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News Disney announces strategic restructuring of media and entertainment divisions.

DDLand

Well-Known Member
A couple thoughts on this...

Something is brewing. I’m starting to think Chapek is frustrated with Disney’s valuation. 2020 was supposed to be the year Netflix would face extreme headwinds as a slew of streaming services entered the market. Investors don’t seem to care though. From the beginning of this calendar year, Netflix has risen an astonishing 70%! Investors are extremely excited about Netflix’s potential as a disrupter. How has Disney stock done since the beginning of the year? Not so well. It’s down roughly 20%.

Disney+ has been off to a successful start, but legacy assets (think theme parks, films, ESPN) have been dragging the valuation down. Despite trillions of dollars being pumped into markets, none of the stimulus/Fed money has made its way to Disney’s valuation. This has got to be extremely frustrating to Chapek, who likely feels Disney+ is relatively undervalued. Right now, if Disney+ and Hulu were publicly traded as a separate company, I wouldn’t be surprised if they would be worth $100 Billion+. Maybe more. That may sound bonkers for a company that is still early in its growth and not posting a profit, but that is not dissimilar to Netflix. While Netflix has been able to flex its pricing power and has a large installed base, costs have soared as they seek out new content. Netflix will likely continue adding debt for years to come as they reinvest all their earnings into content. But even then, right now, Netflix is worth $244 Billion. The entire Walt Disney Company is only worth $233 Billion as of today. That means the scrappy upstart Netflix is now worth more than the nearly century old media behemoth that owns Disneyland, Mickey Mouse, Iron Man, and Darth Vader. It’s actually crazy.

So what’s the difference between Netflix’s valuation and Disney’s? It’s not profitability. While Disney has had a rough year, over the last five years Disney has raked in billions while Netflix added debt. It’s also not brands or content. Netflix doesn’t have anything comparable to Donald Duck or Spider-Man. And it’s not returning money to shareholders. Netflix has returned nothing while Disney has paid handsome dividends and bought back billions of shares. What is it then? Hype! People believe Netflix can grow to be worth 100s of billions more than it is today. And despite Disney having an entity that could be just as profitable, if not more, no one is excited about Disney. It’s tired, and it’s exposed to decaying industries.

It’s like offering a kid one of two types of Macaroni and Cheese. One is straight up noodles and cheese, and the other is the same except with peas in it. Which is the kid going to choose? #peafree

Chapek is now trying to get more recognition for a business he feels is undervalued. That means sidelining other businesses and focusing all firepower on direct-to-consumer. He doesn’t want to be a movie studio. He wants to be a tech company with tech valuations.

What does this mean going forward? Will there be spin offs, IPOs, or asset sales? Too early to say for certain, but I think The Walt Disney Company is going to go through radical change over the next few years. While Iger undoubtably brought radical change, it was still broadly the same corporate structure as Eisner’s Disney. Chapek is tearing apart divisions that have existed for 25+ years. It’s madness. Do theme parks factor into the next Netflix? Probably not. But a rapid recovery may change that. Honestly, a royalty check from a private equity firm seems more natural...

Oh, one to watch. Kareem Daniels, a guy who has followed Chapek around Disney, seems like a rising star. HE is somebody who is interesting. He was Chapek’s chief of staff, rose rapidly, and has wide experience throughout the company. I thought Campbell was a rising star, but she just got pushed into reporting to Daniels. That was actually shocking. Daniels is the one to watch. He’ll either flame out catastrophically or become the next CEO.
 

rk03221

Well-Known Member
Honestly, I’m actually seeing drive-in movie theaters making a comeback. You just stay in your car so there’s the social distancing and people don’t have to wear masks. Disney+ is actually having a drive-in event right now
 

Nubs70

Premium Member
Honestly, I’m actually seeing drive-in movie theaters making a comeback. You just stay in your car so there’s the social distancing and people don’t have to wear masks. Disney+ is actually having a drive-in event right now
I see Disney focusing on the single user experience. The idea of creating content to be consumed in high population settings is dead.
 

MisterPenguin

Rumormonger
Premium Member
Chapek is now trying to get more recognition for a business he feels is undervalued. That means sidelining other businesses and focusing all firepower on direct-to-consumer. He doesn’t want to be a movie studio. He wants to be a tech company with tech valuations.
There's a lot of things off in your post, but I'll focus on the most egregious, the one above.

It was several years ago, not recently, that Iger, and not Chapek, made DTC the top priority of Disney Corporation. Iger's been saying so in quarterly calls since D+ was announced. This is all presumably with the Board's blessing.
 

Lilofan

Well-Known Member
A couple thoughts on this...

Something is brewing. I’m starting to think Chapek is frustrated with Disney’s valuation. 2020 was supposed to be the year Netflix would face extreme headwinds as a slew of streaming services entered the market. Investors don’t seem to care though. From the beginning of this calendar year, Netflix has risen an astonishing 70%! Investors are extremely excited about Netflix’s potential as a disrupter. How has Disney stock done since the beginning of the year? Not so well. It’s down roughly 20%.

Disney+ has been off to a successful start, but legacy assets (think theme parks, films, ESPN) have been dragging the valuation down. Despite trillions of dollars being pumped into markets, none of the stimulus/Fed money has made its way to Disney’s valuation. This has got to be extremely frustrating to Chapek, who likely feels Disney+ is relatively undervalued. Right now, if Disney+ and Hulu were publicly traded as a separate company, I wouldn’t be surprised if they would be worth $100 Billion+. Maybe more. That may sound bonkers for a company that is still early in its growth and not posting a profit, but that is not dissimilar to Netflix. While Netflix has been able to flex its pricing power and has a large installed base, costs have soared as they seek out new content. Netflix will likely continue adding debt for years to come as they reinvest all their earnings into content. But even then, right now, Netflix is worth $244 Billion. The entire Walt Disney Company is only worth $233 Billion as of today. That means the scrappy upstart Netflix is now worth more than the nearly century old media behemoth that owns Disneyland, Mickey Mouse, Iron Man, and Darth Vader. It’s actually crazy.

