Disney Elevates Streaming Business in Major Reorganization

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Walt Disney Co.


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announced a major reorganization meant to give priority to its streaming-video services and ensure they get a steady flow of the company’s best content, in a shift echoing similar moves by other entertainment giants.

Under the new structure, Disney is creating content groups for movies, general entertainment and sports. It is also forming a distribution arm to determine the best platform for any given content, whether that is a streaming service, a TV network or movie theaters.

The new alignment pushes Disney’s streaming platforms, including Disney+ and Hulu, even closer to the center of the company. The various programming arms, including movie and television studios, will be aiming to feed those streaming services, not just legacy outlets.

Disney Chief Executive Bob Chapek said the moves are a recognition of how consumers are changing their consumption habits, favoring streaming platforms over movie theaters and traditional broadcast and cable channels.

“There is a seismic shift happening in the marketplace, and you can either lead or follow and we chose to lead,” Mr. Chapek said of the company’s push into streaming, adding that the focus is now on “what platform is best to meet those consumer needs.”

The Covid-19 pandemic continues to slam the entertainment industry, and Disney has been particularly hard hit. Its Disneyland theme park in Southern California is still closed, and attendance at parks that have been reopened hasn’t returned to normal. Many movie theaters around the nation remain closed or at limited capacity.

Streaming services have been among the bright spots for Disney and other media companies during the coronavirus crisis, as consumers who are working from home and skipping vacations watch more content. Disney+, which said in August it had over 60 million subscribers world-wide, has been a big beneficiary of the pandemic’s streaming surge.

Disney has faced external pressure to pivot more aggressively toward its streaming business, especially given the struggles of its legacy businesses such as cable networks. Activist investor Daniel Loeb, whose Third Point Capital is one of Disney’s biggest stockholders, sent a letter recently to Mr. Chapek calling for Disney to devote more resources to its streaming operations.

Disney is the latest entertainment giant to reorient its business by separating decisions over which shows and movies should be produced from decisions over which platforms are best suited to carry them. Comcast Corp.’s NBCUniversal has restructured much of its content business with this goal in mind, looking to elevate its Peacock streaming service, while AT&T Inc.’s WarnerMedia is centralizing its creative operations in hopes of bolstering its HBO Max service.

The media and entertainment distribution unit Disney has created will be overseen by Kareem Daniel, who most recently was president of consumer products, games and publishing. That unit will handle the distribution of Disney content as well as advertising and technology.

A Disney veteran, Mr. Daniel has also had stints in Disney’s strategy and business development unit and its motion-picture distribution business. Mr. Chapek said having distribution under Mr. Daniel will allow the company to “make our distribution decisions in a less preconceived notion.”

TV production chief Peter Rice will become chairman of general entertainment content under Disney’s reorganization.



Photo:

Rodin Eckenroth/FilmMagic/Getty Images

The content side will be headed by the same executives currently in charge of movies, TV and sports. Disney Studios Co-Chairmen Alan Horn and Alan Bergman will oversee the new movie arm. Peter Rice, who oversees TV production for Disney, will become chairman of general entertainment content, while ESPN head Jimmy Pitaro will head the sports unit.

Disney Chairman and former CEO Robert Iger will also continue to have an active role in content creation, the company said.

Mr. Daniel and the heads of the content units will all report to Mr. Chapek.

The new content structure could end confusion in Hollywood about who is calling the shots regarding television content for Disney+. There had been some tension between Mr. Rice’s unit and Disney+’s own programming team, people familiar with the matter said.

Mr. Chapek played down any friction between the two, saying, “The same people that have been collaborating in the past will be collaborating in the future.”

Rebecca Campbell, who was brought in to oversee Disney+ just last May, will continue in that role but now reports to Mr. Daniel. She will also head international operations and report to Mr. Chapek.

The bulk of Disney’s revenue still comes from its legacy businesses, including cable programming networks such as ESPN, Disney Channel and Freeform, which have suffered declines in subscribers and ratings due to cable cord-cutting.

Ratings for the NBA Finals between the Los Angeles Lakers and Miami Heat were far below past years, amid competition with other live sports such as the National Football League. The fact the basketball playoffs were played at all during the pandemic—in an Orlando “bubble”—was viewed by many in the sports world as a success that averted a disaster for the league and its TV partners. The NFL, meantime, has had to postpone games as it struggles to contain a Covid-19 outbreak.

The theatrical film business was already facing challenges before the coronavirus shut down theaters across the country. The virus has led some movie studios to shorten the time between when a film arrives in theaters and when it appears on other platforms such as on-demand and streaming services—accelerating what industry observers saw as an inevitable shift.

Disney released its big summer movie “Mulan” via Disney+ at a cost of $30. It is also moving its Pixar movie “Soul” to the service but at no extra charge.

Mr. Chapek said that the company still believes in the theatrical business but that Disney needs the “freedom to take a strong pipeline of content and place it where it makes the most sense.”

As movie theaters sit empty during the coronavirus pandemic, some films are being released direct to streaming services and digital platforms, shaking up a distribution model that’s been in place for decades. WSJ explains. (Originally published May 5, 2020)

Write to Joe Flint at [email protected]

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