October 2020

We all know what Disney should do: ALL Content to ONE streaming service. 

They continue to confuse customers with Disney+, Hulu, ESPN+ and soon to launch Star International, and continuing with cable/TV channels, movies in theaters, etc…

Decisions around where to distribute content and how to market will inevitably create internal conflicts.

Disney just announced a massive restructuring plan designed to accelerate their direct-to-consumer strategy, i.e. Disney+. It’s the right direction, but it’s too slow…

As a reminder Covid 19 nuked disney’s traditional businesses: 

• Theme parks: shut down and laying off 28,000 employees. 
• Big movies pushed to 2021, because movie theaters closed indefinitely. 
• Disney Cruises: Corona Cruise anyone?
• ESPN: Sporting events shuttered/delayed; but coming back. Still, layoffs expected. Also, ESPN social wokeness does not seem to be helping viewership. 

Have no fear Disney will return in full force. For reference see Hiroshima before/after below. 

Lockdowns and sheltering in place propelled Disney+ subscriptions to over 60 million as of August. Downside is average revenue per subscriber is less than $5.00. For Netflix that number is over $13.00 in the US and Canada. Netflix is about a ¼ the size of Disney in terms of total revenue.

Disney Strategy and Leadership

Bob Iger resigned as CEO right before Covid hit hard, but maintains the title Executive Chairman and he “will continue to direct the company’s creative endeavors”…whatever that means. 

In his place as CEO is Bob Chapek, who previously led Disney Parks (some find it odd that a CEO was chosen that didn’t have extensive content and media experience) 

So then, this week Chapek announces a management restructuring. Basically, Disney’s three content groups will focus on content creation and a new group will focus on content distribution. 

• Studios: Disney, Pixar, Marvel, Lucas Film, 20th Century Fox
• General: TV channels like ABC, FX, National Geographic, Disney
• Sports: ESPN and ABC sports

The heads or Chairmans of these three divisions will report directly to CEO Chapek. And there is a new division: 

• The Media and Entertainment Distribution group, led by Kareem Daniel, a 46 year old executive who previously ran Consumer Products, Games and Publishing “will be responsible for the P&L management and all distribution, operations, sales, advertising, data and technology functions worldwide for all of the Company’s content engines, and it will also manage operations of the Company’s streaming services and domestic television networks”.

Red Flags: 

• Bob Iger resigns abruptly. 
• Bob Chapek appointed CEO; lacking content and media experience. 
• Disney still talking about Disney+, Hulu, ESPN+ and now launching Star International. 
• Kareem Daniel new Media and Entertainment Distribution group, and he lacks content and media experience. 
• Conflicts of interest among Content Heads and Kareem Daniel. 
  • Think about it. If any of the content in the three content divisions does not perform well the Content Heads will immediately blame the inexperienced Kareem Daniel for his failed distribution and marketing strategies. 

In 12 Months: 

• Disney will slowly be moving more to streaming platform. Maybe some tent-pole blockbusters. 
• A number of analysts believe they will spin-off ESPN; I wouldn’t bet on that. 
• One or more of these chairmen/heads will be gone in the next 12 months…too many conflicts. 

Other fun facts: 

Netflix market cap surpassed Disney again last week: $250 billion vs $230 billion.