'Streaming Instead of Movie Theaters'... Disney's Major Transformation

New Media and Entertainment Distribution Department Established to Strengthen Distribution Network... Focus on Online
Accelerated Business Restructuring Amid COVID-19 Impact on Film and Theme Park Operations

Global Streaming Market Reached $24.2 Billion Last Year

Expected to Reach $30.4 Billion in 2024

[Asia Economy Reporter Kwon Jaehee] The U.S. Walt Disney Company is restructuring its business model to focus primarily on online platforms. Last year, it decided to concentrate content supply around its streaming service 'Disney+'. To this end, it has carried out an organizational restructuring that integrates the management of distribution networks including TV networks, film studios, and online services. Disney described this as "a significant change happening in the market."

According to the Wall Street Journal (WSJ) on the 12th (local time), Walt Disney issued a statement announcing the establishment of a new 'Media and Entertainment Distribution Department' that integrates TV networks, movie theaters, and direct-to-consumer sales divisions. While the background for creating this department was explained as a comprehensive review of optimal content supply methods, the dominant interpretation is that it primarily targets video streaming services. Disney stated that this is "an adjustment to place streaming platforms, including Disney+ and Hulu, closer to the center of the company." WSJ reported that the purpose is "to supply various programs to online services rather than traditional platforms."

Disney's transformation is seen as symbolic, reflecting the flow of the times. Until now, Disney focused mainly on content production and showed little interest in distribution. This was also the reason why coexistence with streaming service Netflix was possible. Disney earned $150 million annually by providing content to Netflix and was able to build a stronger content empire by utilizing Netflix's platform. However, after Disney+ launched in November last year and attracted 10 million paid subscribers on its first day, it has since secured over 60 million subscribers worldwide, changing Disney's perspective.

Especially, the outbreak of the novel coronavirus disease (COVID-19) this year acted as a catalyst for Disney's transformation. As movie theaters closed one after another, Disney faced financial difficulties. Films such as the ambitious Mulan failed at the box office, and the theme park Disneyland had to close as well. In its Q2 earnings report released in August, Disney announced a net loss of $4.72 billion. The company took strong measures including suspending dividend payments and laying off about 28,000 Disneyland employees in the U.S.

Disney shareholders also urged the company to focus on streaming rather than movies. Earlier on the 7th, Daniel Loeb, CEO of Third Point, a U.S. hedge fund known for activist investing, reportedly sent a letter to CEO Bob Chapek demanding a focus on streaming. Loeb urged Disney to "invest the $3 billion reserved for dividends into streaming services," emphasizing that "the media environment is changing, and the goal should be home theaters rather than the traditional film industry." Bob Chapek, Disney's CEO, said regarding the business restructuring, "It was an opportunity to recognize how consumers are changing their consumption habits."

The growth of the OTT market continues globally without pause. The U.S. is the largest OTT market in the world, 6.4 times larger than China, which ranks second. According to market research firm Statista, the OTT market is expected to grow from $11.4 billion in 2019 to $12.9 billion in 2023. During the same period, the number of OTT users in the U.S. is expected to reach 131 million. The global video streaming market size is also projected to expand from $24.2 billion in 2019 to $30.4 billion in 2024.

Disney is first showcasing its content through its OTT service Disney+. Mulan was released on Disney+ in September after several delays due to COVID-19. Pixar's animated film Soul also abandoned its North American theatrical release and is scheduled to premiere on Disney+ in December. CEO Chapek stated, "With the successful launch of Disney+ and this business restructuring, we will adopt strategies that can further enhance the company's growth and shareholder value."

This content was produced with the assistance of AI translation services.