It's debatable whether these films feel like "sequel direct to DVD" or not, but I don't think it's debatable that audiences are watching them.
https://www.adweek.com/lostremote/nielsen-top-15-stranger-th...
The problem with streaming is that you can stream repeatedly (believe me I know that) without incurring anything additional to Disney but costs. In the "old days" going to see Encanto in theaters would have cost our family easily $80+ - now that's just the cost for Disney+. And we would have gone, but why bother when it's available to stream?
They also cannot milk for MORE than the streaming cost/yr. I've noticed a lot of Encanto merchandizing on the clearance aisle, but I don't really have a way to track that.
I think Disney intentionally took a lot of family-oriented films and kept them out of theatres during covid (reminder Encanto released in 2021) to avoid the optics of creating super spreader events where children are at the forefront. In their conference call they mention going back to theatrical releases.
But theater attendance is way down either way - and streaming make have cannibalized other revenue streams more than people think.