Disney Needs to Offer ‘All-You-Can Eat’ Streaming, Says Dan Loeb

(Bloomberg) -- Activist investor Dan Loeb is calling on the Walt Disney Co. to do more to leverage its leadership position in sports, general entertainment and blockbuster franchises in order to unlock the full potential of its streaming services.

Loeb said in a letter to investors in his hedge fund Third Point Friday that his optimistic view of Disney’s streaming service has proved to be correct, with the division now generating over $15 billion in annual revenue and in turn helping drive the company’s stock up 70% since May 2020. The company has also doubled its medium-term Disney+ content investment while maintaining its profitability guidance due to the platform’s early success, he noted.

Experiments with premier access to the release of Black Widow, for example, for an additional fee, and access to the release of films like Pixar’s Luca and Soul have been instrumental in that success, Loeb said.

“While the progress thus far has been commendable, even more can be done to realize Disney’s full potential in streaming,” Loeb said in letter.

Loeb’s Third Point first disclosed its position in Disney in October, and called on the company at the time to suspend its dividend and redirect those funds toward more aggressively creating content for its direct-to-consumer streaming service, Disney+.

On Friday, he urged Disney to provide an all-you-can eat approach to its direct-to-consumer offering. That means offering its various content on a single platform under the Disney+ brand, “where all theatrical content is available day-and-date with no additional fee to subscribers.”

Over the past year, he said he has left his meetings with Disney Chief Executive Officer Bob Chapek and Chief Financial Officer Christine McCarthy impressed by their relentless pursuit of long-term shareholder value. But he said there remains an “immense” opportunity for the company to tap into with a billion global broadband-enabled homes, 4 billion mobile smartphone subscribers, and at least a billion global Disney fans.

“Establishing a durable leadership position in the competitive global streaming market will require tough choices, aggressive investment, unwavering focus and consistent innovation,” he said.

Crypto and RH

In his letter, Loeb also discussed his recent foray into cryptocurrency, and Third Point’s relatively new position in RH, the upscale home-furnishing company that used to be called Restoration Hardware.

He said over the past two quarters, Third Point has made several investments in private companies that are creating critical infrastructure to enable broader crypto trading and usage, including CypherTrace inc., Bitwise Asset Management, and FTX Trading Ltd. He said Third Point also participated in investments in eToro Group Ltd. and Circle, he said.

“Like many emerging asset classes, we anticipate extreme volatility in price and sentiment, but these concerns are dwarfed by the incredible disruptive potential offered by this technology,” he said.

Meanwhile, he said Third Point began building its position in RH late last year on the belief that Chief Executive Officer Gary Friedman was “once-in-a-generation leader.” While most furniture companies are not known for their high returns, RH has bucked those trends by improving product quality and design, supply chain efficiency, retail presentation and essentially eliminating discounting.

“In the same way that Ferrari should not be compared to other auto manufacturers, we believe RH should not be considered a traditional furniture company,” he said.

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