How Important Is Streaming To Disney’s Growth?

Disney+ may well be the future of the House of Mouse after the company announced a restructuring of operations that puts streaming front and center.

Oct. 13, 2020

To say that Disney (NYSE: DIS) is having a tough year would be an understatement. Park closures have cost it billions, theatrical releases are floundering, and even its expected blockbuster, ‘Mulan’, has sparked some unwanted controversy among fans. 

In its most recent quarter, Disney posted a diluted earnings loss of $2.61 per share while total revenue came in at $11.7 billion for the quarter. However, its streaming business was its only profitable segment, and now the company has decided to change gear, revealing yesterday that it will be restructuring its business to reflect this. 

In an official release on the company’s investor relations page, Disney stated: 

“In light of the tremendous success achieved to date in the Company’s direct-to-consumer business and to further accelerate its DTC strategy, The Walt Disney Company today announced a strategic reorganization of its media and entertainment businesses. Under the new structure, Disney’s world-class creative engines will focus on developing and producing original content for the Company’s streaming services, as well as for legacy platforms, while distribution and commercialization activities will be centralized into a single, global Media and Entertainment Distribution organization. The new Media and Entertainment Distribution group will be responsible for all monetization of content–both distribution and ad sales–and will oversee operations of the Company’s streaming services. It will also have sole P&L accountability for Disney’s media and entertainment businesses.”

The move is effective immediately and comes as the global coronavirus pandemic has crippled its theatrical business and ushered more customers toward its streaming options, with Disney services boasting more than 100 million paid subscribers as of August — 60 million of which belonged to Disney+.

Why does this matter?

The reason that this is so important is that, despite its statement to the contrary, Disney is beginning to protect itself against overreliance on its Parks and Experiences segment, which brought in over $25 billion in revenue in 2019 and has ground to almost zero in 2020 so far.

By restructuring its primary focus to media and entertainment, Disney is lowering the risk of disastrous losses due to pandemics and the like in the future. It also opens up a new source of revenue to counter the threat of declining cinema sales, with the recent Disney+ launch of ‘Mulan’ proving that it can make money from original content without theaters. 

Having seen the success of Netflix — which is now valued at more than Disney — through streaming alone, Disney can use all of its substantial resources to creating a Netflix-sized business within its already prolific corporate structure. Imagine having essentially a FAANG company to fall back on when your theme parks are closed?

Is Disney+ better than Netflix?

When it comes to streaming, Netflix remains far ahead of the pack with over 180 million subscribers worldwide, three times what Disney+ has. Of course, it is very early days for Disney+ which isn’t yet one year old, and there is room for more than one leader in streaming.

How much is Disney+?

Disney Plus costs $6.99 per month or $69.99 per year in the US. For that price, you get ad-free access to all of the service’s streaming titles spanning many different genres and interests.

Though no Disney+-specific revenue figures have been released yet, Disney said revenue for its direct-to-consumer and international division increased 2% year-over-year in Q2 to $4 billion. With it 60 million+ subscribers growing constantly, this revenue is expected to increase alongside, with many analysts predicting Disney+ alone to be a $30 billion business by 2023. 

When is Disney’s Investors Day?

Alongside this restructuring, Disney announced that it would host a virtual investor day on December 10, roughly a year after the launch of Disney+, so it will be interesting to see if we get some exact figures and new plans. 

MyWallSt operates a full disclosure policy. MyWallSt staff currently hold long positions in companies mentioned above. Read our full disclosure policy here.