Activist investor Daniel Loeb has called on Disney to divert $3bn that it is currently paying in dividends to sharply increase content for its streaming service.

The radical plan is set out in a letter to Disney chief executive Bob Chapek, seen by the Financial Times, in which Mr Loeb says the company could surpass Netflix’s subscriber base “in just a few years”.

“By reallocating a dividend of a few dollars per share, Disney could more than double its Disney+ original content budget,” Mr Loeb wrote. “These incremental dollars would, based on our analysis, generate returns that are multiples of the stock’s current dividend yield.”

It is unusual for an activist investor to ask a company to divert cash away from shareholders. 

Mr Loeb told investors that Third Point acquired a new stake in Disney during the second quarter when the shares were trading down on fears that the closure of its theme parks and movie theatres would “cripple the company”.

Third Point owned 5.5m Disney shares at the time of its most recent regulatory filing, equating to about 0.3 per cent of the company, worth $676m. 

Mr Loeb also called on Disney to move away from one of its more important traditional moneymakers: theatrical films. Disney made about $13bn from the box office last year as it churned out blockbuster after blockbuster. But that business has been wiped away by the pandemic. 

Mr Loeb said Disney should further embrace the shift from “the box office to the home” and devote its best content to its streaming service, likening the transition away from cinemas to “horse-drawn carriages when the automobile was first introduced”. 

Competition in streaming has increased in recent years as more traditional media groups unveiled their own services to compete against Netflix, increasing the cost of producing and licensing content. 

Bob Iger, Disney’s former chief executive, last year declared that streaming was the “number one priority” of the company. Investors responded enthusiastically by pushing its shares up nearly 30 per cent in 2019. 

This year, however, the pandemic has ravaged Disney’s business, which had previously been able to rely on its theme parks, cruise ships and blockbuster movies to deliver profits. The company reported a $4.7bn loss in the quarter to June.

In attempts to preserve cash, Disney in May said it would suspend its half-year dividend payment, saving about $1.6bn, and last month revealed job cuts for 28,000 theme park employees in Florida and California. 

Its Disney+ service has drawn more than 60m subscribers less than a year after launching, although it is lossmaking.

Mr Loeb cited the ratings success of Hamilton as an example of why the company should divert cash to buying and creating new content. Disney acquired the rights to a television version of the hit musical for $75m.

He said Netflix proves such investments pay off. “There is no arguing against the $1,200 per subscriber valuation the market currently ascribes to Netflix,” he wrote. 

A reorientation towards streaming would help Disney become the only one of its peers in media to “thrive in a world beyond the box office and cable TV ecosystem”, Mr Loeb said. 


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