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Disney’s 14-year bet is saving its life

Welcome to Buy/Sell/Hold, Marker’s weekly newsletter that’s 100% business intelligence and 0% investment advice. Each week, our writers Steve LeVine and Rob Walker make sense of the most important developments in business right now — and give them a Buy for clever moves or positive trends, a Sell for mistakes or missed opportunities, or a Hold if they’re noteworthy but too early to call.

🐭 How Disney got smart before it got lucky 🐭

The Buy/Sell/Hold Analysis

It was only last November that the Walt Disney Company introduced its own streaming service, Disney+. At the time, pulling its intellectual property from other services and building an exclusive destination for all things Disney seemed like a plausible gamble — but by no means a certain one. After all, this was a plunge into a full-on streaming war with Netflix, Apple, and HBO.

But looking back, the bet doesn’t merely seem smart — it also seems like incredibly lucky timing. Seven months into the pandemic — with movie theaters idle, film and TV studios facing mass layoffs, and theme parks closed or sparsely attended — Disney+ has turned out to be a lifeline. The service already has around 60 million subscribers, and even Netflix’s Reed Hastings has praised it. The House of Mouse must shiver to consider what it would be right now if it had plotted the launch for November 2021.

As if to acknowledge all this, Disney has now announced a restructuring explicitly focusing its entertainment divisions on a streaming-centric direct-to-consumer strategy. In other words: less emphasis on gathering audiences through theaters, networks, and parks, and more emphasis on making content and distributing it through the company’s own platforms (including Hulu and ESPN+). Much to the dismay of the struggling cinema business, the next film from Disney’s Pixar — the family-oriented animation Soul — will skip a theatrical release and debut on the streaming service December 25 .

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“I would say Covid accelerated the rate at which we made this transition,” CEO Bob Chapek told CNBC. “But this transition was going to happen anyway.” (The company laid off 28,000 workers last month as it struggled with troubles in its parks, experiences, and consumer products business segment, which accounted for 37% of the company’s total revenue in 2019, according to CNBC.)

Back in February, before coronareality set in, Chapek’s predecessor Bob Iger was on a victory lap, stepping away from a career marked by the acquisition of Pixar in 2006, followed by Marvel, Lucasfilm, and 21st Century Fox. The deals were occasionally viewed with confusion by some analysts — but there’s not much confusion now about what Iger was up to. As the Wall Street Journal put it, he essentially “assembled Buzz Lightyear, Captain America, Princess Leia and Bart Simpson” under one corporate umbrella.

That’s why the sheer firepower of the IP he assembled is even bigger than this particular pivot. Eventually the Covid-19 moment will pass, and Disney theme parks will attract crowds again — with attractions and rides inspired by Disney classics, Star Wars, Guardians of the Galaxy, and whatever newer properties take hold. But for now, the early success of Disney+ proves that one of the most impressive strategies for surviving the pandemic is one that got underway nearly 15 years ago.

Verdict: Buy

— Rob Walker

⚡ Lightning Round ⚡

Dollar General branches past $1 deals and discounted aspirin to attract wealthier suburbanites. According to the Wall Street Journal, the chain plans to open stores under a new brand, Popshelf, that caters to “women from households that earn as much as $125,000 a year.” Popshelf will sell fewer everyday goods in favor of products like home decor, holiday decorations, and beauty products (95% of which will still be priced under $5) — categories that Dollar General has said witnessed increased sales in during the pandemic. As the U.S. economy continues to sag under the weight of massive unemployment and lockdowns, it’s a safe bet to assume more families, even in the upper middle class, are looking to buy more for less across as many product categories as possible. Watch out Target. Buy.

WeWork once tried to pivot into a tech company; now, tech companies are trying to pivot into WeWork. Dropbox announced on Tuesday that it plans to convert its existing real estate into “Dropbox Studios”: flexible office space built for “community-building” teamwork (instead of “solo work”) to supplement a virtual-first policy of employees working from home who miss in-person collaboration. WeWork co-founder Adam Neumann, meanwhile, is finding his way back into the real estate/tech game, investing $30 million in Alfred Club Inc, a startup that provides apartment buildings with staffing and maintenance request software. Hold.

