Shares of entertainment giant Disney went up by 11% on Friday morning to record a new all-time high thanks to the strength of its Disney+ streaming service.
With the new all-time high, Disney shares have now increased by almost 20% for the year due to its strong streaming service, despite the coronavirus pandemic forcing its theme park businesses to layoff employees and temporarily closed down parks.
Disney's movie studios have also been prompted to delay it major theater releases.
Positive investor outlook on streaming
Prior to the share increase, Disney+ previewed dozens of new television series and movies. The new all-time high is an indication of investors' belief that the strength of Disney's streaming service could offset other areas of its business.
Following the launch of the new content, Wall Street analysts upgraded the entertainment firm and at least 13 of them increased their price targets on the stock.
In a report, Citi analyst Jason Bazinet pointed out that Disney was making a "robust commitment" to new content. He explained that that the increased costs on programming have resulted to a faster than forecast increase in subscriber growth.
Reorganization at Disney
Last October, Disney announced that it will undertake a major reorganization of its media and entertainment business and focus on streaming.
The media and entertainment giant’s reorganization involves the creation of a new Media and Entertainment Distribution group that will be responsible for monetizing content via distribution and ad sales.
This particular business group will also handle the operations of the company’s streaming services, including Disney+, Hulu and ESPN+. The new group will be under the leadership of Kareem Daniel, who previously served as president of consumer products, games and publishing division.
Disney’s chief executive officer (CEO) Bob Chapek said: "Given the incredible success of Disney+ and our plans to accelerate our direct-to-consumer business, we are strategically positioning our Company to more effectively support our growth strategy and increase shareholder value."
"Managing content creation distinct from distribution will allow us to be more effective and nimble in making the content consumers want most, delivered in the way they prefer to consume it," Chapek explained.
In response to the announcement, Trip Miller, a Disney investor and managing partner at hedge fund Gullane Capital Partners, said: "This is further proof that the direct to consumer model is not only well received, but more critical than ever to Disney’s future."
Miller added: "These moves will not only result in higher quality content, and focused distribution, but allow the company to streamline corporate complexity and hopefully lower expenses."
He also pointed out that the move will enable Disney to further monetize in demand content and possibly "make up for revenue and profit lost in other divisions this year."
Tightening competition
Despite its success, Disney+ is facing increased competition aside from its rival Netflix, as tech giants Apple and Amazon are investing more on original programming.
It will also have to go toe-to-toe with other media giants that are also launching streaming services, including Comcast's Peacock, Paramount+, the rebranded version of ViacomCBS' CBS All Access, and HBO Max, the service for Warner Bros. content owned by AT&T's WarnerMedia.