So what’s the difference between Netflix’s valuation and Disney’s? It’s not profitability. While Disney has had a rough year, over the last five years Disney has raked in billions while Netflix added debt. It’s also not brands or content. Netflix doesn’t have anything comparable to Donald Duck or Spider-Man. And it’s not returning money to shareholders. Netflix has returned nothing while Disney has paid handsome dividends and bought back billions of shares. What is it then? Hype! People believe Netflix can grow to be worth 100s of billions more than it is today. And despite Disney having an entity that could be just as profitable, if not more, no one is excited about Disney. It’s tired, and it’s exposed to decaying industries.

It’s like offering a kid one of two types of Macaroni and Cheese. One is straight up noodles and cheese, and the other is the same except with peas in it. Which is the kid going to choose? #peafree

Chapek is now trying to get more recognition for a business he feels is undervalued. That means sidelining other businesses and focusing all firepower on direct-to-consumer. He doesn’t want to be a movie studio. He wants to be a tech company with tech valuations.

What does this mean going forward? Will there be spin offs, IPOs, or asset sales? Too early to say for certain, but I think The Walt Disney Company is going to go through radical change over the next few years. While Iger undoubtably brought radical change, it was still broadly the same corporate structure as Eisner’s Disney. Chapek is tearing apart divisions that have existed for 25+ years. It’s madness. Do theme parks factor into the next Netflix? Probably not. But a rapid recovery may change that. Honestly, a royalty check from a private equity firm seems more natural...

Oh, one to watch. Kareem Daniels, a guy who has followed Chapek around Disney, seems like a rising star. HE is somebody who is interesting. He was Chapek’s chief of staff, rose rapidly, and has wide experience throughout the company. I thought Campbell was a rising star, but she just got pushed into reporting to Daniels. That was actually shocking. Daniels is the one to watch. He’ll either flame out catastrophically or become the next CEO.
Kareem Daniels while talented is a move in TWDC to improve diversity in the top ranks. Iger's been pushing this initiative.
 

_caleb

Well-Known Member
Disney wants dollars not dimes. After the pandemic, people will want what they had to be deprived of. Disney can make much more money in the long run with pay windows than with the drop it on SVOD model.
“Pay windows?”

I definitely don’t think there’s going to be a theater boom “after” the pandemic.
 

DisneyCane

Well-Known Member
Great box office films like the Transformers series? The Fast and the Furious? That kind of ****?

Once movie theaters started to rely on those films for revenue over avant-garde independent cinema, the writing was on the wall.
When did movie theatres (outside of specialty art houses) ever rely on avant-garde independent cinema for revenue? Since at least the late 70s (which encompasses my conscious life) the revenue from crowd pleasing hits was relied on.

Maybe it would be different now with the dine-in theatres that serve alcohol but during the time in my life (l990-2010) when I was in the exhibition industry in various capacities, the audience for independent "art" films was somewhat undesirable because they didn't tend to purchase much from the concession stand.
 

Disstevefan1

Well-Known Member
I'm seeing people saying that "Disney's just a streaming company now" and that all of its legacy assets, ESPN/ABC, theme parks and theatrical business, will be spun-off. That Disney is "giving up" on theatrical distribution.

This is stupid for four reasons:
a) ALL of Disney's distribution operations are being centralized, not just streaming.
b) The three divisions are being operated as content creators, not legacy assets.
c) Parks are pretty much as is, as expected.
d) This restructuring was in the cards way before Covid. Once Disney+ was a hit, another restructuring was inevitable.

I think Disney is just hitting the big red mickey shaped pause button on theatrical distribution. Theatrical distribution will return in a couple of years when things are fully back to normal. Right now most theatres are closed, there is no money in theatrical distribution right now.
 

Ldno

Well-Known Member
Wall Street has been on Disney's side ever since the last quarterly report that Disney didn't have a net loss during the quarter in which parks and cruises were shut down. They know Disney isn't going backwards (tho, moving forward would be better). This makes Disney the ideal stock to grab while it's low with the presumption it isn't going to crash and will go way up once the vaccine comes. Also, good news on vaccines drives Wall Streets' optimism on companies that can hang on for another 6-8 months.

The good news of how well Disney's streaming efforts have been and how the linear channels aren't crashing (yet) also drives Disney stock optimism.
i have been seeing mixed answers on this shift though

 

Slpy3270

Well-Known Member
I think Disney is just hitting the big red mickey shaped pause button on theatrical distribution. Theatrical distribution will return in a couple of years when things are fully back to normal. Right now most theatres are closed, there is no money in theatrical distribution right now.
As I've said before, this restructuring was in the works long before Covid. They just chose a convenient time to execute it.
 

Ldno

Well-Known Member
As I've said before, this restructuring was in the works long before Covid. They just chose a convenient time to execute it.
**Tinfoil hat in place**. Disney’s decisions as of late are almost prophetic, is like they have *insider* info on world events before they happen... It all started with Bob Iger stepping down in February right before the pandemic shut everything down **tinfoil hat off**
 

Slpy3270

Well-Known Member
**Tinfoil hat in place**. Disney’s decisions as of late are almost prophetic, is like they have *insider* info on world events before they happen... It all started with Bob Iger stepping down in February right before the pandemic shut everything down **tinfoil hat off**
Restructurings normally take months if not a whole year to conceive and implement.
 

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