Many segments of The Walt Disney Company have struggled in 2020 amid the global health crisis.
The Disney parks have been hit especially hard. Disneyland Resort in California is still facing an ongoing closure, and capacity is limited at the parks which have reopened. As a result of the setbacks, Disney recently announced that they are laying off 28,000 employees from the Parks, Experiences, and Products segment. And this isn’t the only area of the business that has been impacted. Several major film release dates, like Black Widow, have been pushed back as movie theaters face an uncertain future.
Amid all of the challenges The Walt Disney Company has faced in 2020, there is one segment of the business that has performed well — Disney+. And activist investor Dan Loeb is encouraging Disney to pump more money into the new streaming service in lieu of shareholder dividends.
As reported by CNN, Dan Loeb, the chief of hedge fund Third Point, penned a letter to Disney CEO Bob Chapek on Wednesday calling on the company to permanently suspend its $3 billion in annual dividend payments and invest that money back into Disney+.
In the letter, Loeb wrote, “Since its founding, Disney has been defined by its creativity, bold vision, and prescient grasp of the future of entertainment. We share the view that Disney is embarking on one of the most important transitions in its history: shifting distribution of the world’s most iconic entertainment brands from the box office to the home.”
He also argued that by reallocating the money, Disney could, “more than double its Disney+ original content budget.”
Loeb’s comments are supported by the strong performance of Disney+ in its first year. Last year, the company told investors that they expected to reach 60 million to 90 million global subscribers by 2024. Disney+ made its debut in the U.S. in November 2019 and the streaming service now has over 60 million subscribers worldwide.
Most activist investors push companies to return more cash to shareholders via dividends and buybacks, not less. Loeb’s letter is particularly notable since it’s a departure from that view. He believes that Disney “deserves growth-minded, long-term oriented investors,” and said that growing the new streaming business is the best way to reach them.
What new content and features would you like to see added to Disney+? Let us know in the comments!
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Good for him about time someone looks to the future of business instead of the now only. And me iger although thoughtful should forgo more then just his salary and give to his employees that make it possible for him to have the ridiculously large payment to him every year.