Disney: Reorganizing and Accelerating The D2C Pivot


The Walt Disney Company is moving forward with a major strategic reorganization of its media and entertainment businesses. Wall Street analyst Michael Nathanson‘s attention was immediately grabbed, and he has some thoughts on what it means to advertisers, consumers and media company investors.

“It is clear to us that the company is positioning itself to more aggressively satisfy changing customer behavior by accelerating and re-prioritizing content distribution to further enhance its DTC platforms,” he says. “Disney will essentially now have two revenue centers.”

That assessment came after Nathanson, Senior Analyst of MoffettNathanson, read a press release and saw CEO Bob Chapek conduct an interview on CNBC.

Disney dollar generation is now poised to come from its existing Disney Parks, Experiences
and Products (DPEP) business, as a new Disney Media & Entertainment Distribution (DMED) group — led by new Chairman Kareem Daniel — is taking shape.

Look at DMED as brining just what the doctor ordered for Disney investors.

“The DMED group will be the clear revenue generating decision maker for content sourced by three new divisions – Studios, General Entertainment and Sports – that will effectively serve as content pipelines (and cost centers) for DMED,” Nathanson says.

Revenue will be driven by legacy and new digital revenue streams of advertising, affiliate revenues, content sales and DTC subscriptions.

And, Nathanson notes, “It seems clear that Mr. Daniel, who brings a fresh perspective to the media business, will re-visit traditional media models and focus on accelerating window changes.”

That’s important, as Nathanson assumes Disney will seek to “collapse film release windows to monetize both in-theater and at-home DTC demand while shortening home video windows.”

But, the biggest takeaway is Nathanson’s assessment that Disney’s shift “also underscores increasing risk for linear networks and the MVPDs that support them – including their own.”

He adds, “We were impressed that the press release stated, ‘Under the new structure, the company’s three content groups will be responsible and accountable for producing and delivering content for theatrical, linear and streaming, with the primary focus being the company’s streaming services.’ Going forward, it would seem that the dollar investment in content will be rapidly accelerating for streaming and materially decelerating for linear channels like ESPN, ABC, Disney Channel and FX. Now with one integrated revenue
center, Disney can better review and re-allocate how they source content, which could translate into more cross-platform deals for key sports rights like the NFL, NBA and MLB.”

What will the new segment reporting look like? Answers are now expected on December 10, Disney’s Investor Day.

“Those who can look out a few years can envision a company with pre-COVID theme park
attendance and a global Disney+ business that is second only to Netflix, which is valued at $253 billion vs. the entire Walt Disney Company at $275 billion,” Nathanson says. “Yet, we are consistent in our view that Netflix is over-valued and, with that said, Disney’s DTC operations are still a long way away from Netflix.”

Will this reorganization help Disney close the gap quicker? Attention now turns to early December.