Dan Loeb Keeps Urging Disney (DIS) to Focus on Streaming

In October of last year, hedge fund manager Dan Loeb made headlines when he urged Disney’s (NYSE: DIS) CEO Bob Chapek to implement bold actions, like a permanent dividend cut, to invest aggressively to capitalize on the full potential of Disney+.

DIS should end its annual $3 billion dividend, said Loeb back then, and instead use the funds to build more content for Disney+. Loeb’s Third Point is one of the largest shareholders at Disney after it had started to accumulate a sizable position in the company in Q2 last year.

“By reallocating a dividend of a few dollars per share, Disney could more than double its Disney+ original content budget. The ability to drive subscriber growth, reduce churn, and increase pricing present the opportunity to create tens of billions of dollars in incremental value for Disney shareholders in short order, and hundreds of billions once the platform reaches larger scale,” he wrote back then.

Nearly a year later, Loeb says the progress “thus far has been commendable,” but the entertainment giant should not stop here.

“In our view, the combined strength of Disney’s various sports, general entertainment, and blockbuster franchises remains unparalleled in the global media industry. We continue to believe that the best way to capitalize on this strength to maximize future earnings potential globally (both reach and pricing power) is by providing all-you-can eat DTC offering on a single platform under the Disney+ brand, where all theatrical content is available day-and-date with no additional fee to subscribers,” Loeb said in a letter.

Disney generates more than $15 billion in annual revenue 159 million subscribers (104 million from Disney+ alone) after the company more than doubled its mid-term content investment (from $4 billion to $8-9 billion by 2024).

“Over the past year, we have left our conversations with Mr. Chapek and CFO Christine McCarthy impressed by their relentless pursuit of long-term value creation for Disney and its shareholders. They have done what is right for consumers, even when it may be at odds with the legacy Hollywood ecosystem. The opportunity ahead remains immense: 1 billion global broadband-enabled homes, 4 billion mobile smartphone subscribers and, most importantly, at least 1 billion global Disney fans,” Loeb concluded.

Shares of Disney have gained more than 35% in the past 12 months.

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