Activist Investor Urges 'All You-Can-Eat' Disney (DIS) Streaming

Hedge funder Dan Loeb wants The Walt Disney Company (DIS) to offer a feast to investors. In a letter to his investors, Loeb urged the company to offer an "all you-can-eat approach" for its streaming service, Disney Plus. He disclosed a stake in Disney in the second quarter of 2020. Bloomberg estimated last year that Loeb held less than 1% of the entertainment company's stock.

The all you-can-eat approach entails releasing the company's extensive slate of content on the same day and date that it is released in theaters. Disney tentatively dipped into direct-to-streaming waters this year by releasing select titles on Disney Plus at the same time as their theater releases.

Key Takeaways

  • Hedge fund owner Dan Loeb has called on Disney to follow an "all-you-can-eat" approach—i.e., making all its content available on its streaming platform Disney Plus as soon as it is released.
  • Loeb has a stake in the entertainment behemoth.
  • Disney has experimented with the approach this year to mixed results.

According to Loeb, Disney has an "immense: opportunity" before it. He cited figures—1 billion broadband-enabled homes, 4 billion smartphone subscribers, and at least 1 billion global Disney fans—to make his case for the company to push more content onto the platform. "Establishing a durable leadership position in the competitive global streaming market will require tough choices, aggressive investment, unwavering focus, and consistent innovation," he wrote.

Loeb said that Disney has been "one of the largest profit generators" for his investing firm. He disclosed a stake in Disney in the second quarter of 2020. Bloomberg estimated last year that Loeb held less than 1% of the entertainment company's stock.

A Case of Mixed Results

Disney Plus executed a hybrid release strategy with its recent movie Black Widow. It had mixed results. The entertainment studio touted first weekend figures—$60 million on Disney Plus—for the movie but did not disclose subsequent collections. Many speculated that streaming viewership figures matched the movie's dismal collections in theaters, where they crashed by 67% at the domestic box office in the second weekend.

The tactic of going directly to consumers has also rankled existing stakeholders in its supply chain. The National Association of Theater Owners (NATO) released a scathing letter to the company, calling direct day and date releases "a pandemic-era artifact" that is best left to history. The Burbank, California-based company is also engaged in a public spat with Scarlett Johannsson, who has filed a case against it for breach of contract.

Loeb, however, has been a steadfast supporter of Disney’s streaming efforts. Last year, he urged Disney to suspend its dividend and reinvest $3 billion into its streaming service. "Every Hollywood executive has been able to enjoy first-run films in the comfort of their home theaters for years. We urge you to democratize the experience," he wrote to Disney's management.

A Streaming Behemoth in the Making?

While it was a late entrant to the world of streaming, Disney has more than made up for the delay. The Disney Plus service, which was launched amidst a blitz of publicity in November 2019, raked in more than 100 million subscribers in just 16 months. For context, Netflix, Inc. (NFLX), the current leader in streaming, took 10 years to reach that figure.

To be fair, however, Netflix achieved the feat in much more difficult operating conditions. Disney has boosted its subscription numbers with acquisitions around the world. For example, the company's acquisition of 21st Century Fox in 2019 brought Hotstar, India's largest streaming platform, into its fold. Hotstar had 18 million subscribers in 2020.

Investors are keenly watching the company's transition from a legacy player to a streaming behemoth. Their concerns are reflected in the company's stock price, which jumps with positive results about Disney Plus and vice versa.

Article Sources
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  1. Third Point Limited. Daniel Loeb, Letter to Investors.

  2. Bloomberg. Disney Activist Loeb Urges Using Dividend to Fund Streaming.

  3. Bloomberg. Disney Activist Loeb Urges Using Dividend to Fund Streaming.

  4. Business Insider. Disney Plus Crosses 100 Million Subscribers.

  5. Medium. Disney's Secret Weapon is a Streaming Platform in India.

  6. Fast Company. Disney Stock Price Takes a Hit After Low Subscriber Growth on Disney Plus.

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