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Activist Investor Wants Disney to Double-Down on Streaming

Stephanie Sengwe

Dan Loeb, founder of the hedge fund Third Point and an activist investor in Disney is urging the company to bypass it annual dividend and instead, invest that money into its streaming services.

In a letter addressed to Disney CEO Bob Chapek and the company’s board of directors, Loeb suggested that putting the $3 billion dividend towards creating more content for their streaming services would give services such as Disney+, ESPN+ and Hulu more of a competitive edge against the rest of the streaming services in the market.

“By reallocating a dividend of a few dollars per share, Disney could more than double its Disney+ original content budget,” Loeb said in the letter. “Beyond bringing additional subscribers onto the platform, increased velocity of dedicated content production will deliver several knock-on benefits spread across your existing base including elevated engagement, lower churn, and increased pricing power.”

With movie theaters currently going through tough times—Regal Cinemas announced they are closing all 536 theaters in the U.S. on Oct. 8—Loeb believes focusing on streaming would give Disney more footing outside the box office.

“A more aggressive content roadmap will distinguish Disney as the only traditional US media company able to thrive in a world beyond the box office and the cable TV ecosystem, alongside digital-first businesses like Netflix and Amazon.”

“Of equal importance, meaningfully accelerating [direct-to-consumer] content spend will further broaden the divide between Disney and its traditional media peers—AT&T’s WarnerMedia, Discovery, ViacomCBS, Comcast’s NBCUniversal and Fox – none of which have the financial capabilities to execute such a bold plan,” Loeb wrote.

Another way Loeb feels they could differentiate themselves is by “collapsing all of Disney’s DTC services into the Disney+ application.” He continued, “Given that Disney+’s subscriber base is already meaningfully larger than any of your other DTC services, we believe Disney would benefit from a single customer acquisition vehicle led by Disney+.”

Loeb also gave his input regarding the premiere of “Mulan,” suggesting that a better a strategy would be offering such blockbusters as part of the subscription as well.

“While some pundits have described the ‘Mulan’ release as a ‘debacle’ due to the $29.99 cost for a VOD download, we see this as a valuable learning experience, expect stumbles on the way to greatness, and believe this will drive a faster decision to make all content available to subscribers for a simple subscription fee.”

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