This week, The Walt Disney Company announced that it is combining all of its media distribution segments, including Direct-to-Consumer and International, into one segment called Media and Entertainment Distribution. Content creation is being split up into three segments called Studio, General Entertainment, and Sports. Profit and loss responsibility will be handled by the Media and Entertainment Distribution segment.
With profit and loss being handled by the new segment, it seems that financial reporting will be consolidated under the new segment. Right now, it is unknown if Disney will continue to break down its financial results based on the prior segments/divisions under the new reporting structure.
Disney has explained that the restructuring move is to help the company focus on accelerating its Direct-to-Consumer (DTC) strategy. All distribution and ad revenue operations will be handled by Media and Entertainment Distribution.
Center (Our) Analysis
It is unclear if this move is to help Disney with accelerating its DTC or to help it with weathering the financial storm that it has not exited from yet. Although Walt Disney Co. has said that it is restructuring to accelerate DTC, it is also combining its legacy operations financial results into the same segment. That may allow the company to smooth out its media segment results by having the solid performance from the Media Networks segment counterbalance the declines at Studio Entertainment and the losses at Direct-to-Consumer and International.
The Walt Disney Company remains in a difficult financial situation due to the revenue declines at its Parks, Experiences, and Products segment. That segment is responsible for a significant portion of the company’s revenues. Without the revenues that PEP provides, the company will have to rely on growth in its media businesses.
This move may signify that Disney is working to bring profitability to is DTC division so that it can help to make up for some of the revenue and profits that have been lost due the decline of Parks, Experiences, and Products. DTC can also make up for the declines at Studio Entertainment, which may get worse as movie theaters are not performing well.
Will this move help to grow Disney’s media segments? That is the question that will be answered over the next few quarters.
Above: The Walt Disney Company's Direct-to-Consumer and International Logo