Disney CEO Bob Iger announced a significant shift in the company’s investment strategy, focusing less on traditional TV content and more on streaming platforms. Speaking at MoffettNathanson’s 2024 Media, Internet, and Communications Conference in New York, Iger highlighted that Disney is cutting back on spending for linear entertainment TV networks. This decision aligns with the shrinking traditional pay-TV market and aims to distribute content spending more effectively across streaming services.
Strategic Shift to Streaming
Iger’s analysis, upon returning as CEO in late 2022, concluded that traditional TV isn’t a growth sector but can still play a crucial role in consumer engagement. During Disney’s recent upfront presentation in New York, new shows were announced across both TV and streaming, underscoring the company’s dual focus.
Dana Walden, co-chair of Disney Entertainment, is credited with managing this transition. The company will continue investing in certain traditional TV areas but aims to drive growth and efficiency by consolidating management under Walden and ESPN chair Jimmy Pitaro. This approach is intended to enhance profitability by effectively managing costs.
Content Amortization Across Platforms
An example of this strategy is seen with shows like “Grey’s Anatomy” and “Abbott Elementary,” which air on ABC and are quickly available on Hulu. This method allows Disney to reach a broader audience and amortize costs. Iger noted that this practice is effective across Disney’s various networks, including ABC, Disney Channel, and National Geographic.
Despite expecting continued subscriber losses in traditional TV, Iger emphasized that profitability will rise due to efficient cost management. Disney is leveraging its networks to maximize engagement and reduce expenses, maintaining a comfortable position.
Lessons from Overinvestment in Streaming
Reflecting on Disney’s aggressive entry into streaming with Disney+ in 2019, Iger admitted to overinvesting in content. This led to significant losses, as the focus was more on quantity than quality. After restructuring, Disney now holds creative executives accountable for the profitability of their content, ensuring that spending aligns with revenue generation. Iger stressed the importance of having a CEO with a creative background to maintain high standards.
Disney’s immediate goal is to enhance engagement and reduce churn in its streaming services. Integrating Hulu with Disney+ for subscribers and adding an ESPN tile are steps towards this. Furthermore, Disney plans to curb password sharing, starting in limited markets in June, followed by a global rollout in September.
Personalized Content and AI Integration
Disney is also focusing on personalized content experiences using AI technology. Iger mentioned that ESPN would soon offer a customized version of “SportsCenter,” tailored to individual users’ preferences. This initiative aims to deliver dynamic and engaging experiences, increasing user satisfaction.
While Iger did not detail ESPN’s sports rights negotiations, he highlighted the importance of maintaining a robust portfolio to keep ESPN a leader in sports coverage. This strategy is essential for preserving the economic viability of ESPN and its engagement levels.
Financial Performance and Future Outlook
Disney’s entertainment streaming sector, which includes Disney+, Hulu, and Disney+ Hotstar, reported its first operating profit for early 2024. Despite an overall loss in the direct-to-consumer segment due to ESPN+, the company aims for streaming profitability by the September 2024 quarter.
Following a recent earnings report, Disney’s stock fell due to weak guidance for its theme parks and the ongoing decline in TV business. However, Iger remains optimistic about the parks’ growth potential, projecting significant operating income increases in the latter half of the fiscal year.
In the wake of a proxy battle with activist investor Nelson Peltz, Disney’s board, including Iger, secured reelection, reinforcing the current management’s direction. Despite challenges, Iger’s strategic adjustments are poised to navigate Disney towards sustained profitability and growth.
Source: Variety