As the future of the movie theater industry – and moviegoing as a whole – becomes increasingly uncertain, all eyes have turned to streaming services. Not only do they offer the easiest way to consume content, but they also encourage the safest way to consume it amid the ongoing global pandemic. For those reasons, one of Disney’s investors has come forward to insist that the company suspend its annual dividend and, instead, redirect those funds to achieve more long-term growth.
Daniel Loeb only owns a small share of the company via his hedge fund, Third Point Management, but that did not stop him from sending Disney CEO Bob Chapek a letter with the idea. “We believe the company should permanently suspend its $3 billion annual dividend, redirect capital entirely into content production and acquisition for Disney’s DTC business, centered around Disney+,” Loeb explains in the letter. He also goes on to say that the decision could,”[bring] additional subscribers onto the platform,” and that, “increased velocity of dedicated content production will deliver several knock-on benefits spread across your existing base including elevated engagement.”
While it is sometimes considered taboo for investors to try and meddle in studio affairs, Loeb’s letter comes off more as a series of suggestions than cautionary demands. After all, he is willing to forego a bonus in order to keep the company in the green.
Disney had already previously ditched its dividend for the first half of the year, but only in an effort to save money. While the company is far from bankrupt, it’s no secret that it’s has suffered several financial setbacks in the past few months. Just two weeks ago, the company announced that it would lay off 28,000 workers from it Disney Land theme park. In early September, it also suffered a massive loss when it’s live action adaptation of Mulan flopped both internationally and as a “Premier Access” release on Disney+.
In the letter, Loeb also points out the problem with offering “Premier Access,” comparing the success of Mulan with Hamilton‘s. He states that the company could benefit from an “all-you-can-eat” approach, that wouldn’t require users to pay for any additional content after already being charged their usual subscriber fee.
Unlike all of the other media companies like Netflix, Warner Media, and Amazon, Disney has not only one but three streaming services to manage; therefore it also has more to lose. Loeb just wants the company to develop a more “aggressive content roadmap,” because that’s the area it cannot compete with right now. The best way to ensure that is with more money at its disposal, so why not use money it already has?