Disney's digital transformation

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“I get up at 4:30 in the morning, seven days a week, no matter where I am in the world.”
CEO: Bob Iger


Disney in Numbers: 5-Year Stock Price
Disney’s 5-Year Financial Performance

Business Model Innovation
Direct streaming

Wall Street analysts are on the battlefield predicting a very difficult time for the global video streaming industry. They say the grand old entertainment company’s foray into digitally transformed streaming is going to change everything. From rising production costs to over-the-top marketing spends, the arrival of Disney+ on the street is not going to be an easy sail either.

People who know Bob Iger, CEO of Disney and an introvert of sorts believe this move is what will etch his name in company’s history and will perhaps even overshadow industry-defining moves like the acquisition of Marvel, Pixar, Lucas Films and more recently, the mammoth acquisition of 21st Century Fox.

So, what is the game Bob is trying to play here, and why?

It all started in 2015 when its cable networks led by ESPN which contributed 40% of Disney’s overall profits, saw a decline in cable TV memberships. As a result, the stock price went tumbling down 9%. At the same time, Netflix saw double-digit growth in its digitally transformed video streaming business.

However, the biggest challenge to go digital at Disney was its lack of understanding and expertise in the technology business. Being digital natives, launching and scaling a digital streaming service is not a challenge for Netflix, Amazon, Apple, and Google. However, this is not the case for Disney. Its nonexistent technological background became a huge barrier in making any sort of leeway in this space.

The failed acquisition of Twitter became the turning point for Disney as Iger started looking elsewhere. It was then that Iger and the board doubled down on their earlier minority investment in Major League Baseball-owned online streaming company BAMTech. BAMTech which was originally a 33% minority investment by Disney to take ESPN’s online streaming service to the market, is now a wholly-owned Disney company and is the foundation technology framework behind Disney+.

Pixar – Marvel – Lucas – Fox – Disney+

Bob Iger’s core strategy to grow Disney and its footprint throughout the global entertainment market can be articulated as below:

  • Put capital in high quality IP
  • Use technology to reach people
  • Grow globally

Each acquisition has been to solidify and actively pursue this strategy. Till today, the missing piece in this strategy has been to really have a solid direct-to-consumer model at play. However, with Disney+, Iger has essentially come full circle. Yes, for Disney it is foraying into unknown territory. Although with solid technology in place and a barrage of high-quality characters and shows in its armory, Disney can really change the face of the global streaming industry.

Future

The company estimates to sign-up and serve 90 million subscribers under its Disney+ offering by 2024. Considering Hulu and ESPN+, the firm is targeting a combined online user base of more than 160 million users. Although this number may well be half of Netflix, the real game changer is the array of characters and the hot digital properties that Disney owns. The firm now intends to use Disney+ as an intertwined offering whose ripple effects will be far and wide across the Disney model. For instance, the upcoming Marvel movies will have storylines connected to shows launched on Disney+ while spurring the merchandising and consumer product businesses, too. This will change the game for Disney and the future of the entertainment industry forever.

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Topic:

Digital Transformation

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