Disney’s New Corporate Structure Looks Much More Like Netflix

disney (NYSE: DIS) has just undergone a major overhaul of the way it produces and distributes new films and television series. The company is creating a media and entertainment distribution group, which will decide where each new content goes: movie theatres, broadcast and cable networks, streaming, or a combination of the three.

CEO Bob Chapek said the restructuring will allow his various content groups to focus more on productions for streaming. And the greater flexibility in distribution could open the door to creating content more like netflix (NASDAQ:NFLX).

Disney+ home screen. Image source: Disney.

Separating content creation from distribution

The overarching goal of the restructuring is to break down content distribution silos for each segment of Disney’s media business. Disney’s movie studios used to operate on the assumption that whatever they produced would be released theatrically. Similarly, television studios were producing content suitable for the linear TV format.

Under Disney’s new corporate structure, all production from Disney’s three content groups – studios, general entertainment and sports – will flow into the Distribution group, led by Kareem Daniel. His team will decide how to maximize the value of each piece of content.

Disney has already had to make decisions about delivering content through distribution channels it didn’t originally intend to use. Several films, including hamilton and Mulane, saw distribution via Disney+. Pixar Soul will also go in this direction. With the restructuring, Disney is telegraphing its intention to distribute more movies directly to consumers through its streaming services.

Become a streaming leader

Disney says each content group’s primary focus now is to produce content for its streaming services. Disney currently operates three direct-to-consumer streaming services and will provide details on its fourth offering — a Star-branded service in international markets — at its Investor Day in December.

By relaxing the constraints on the distribution method each content group will use, it opens the door to more productions and more creativity. Netflix has shown that flexibility can lead to better viewing experiences and more efficient use of its content budget.

For the past 20 years or so, Disney (and other major studios) have focused almost exclusively on producing big-budget blockbusters. Sometimes it pays off very well, like in 2019; sometimes it doesn’t, like in 2020. If studios didn’t have to selectively produce movies that draw viewers to theaters, that could make more projects viable for Disney.

Netflix, for example, is expected to release over 100 new movies this year. Disney released about a quarter of Netflix’s output last year.

Similarly, Netflix is ​​able to release hundreds of hours of new series each year because it doesn’t have to window its content into three hours of primetime viewing each night. The series can be made up of as many episodes as needed to tell the story. And they don’t need the same mass appeal as a primetime show on ABC.

If Disney wants to compete with Netflix, it will have to produce more content. He can’t do that if his film group is only trying to make blockbusters.

Chapek says he expects new content every week on Disney+ going forward. Growing its content catalog is key to building on the strong subscriber base the company quickly attracted with Disney+, as well as its ability to raise its price in the future.

Disney certainly isn’t giving up on its hugely profitable theatrical release and media network business. But the greater flexibility inherent in its new corporate structure will allow it to produce more content for streaming, leading to greater efficiency in its content budget and subscriber growth.

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