Activist Investor Dan Loeb Calls on Disney to Halt Dividend and "Double" Streaming Budget

The Walt Disney Studios
Amy Sussman/Getty Images

The Walt Disney Studios

The Third Point founder sent a letter to Disney's board Wednesday arguing that the move would help Disney capture a "transformational opportunity."

The Walt Disney Co. should halt its $3 billion annual dividend and instead spend that money on content for Disney+.

That is the crux of a letter sent by activist investor Dan Loeb — the founder of the hedge fund Third Point — to Disney CEO Bob Chapek and the company's board of directors Wednesday.

"By reallocating a dividend of a few dollars per share, Disney could more than double its Disney+ original content budget," Loeb writes in the letter, which was obtained by The Hollywood Reporter. "Beyond bringing additional subscribers onto the platform, increased velocity of dedicated content production will deliver several knock-on benefits spread across your existing base including elevated engagement, lower churn, and increased pricing power."

Loeb called streaming a "transformational opportunity" for the company, and wrote that increased investment would let the company "thrive in a world beyond the box office and the cable TV ecosystem, alongside digital-first businesses like Netflix and Amazon."

"[M]eaningfully accelerating DTC content spend will further broaden the divide between Disney and its traditional media peers — AT&T’s WarnerMedia, Discovery, ViacomCBS, Comcast’s NBCUniversal and Fox — none of which have the financial capabilities to execute such a bold plan," the letter added.

In fact, Loeb argues that "with Disney’s superior tentpole franchises and production capabilities, we believe that the company can exceed the subscriber base of the industry leader, Netflix, in just a few years."

Loeb also suggested that Disney collapse all its streaming services into Disney+: "Given that Disney+’s subscriber base is already meaningfully larger than any of your other DTC services, we believe Disney would benefit from a single customer acquisition vehicle led by Disney+."

He also recommended that the company should "democratize" the theatrical experience by bringing more films direct to streaming.

Loeb's Third Point has been buying shares in Disney over the past few months. As of June 30, the company owned some 5.5 million shares in the entertainment giant, valued at more than $600 million.

Loeb has a history of taking activist approaches to media and entertainment companies. Last year Third Point took a sizable stake in Sony Corp. and called on the Japanese tech conglomerate to spin off its semiconductor business to focus on entertainment and gaming. Sony did not conduct the spinoff, but did sell some of its smaller assets, including a stake in Olympus.