The NBA stopped the virus — but it couldn’t stop plummeting ratings. The league’s ambitious coronavirus bubble — in which players, coaches, and staff were sequestered at Walt Disney World Resort in Orlando for fan-free playoffs — came to a close with the Lakers’ 17th championship and zero positive cases of Covid-19. The bubble is one of the most effective business innovations of the pandemic, but while the NBA made history for its vigilance planning, it still saw a record low in viewership (including a 45% drop in viewers for Game 1 of finals) as its pandemic-postponed schedule forced it to compete with the return of the entertainment behemoth that is the NFL. Hold.

New startups surge, but VC funding for women founders hasn’t quite gotten the memo. In 2017 and 2018, women startup founders brought in just 2.2% of all U.S. venture dollars; in 2019, this percentage ticked up a bit to 2.6%. But the pandemic appears to have undone that small amount of progress, with women founders raising just 1.8% of all U.S. venture capital this year, according to the PitchBook-NVCA Venture Monitor. Even though the pandemic has spurred a historic spike in the creation of new businesses, it’s been a disproportionate disaster for women in the workforce — and thanks to lagging VC funding, it looks like that crisis includes women entrepreneurs, as well. Sell.

📈 The Number: $275

The price of a chicken dinner meal kit from the famous upscale Manhattan restaurant Eleven Madison Park, as reported in Bloomberg Quint.

Eleven Madison Park’s new offering is only the latest in a string of fancy meal kits now being sold by high-end restaurants: New York eateries Carbone and Masa offer $500 and $800 meal kits, and Alinea, a Chicago three-Michelin-star restaurant, is rolling out its own Thanksgiving packages that go for up to $895 (they include free-range turkey, not Butterball). Restaurants that have managed to hang on through the pandemic have largely done so by turning to outdoor seating, takeout, and delivery. This has proved difficult for high-end restaurants, whose clientele expects a certain level of ambience, service, and presentation for the premium menu prices — not plastic containers or a wobbly table on a sidewalk. They’re now betting that trying to replicate an upscale experience at home will insulate their brand more than traditional delivery and takeout.

Back in June, Marker interviewed chef and restaurant owner Dan Barber, who was up to something similar: He turned his shuttered farm-to-table restaurants into food-processing lines, selling produce boxes to keep staff employed and help the local farmers who supplied his restaurant get their meat and produce in the hands of customers. Meal kits as a lifeline is one of the more unexpected narratives to emerge from the pandemic — even previously struggling meal kit delivery companies like Blue Apron have seen their fortunes turn.

— Kaushik Viswanath, Senior Editor, Marker

📖 Longreads of the Week: What premium cooler company Yeti’s unlikely pandemic success reveals about our wacky recession — and how Butterball, one of America’s largest turkey purveyors, is gearing up for a Zoom Thanksgiving.

🔎 Marker’s New Fixation 🔎

Covid-19 may put a damper on trick-or-treating, but that hasn’t stopped one Halloween decoration in particular from capturing people’s hearts this year: Home Depot’s 12-foot tall skeleton. With hauntingly realistic eyes, durable metal frame, and “ground stakes for stability,” the monstrosity sells for $299. If you’re wondering, “What would I do with a 12-foot skeleton,” well, you may just be in the minority here, because not only is it being repurposed into every possible meme, it’s also sold out; according to the New York Post, some resales on eBay and Amazon have been priced at more than $1,300. And now beer companies and jerky manufacturers are jumping on the skeleton bandwagon to syphon off their own social media buzz. Count me among the many would-be consumers who — while having no idea why we’re drawn to its ghoulish aura nor any idea where we’d put it — are livid at missing the opportunity to buy it when we had the chance.

— Jean-Luc Bouchard, Senior Editor, Marker

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