’s Disney Plus unit. Some have wondered whether Disney Plus at the eventually it would centralize programming and manufacturing operations under a single leader. In addition to Marvel, Lucasfilm and Pixar, Walden’s Disney Television Studios and National Geographic produce content for Disney Plus. Walden also oversees the original content for Disney’s Hulu.
Also absent from the reorg news was Ricky Strauss, who had been president of content and marketing for Disney Plus since 2018. A well-liked figure among veteran Disney executives, Strauss was not named as a player in either Horn’s group or in Bergman’s studies. nor in Rice’s general entertainment team. Variety learned that Strauss was subsequently appointed head of curatorship for Hulu and Disney Plus.
In addition to the missing names, numerous people Variety she spoke with wondering aloud when Horn, 77, intends to retire. He continues his long reign with another new title – Chairman, Studios Content – which he shares with Bergman.
Disney’s effort to reorganize its film and television units around its streaming business is another indication of how fast the coronavirus is accelerating Hollywood’s shift from providing movie theaters and cable boxes to ambitious direct-to-consumer initiatives. Disney Plus was one of the first success stories when old Hollywood tries to change its entrepreneurial mindset. WarnerMedia and Comcast have undertaken similar efforts to reorganize executive teams and reallocate resources around streaming initiatives that promise future growth at a time when traditional revenue streams are under extreme pressure.
These companies don’t have much choice. Many people are afraid to go back to theaters when the coronavirus rages on, and with theaters in places like New York City remaining closed, Disney has been pushing one major movie after another in 2021 and beyond with the hope that a vaccine will be next. widely available. Clearly, the box office will not be the profit driver it once was.
At the same time, a prolonged recession or even a depression could push consumers to find ways to save. In tough times, cutting the cord could become very tempting, potentially jeopardizing the advertising revenue and retransmission fees that Disney has historically pocketed from ESPN, Disney Channel, and the like.
The one constant bright spot in all this uncertainty was Disney Plus, which continued to attract customers and captured the spirit of the times with the release of “Hamilton” last summer and Beyonce’s “Black is King”.
“If you look at it from 30,000 feet, this wasn’t the tail wagging the dog’s tail, this is the revenue source that the dog wagging,” said Peter Newman, MBA / MFA program head at NYU Tisch School of the Arts. ” Just as Disney’s shares have risen, AMC has said it will run out of cash and Regal will close. The system was so broken and in need of a reconfiguration. “
Given the fractured nature of the theatrical distribution landscape and the wasteland that is the business of live events, an industry that has produced untold wealth at Disney across everything from cruises to Broadway shows, it’s a very convenient time for the company. to emphasize its streaming efforts. The announcement is an indication that for the foreseeable future, Disney would very much like the investment community to treat its financial results as it does Netflix’s, focusing more on subscriber growth and less on annoying columns like profit margins and the revenue with which media conglomerates have traditionally been classified. It’s the kind of business that allowed Netflix’s $ 244 billion market capitalization to dwarf Disney’s $ 233 billion, despite the fact that Disney controls Marvel, Pixar and Lucasfilm.
“The Street loves subscription business models and recurring revenue models,” says Peter Csathy, president of CREATV Media. “Locking consumers into some sort of monthly payment plan is the holy grail for investors.”
In the short term, the announcement is a boon for Dan Loeb. Using its roughly $ 1 billion stake in Disney, Third Point’s hedge fund manager is pushing the company to forgo a dividend and pour the money it would have paid to investors in developing more streaming programming. In an interview with Variety, Loeb said he would like Disney movies coming out like “Black Widow” to ignore theaters for Disney Plus. He says more money can be made by adding and retaining subscribers, who will in turn pay monthly fees, rather than through a one-time ticket sales.
“I don’t think they like the tiger they have for the tail, which is the value they can get by switching to a subscription model, which has been adopted by everyone from Microsoft to Amazon,” Loeb said. Variety last week. “It’s such an augmentative value.”
Loeb seemed enthusiastic about the moves, telling CNBC that he is “pleased to see Disney is focused on the same opportunity that makes us so enthusiastic shareholders: invest heavily in the DTC business, positioning Disney to thrive in the next era of entertainment.”
Of course, some of the moves Loeb and others are advocating could hurt in the short term, depriving the company of hundreds of millions of dollars in ticket sales, as well as untold revenue from rents, licenses and other ancillary businesses. But COVID-19 is allowing Disney to justify taking these types of risks.
“These are very tough decisions when it comes to moving a movie release to streaming,” said Jason Squire, professor at USC’s School of Cinematic Arts and editor of “The Movie Business Book”. “They involve the sacrifice of the gross. But the reality is that there are no internal collections during the coronavirus. “
Rebecca Rubin and Cynthia Littleton contributed to this report.