Is Disney’s Pivot To Streaming A Sign Of Covid Economic Crises Still To Come?
Image by skeeze 

Disney has announced a significant restructuring of its media and entertainment business, boldly placing most of its growth ambitions and investments into its recently launched streaming service, Disney+. The 97-year-old media conglomerate is now more like Netflix than ever before.

What this means is that Disney will be reducing its focus from (and potentially the investments routed to) theme parks, cruises, cinema releases and cable TV. As CEO Bob Chapek said:

Given the incredible success of Disney+ and our plans to accelerate our direct-to-consumer business, we are strategically positioning our company to more effectively support our growth strategy and increase shareholder value.

This change has not come easily as the company’s fortunes have gone through a rollercoaster ride in 2020. Amongst its portfolio of businesses, Disney+ is the only clear winner, with the service gaining over 60.5 million members in just ten months since launch. The COVID-19 pandemic, on the other hand, crushed Disney’s cruise, theme park, cable TV, live sports, cinema and retail businesses, resulting in losses over US$4.7 (£3.6) billion in the financial quarter ended June 27.

Disney’s strategic pivot also comes about as activist investor Daniel Loeb called on the company to reinvest its planned dividend payments back into its streaming service. He did so because it’s likely to produce a higher return for shareholders than just returning cash to them. The stock market appreciated this change in strategy and resource allocation, causing the Disney stock to jump up by 6% upon the announcement.


innerself subscribe graphic


A quick change

From a corporate strategy perspective, the move is remarkable on two fronts. Firstly, the sheer velocity of this pivot for a company the size and age of Disney is, for lack of a better word, unprecedented.

Let’s not forget that it was just last year that Disney held a near 40% revenue share of the US box office, thanks to Marvel films becoming a cultural phenomenon in the past decade. The company’s theme park and cruise line business was equally successful, with a year on year growth rate at a respectable 6% and revenues of US$26.2 (£19.8) billion in the same period.

{vembed Y=v8YkE_CUnuM}

These are significant enterprises by any measure, with Disney enjoying deep competitive advantages in each of the sectors it participates in. In fact, before this announcement, most stock market analysts had made peace with the fact that Disney was likely to hunker down and wait for the pandemic to pass instead of changing gears. After all, why should the company leave money on the table if the pandemic was going to be over soon?

The fact that in just seven months of the pandemic breaking out, Disney decided to reinvent itself primarily around streaming speaks volumes about its expectations regarding the pandemic length. Clearly the group decided that waiting it out was no longer an option.

Spillover effects

The second reason why this pivot is remarkable is that it is likely to be far-reaching and not limited to just the streaming industry. Disney’s transformation does not bode well for its less diversified competitors, such as Universal Studios, themes park group Six Flags and cruise group Royal Caribbean.

A better funded Disney+ that is willing to stream highly anticipated theatrical releases on day one will also sharply impact the ability of cinema chains to bounce back whenever the pandemic subsides. Disney has already chosen to release not only the live action Mulan but its newest Pixar animation, Soul, through the streaming site.

Traditional cable and linear TV companies will likely feel more pressure from a faster-growing Disney+. This is because more streaming subscriptions can drive an increased number of cancelled cable TV packages as well as disinterested advertisers, who will continue to reduce their advertising spend on linear TV thanks to lower viewership and engagement.

{vembed Y=Gs--6c7Hn_A}

For pure-play cruise and travel companies such as Royal Caribbean, Disney’s move hints at a longer and deeper downturn for the sector. And unlike Disney, most of these players are simply too specialised and invested in their industries to be able to make bold and timely pivots of their own. It would not be surprising to see at least some of them going on aggressive acquisition and divesture sprees to buy their way out of the current situation.

Taking a step back, Disney’s urgency to change itself is a wake-up call for business leaders everywhere who are waiting for the effects of COVID-19 to go away and, in the process, bring their businesses back to their former glory. Even for seemingly unrelated industries, such as construction or even energy, the writing on the wall is clear: boldly transform yourself into digital-first businesses or go obsolete. This includes investing in robotics and AI for core operations and shifting business models that allow for more affordability and access for customers during a global recession.

Chef Gusteau in the Disney movie Ratatouille once said: “if you focus on what you left behind, you will never be able to see what lies ahead”. This seminal line seems more relevant now than ever before.The Conversation

About the Author

Hamza Mudassir, Visiting Fellow in Strategy, Cambridge Judge Business School

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Recommended books:

Capital in the Twenty-First Century
by Thomas Piketty. (Translated by Arthur Goldhammer)

Capital in the Twenty-First Century Hardcover by Thomas Piketty.In Capital in the Twenty-First Century, Thomas Piketty analyzes a unique collection of data from twenty countries, ranging as far back as the eighteenth century, to uncover key economic and social patterns. But economic trends are not acts of God. Political action has curbed dangerous inequalities in the past, says Thomas Piketty, and may do so again. A work of extraordinary ambition, originality, and rigor, Capital in the Twenty-First Century reorients our understanding of economic history and confronts us with sobering lessons for today. His findings will transform debate and set the agenda for the next generation of thought about wealth and inequality.

Click here for more info and/or to order this book on Amazon.


Nature's Fortune: How Business and Society Thrive by Investing in Nature
by Mark R. Tercek and Jonathan S. Adams.

Nature's Fortune: How Business and Society Thrive by Investing in Nature by Mark R. Tercek and Jonathan S. Adams.What is nature worth? The answer to this question—which traditionally has been framed in environmental terms—is revolutionizing the way we do business. In Nature’s Fortune, Mark Tercek, CEO of The Nature Conservancy and former investment banker, and science writer Jonathan Adams argue that nature is not only the foundation of human well-being, but also the smartest commercial investment any business or government can make. The forests, floodplains, and oyster reefs often seen simply as raw materials or as obstacles to be cleared in the name of progress are, in fact as important to our future prosperity as technology or law or business innovation. Nature’s Fortune offers an essential guide to the world’s economic—and environmental—well-being.

Click here for more info and/or to order this book on Amazon.


Beyond Outrage: What has gone wrong with our economy and our democracy, and how to fix it -- by Robert B. Reich

Beyond OutrageIn this timely book, Robert B. Reich argues that nothing good happens in Washington unless citizens are energized and organized to make sure Washington acts in the public good. The first step is to see the big picture. Beyond Outrage connects the dots, showing why the increasing share of income and wealth going to the top has hobbled jobs and growth for everyone else, undermining our democracy; caused Americans to become increasingly cynical about public life; and turned many Americans against one another. He also explains why the proposals of the “regressive right” are dead wrong and provides a clear roadmap of what must be done instead. Here’s a plan for action for everyone who cares about the future of America.

Click here for more info or to order this book on Amazon.


This Changes Everything: Occupy Wall Street and the 99% Movement
by Sarah van Gelder and staff of YES! Magazine.

This Changes Everything: Occupy Wall Street and the 99% Movement by Sarah van Gelder and staff of YES! Magazine.This Changes Everything shows how the Occupy movement is shifting the way people view themselves and the world, the kind of society they believe is possible, and their own involvement in creating a society that works for the 99% rather than just the 1%. Attempts to pigeonhole this decentralized, fast-evolving movement have led to confusion and misperception. In this volume, the editors of YES! Magazine bring together voices from inside and outside the protests to convey the issues, possibilities, and personalities associated with the Occupy Wall Street movement. This book features contributions from Naomi Klein, David Korten, Rebecca Solnit, Ralph Nader, and others, as well as Occupy activists who were there from the beginning.

Click here for more info and/or to order this book on Amazon.