What happened and why Activist investor Daniel Loeb went into full-keyboard-warrior mode and called for Disney (+0.4%) to shift the $3 billion-dollars currently being handed over to investors in dividends, into its content production for its streaming service, Disney+. The 'big shout' from the Disney shareholder was laid out in a letter to Disney chief, Bob Chapek, and suggests the company could topple Netflix's customer base "in just a few years". 😧 Loeb blow... Loeb is the founder of investment fund Third Point, which snapped up a new stake in Disney as the shares tumbled on the theme park shutdown and movie-outage. Third Point swooped in for 0.3% of the company and despite owning just a fraction of the shares, Loeb wants big changes... Divvy up the div... Divert the dividend payouts to the content, shifting the focus from “the box office to the home”, devoting its best content to its streaming service.Block the Blockbusters... calling on Disney to shift its attention away from theatrical films, where Disney cashed about $13bn from the box office last year. All-in-all, it is an unusual move for an activist investor, to encourage a company to divert cash away from shareholders and back into the business. But in recent years, activist investors have shifted towards a more nuanced outlook. Competition in streaming ramping up and an increasing number of media giants unveiling their own services to compete with Netflix, for Disney to own the space, they'll have to splash. 🤔 That's what we're doing... In reality, Loeb's letter outlines a strategy that is little different from Disney's direction. Last year, Disney declared streaming was the "number one priority". With the pandemic ravaging Disney's business and bringing parks, cruises and movies to a grinding halt, the refocus on streaming was inevitable. Disney+ service has drawn more than 60m subscribers less than a year after launching but remains loss-making and topped up the $4.7bn mega-loss that Disney chalked up in the latest quarter. But the success of Hamilton, which Disney acquired the rights to a television version of the hit musical for $75m, demonstrates the mega-market potential that Disney knows it has at its fingertips... but thanks for the memo Dan. The Takeaway In attempts to preserve cash, Disney said it would suspend its half-year dividend payment, and followed this up with job cuts for 28,000 theme park employees in Florida and California. Savings the company around $1.6bn in the process. Got their ear Loeb... Loeb's letter is an eye-opener for two reasons. i) it demonstrates a broader shift in thinking from the modern activist investors towards a business creating value rather than handing it over and, ii) It highlights the easiest way in which Disney can go full-throttle into streaming with the backing of an investor.
