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Walt Disney Co. said they will be restructuring their media and entertainment to promote the growth of Disney+. They'll be separating the development and production of programming from their distribution of media to tailor to consumer demands as more and more people shift to digital viewing. This move is likely thanks to Daniel Loeb, an activist investor of hedge fund Third Point who suggested Disney shouldn't go for a dividend payment, and instead double down on its investment into its streaming service. Thanks to that move, Disney's shares popped nearly 5%.
Disney+ is new to the streaming scene, since it only launched in November of 2019. But their customer loyalty runs deep, since they've already drawn in more than 100 million customers worldwide, including those subscribed to Hulu and ESPN+. Netflix still has a huge lead, with 193 million customers, but not only did they create the market, they've also been able to build their customer base for over 13 years.
In an interview with CNBC, Disney's Chief Executive Bob Chapek said the company was planning increased investments into content, but didn't divulge the strategy to do so. Chapek said in a separate statement, "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." Loeb commended Disney taking his advice as well, saying "We are pleased to see that Disney is focused on the same opportunity that makes us such enthusiastic shareholders: investing heavily in the (direct-to-consumer) business, positioning Disney to thrive in the next era of entertainment."
The only downside is the alleged layoffs, according to Chapek. Centralizing general entertainment and sports business into one, and combining distribution and commercialization into another. While Chapek didn't tell CNBC where the layoffs would be coming from, we do know the former president of consumer products, games and publishing Kareem Daniel, will be overseeing Disney's new media and entertainment distribution group. Along with Daniel, Alan Horn and Alan Bergman will maintain their positions by heading Disney's studio operations, which include Marvel, Star Wars, Disney animation and Pixar. Jimmy Pitaro will be taking care of sports, and Peter Rice will oversee general entertainment programming. Disney also announced it will be holding an investor day on December 10 and provide more information about its strategy then.
