Disney (NYSE:DIS) is in a world of hurt this year, but there is hope. Theme parks, movie theaters, and sporting events are operating on a limited basis at best. However, the company's direct-to-consumer (DTC) segment -- home of streaming and content-distribution businesses Disney+, Hulu, and ESPN+ -- is booming. So Disney announced on Monday that, effective immediately, it's separating the management of content creation from distribution to build on its success thus far in its tech-forward DTC segment.

A family of four sitting on a couch watching TV.

Image source: Getty Images.

In early 2018, Disney combined all of its international media assets, technology platforms, and distribution and marketing into the DTC reporting segment. So far, so good. During Disney's fiscal 2020 third quarter, DTC quickly became the company's second-largest unit with $3.97 billion in revenue (after cable and broadcasting, with $6.56 billion). And DTC amassed 101.5 million subscribers worldwide, including 57.5 million Disney+ subscribers less than a year after launch.

But we live in an entirely different world than in 2018. Technology platforms that not only reach consumers directly in their home but also flexibly deliver the right content at the right time are more important than ever. The release of Mulan on Disney+ for $30 to mixed reviews -- for the distribution strategy itself as well as the movie -- is a perfect example. To continue the DTC segment's epic run, a new unit called Media and Entertainment Distribution has been created to handle all monetization of content and advertising sales.  

As for entertainment content itself, it also will be managed in three distinct segments:

  • Studios: Movies and TV shows for theaters and streaming based on Disney franchises like Star Wars, Marvel, Pixar, and 20th Century Studios.
  • General Entertainment: TV content for streaming, cable, and broadcast networks.
  • Sports: ESPN and other cable and broadcast events.  

Disney's DTC break-up makes sense and could help it continue to catch up to Netflix (NASDAQ:NFLX) and its nearly 193 million subscribers. Not only is streaming a totally different business model than theatrical releases (which suddenly look like a relic of a bygone era), but the creative engine for streaming is also a totally different game.

Quantity is king, as is plenty of fresh material. With newfound flexibility in its most important segment, Disney will increasingly look like a global tech company in the years ahead.

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