Disney makes streaming its “primary focus” as studio announces major shakeup

Disney, owners of the likes of Marvel, Stars Wars Pixar, Indiana Jones, and the massive list of franchises it acquired through the Fox deal like Avatar, Alien, Ice Age, Die Hard, and more, is above and beyond the biggest movie studio on planet Earth. And now it may no longer be releasing its movies in cinemas. So too is Disney’s many TV franchises destined for traditional network releases. That was the industry-shaking revelation made by Disney CEO Bob Chapek in an interview with CNBC before the studio officially announced a major organizational restructure in the wake of the COVID-19 pandemic that will see it shift its “primary focus” to streaming services for both its movies and TV slate.

As COVID-19 ravaged the world this year, the entertainment industry has been grievously wounded with movie theatres taking an extra heavy beating as theatrical releases either got extensively delayed or flopped at the box office. But through all of this though, streaming services flourished, with Disney+ being a standout as it exceeded expectations to already pull in over 60 million subscribers since launch in November 2019. And while initially hesitant to react to the COVID-19 pandemic by switching its major theatrical release to digital streaming like competitor Universal, Disney eventually did just that by moving some smaller films to Disney+.

The big watershed moment came though when Disney made its $200 million tentpole blockbuster Mulan available for a premium rental fee of $30 on Disney+ alongside a limited theatrical release. While no official numbers have been released yet, the experiment was reportedly a massive success for the company prompting Disney to think about this as a long term strategy. According to Chapek, this has always been the game plan (and admittedly, the studio did indicate as much back in 2018 already) but the likes of COVID-19 and the surprising success of Disney+ has “accelerated the rate at which we made this transition”, adding that “We are tilting the scale pretty dramatically [toward streaming]”.

So what does this mean? The official press release states that “Under the new structure, Disney’s world-class creative engines will focus on developing and producing original content for the Company’s streaming services, as well as for legacy platforms, while distribution and commercialization activities will be centralized into a single, global Media and Entertainment Distribution organization.”.

That “legacy platforms” bit is key there as those are the traditional theatrical releases for movies and network releases for TV series, which Disney is not abandoning. Instead, “[Consumers] are going to lead us,” according to Chapek.

Right now they are voting with their pocketbooks, and they are voting very heavily toward Disney+. We want to make sure that we are going the way the consumers want us to go.

Essentially, whether a big blockbuster gets released in cinemas or not will no longer be determined by its budget, franchise association, or any of the historical factors that decided such things. Instead, Disney will release a title wherever it will be most welcomed by consumers – and most profitable! That could mean that the next Star Wars or Marvel Cinematic Universe release could hit Disney+ exclusively or have a hybrid theatrical/premium Disney+ strategy. Hell, just days ago Disney revealed that Pixar’s Soul is now heading to Disney+ as well. The days of Disney movies always hitting cinemas first and then consumers having to wait 90 days or more before they could grab it at home is officially over.

Disney’s newly created Media and Entertainment Distribution group “will be responsible for all monetization of content—both distribution and ad sales—and will oversee operations of the Company’s streaming service. The creation of content will be managed in three distinct groups—Studios, General Entertainment, and Sports—headed by current leaders Alan F. Horn and Alan Bergman, Peter Rice, and James Pitaro.” These content groups “will be responsible and accountable for producing and delivering content for theatrical, linear and streaming, with the primary focus being the Company’s streaming services,” as Chapek explained further.

Managing content creation distinct from distribution will allow us to be more effective and nimble in making the content consumers want most, delivered in the way they prefer to consume it. Our creative teams will concentrate on what they do best—making world-class, franchise-based content—while our newly centralized global distribution team will focus on delivering and monetizing that content in the most optimal way across all platforms, including Disney+, Hulu, ESPN+ and the coming Star international streaming service.

Thus far this news has been very well met on the stock market with Disney’s stock climbing 5.4 percent since the announcement. It’s not all good news though. According to Chapek, the new restructuring “could result in some reduction of staff”. Due to COVID-19’s effect on Disney’s parks, the company had already been forced to layoff over 28 000 employees recently. Chapek says the new changes won’t be as devastating as those numbers though.

And then, of course, there’s the issue of cinemas, which are already on incredible shaky legs right now. Even before COVID-19, there had been doomsayers predicting that the entire industry would collapse as top quality home entertainment setups became more commonplace and replaced the increasingly expensive cinema experience. The pandemic will undoubtedly force many theatre venues around the globe to go under completely. Just two weeks ago we saw how Cineworld, the world’s second-largest cinema chain, was forced to shut down hundreds of venues in North America and the UK just because the latest James Bond film was delayed and left them with no major tentpole to pull in consumers. And now Disney, who release literally the biggest tentpoles in the world, may not drop any of them in cinemas anymore. As a theatre operator, I would be dreading for my future right now.

Last Updated: October 13, 2020