Disney’s Problem
These past two weeks have been a whirlwind for Disney. Last week’s Apple Vision Pro launch saw Disney as one of the largest third-party video streamers to embrace Apple’s new computing platform. On Tuesday, news broke of Disney forming a surprising partnership with Warner Bros. Discovery and FOX for an all-new sports app. On Wednesday, Disney announced it would buy a stake in Epic Games as part of a larger agreement that will see the gaming company leverage Disney IP into a new Fortnite-like Disney universe. Despite these moves, some of which are likely being done to quiet down activist shareholders, it’s hard to shake the feeling that Disney’s actual problem is being minimized, or worse, ignored, by management.
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Higher Video Streaming Pricing Is a Good Thing
In what has become something of a quarterly tradition, people are once again sounding the alarm about video streamers raising subscription prices. Disney was the latest company to announce higher prices with Disney+ (with no ads) seeing a 27% price increase and Hulu (with no ads) seeing a 20% increase. Despite drawing anger and frustration, continued price increases end up being one of the better developments for an industry that has been dealing with its fair share of issues and challenges.
A common refrain that has accompanied video streaming price increases is that the cost of streaming is getting close to what the big cable bundle costs. This is then said to indicate failure on the part of streamers to push the video industry forward. A major issue with this line of thinking is that it ignores why the cable bundle was problematic.
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TikTok vs. Pixar
Last weekend, Disney saw its second-weakest box office opening for a Pixar film. “Elemental” brought in just $30 million domestically during opening weekend. This has led to various accusations being thrown at Disney CEO Bob Iger, who just saw his CFO resign last week, as to what happened. Talk about a tough stretch.
In what have become perennial excuses, some are saying Disney’s issue is relying too much on established Pixar IP and wading too far into culture wars. Neither do a great job of explaining the situation. Disney is on the record saying they were disappointed in “Elemental’s” performance although they think the issue isn’t specific to Pixar but rather to all original stories and characters. That doesn’t exactly provide a sigh of relief.
With Pixar troubles seemingly hitting a new level of bad, new theories have been put forth as to what may be unfolding such as the Pixar brand being tarnished by having some films be released directly to Disney+.
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Disney vs. Florida
Disney finds itself in an awkward place. From a financial perspective, things are humming along. Disney Parks are busy printing cash. Linear networks are offsetting ongoing losses in streaming. From a PR perspective, the Disney train is off the rails. Bob Iger is embroiled in an all-out feud with Ron DeSantis, governor of Florida. Caught in the crosshairs: Disney Imagineering – one of the storied groups within the company, responsible for customer-facing experiences at its parks. The saga produces an interesting case study of the changing role being given to CEOs - and why Disney is making mistakes that a company like Apple has been careful to avoid.
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The Art of the Turnaround
Bob Iger isn’t wasting time attempting to put Disney on his preferred track. Yesterday, the WSJ reported that Iger had axed Disney’s metaverse and membership teams – two initiatives in their infancy that were spearheaded by Bob Chapek. This follows a reorganization a few weeks back that returned power to the company’s creative executives. Disney is just one of a handful of companies that have been changing strategies to get a better footing in the marketplace.
We can look at Netflix’s move into advertising – something that executives had talked down and dismissed for years - as an acknowledgement of paid streaming becoming bigger than any one company.
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Movie Theater Cracks Grow
Disney is in a weird position when it comes to the box office: Its strategy is being questioned. For years, Disney was considered to have mastered the evolving box office to maximize profit while protecting future interests. Although “Thor: Love and Thunder” got off to a good box office start last month, the subsequent 68% drop in ticket sales during its second weekend was alarming. The steep drop follows another recent Marvel movie that similarly saw far less in the way of staying power with consumers. A broader look at the Marvel slate of movies suggests bigger issues may be at play.
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ESPN’s Staying Power
The new year started out with a bang in the digital media space. Last week, the New York Times announced that it was buying The Athletic, widely considered to be the most intriguing sports media start-up, for $550 million in cash.
The deal does not look to come at a time of strength for The Athletic. Rumors from just a few months ago pegged The Athletic as seeking $750 million in a sale. The planted rumors didn’t have their intended goal of creating a bidding war for the sports start-up. Instead, the New York Times, which had been mentioned as an interested suitor last year, got The Athletic to budge. I don’t have too many positive things to say about The Athletic from a business model perspective.
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