Recent changes at Disney prioritize Hulu, Disney+ and ESPN+ —

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Disney had no streaming platforms three years ago. Today, its business revolves around them.

Yesterday the company announced a “strategic reorganization” to further prop up its streaming services: Disney+, ESPN+, and Hulu. Effective immediately, Disney will separate content creation from distribution. Each content group—studios (Marvel, Lucasfilm, Pixar, among others), sports (ESPN), and general entertainment (television networks and studios)—will now produce content for streaming, in addition to theaters and traditional television. A distinct distribution team will be tasked with figuring out the best way to monetize all of that content.

In effect, Disney’s various teams will soon funnel a lot more content to its streaming services.

“What we want to do is separate out the folks who make our wonderful content from the decision-making in terms of how it gets commercialized into the marketplace,” Disney CEO Bob Chapek said on CNBC yesterday. “We want to leave that to a group of folks who can really see objectively across all the constituents that we have and make the optimal decision for the company, as opposed to having it be predetermined that a movie is destined for theaters or that a TV show is destined for ABC.”

Normally, TV series or movies are developed with a specific medium in mind. That will likely remain the case for some content, but other entertainment could be made without a preconceived platform—or with more flexibility to move to streaming. Expect to see more instances of movies hitting Disney+ instead of, or in addition to, theaters, as the company did last month with Mulan and will do in December with the Pixar movie Soul.

It’s unclear how much say the content makers will have over where their content ends up. Chapek’s comments suggest those distribution decisions could be made by an independent team, but some analysts have argued the shift is actually less transformative than that sounds. Disney did not respond to a request for comment. Either way, the clear focus of the reorganization is to guide more of Disney’s content toward streaming.

Disney was already headed in this direction, but the pandemic accelerated the shift. Its theatrical and theme park businesses have been devastated by the pandemic, and neither will recover to prior levels of profit any time soon (if ever). Streaming, however, has remained Disney’s lone bright spot: Disney+ has more than 60 million global subscriber less than a year after launching.

The Mouse House will not abandon cinemas, but its reorganization is an admission that theaters do not represent the future of the company—or perhaps of any Hollywood content company. Earlier this year, AT&T’s WarnerMedia made a series of moves meant to boost its new streaming service, HBO Max. Comcast’s NBCUniversal, meanwhile, struck a deal with AMC Theatres to shorten the amount of time a movie plays in theaters before it’s allowed to be watched digitally. It is also investing heavily in its own nascent service, Peacock.

All these moves position legacy media companies to compete more directly with Netflix, which is closing in on 200 million subscribers amid a record year of growth. While consumers can and do pay for multiple streaming services, a more robust Disney streaming offering would pose a genuine threat to Netflix’s continued growth around the world.

It’s another sign that Disney believes streaming is its biggest global growth opportunity moving forward—and that releasing big movies on Disney+ instead of theaters isn’t only a pandemic-induced necessity. It’s just what Disney does now.

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