During Disney’s Q4 2023 earnings call, Bob Iger said he was ready to start building again after a long period of fixing. Disney went on to outline these key building opportunities. Let’s explore what they are and what Disney could do with these building opportunities.
Disney’s Key Building Opportunities At A Glance
Profitability in Streaming
Disney sees a key building opportunity in streaming but in order to get there they need to achieve significant and sustained profitability. Disney plans to improve its direct-to-consumer offerings with high-quality content, new advertising tools, and a more unified streaming experience.
The biggest key to Disney’s streaming profitability will be the opportunity to combine Disney+, Hulu, and ESPN into an all-in-one streaming experience. Iger even said that a combined service would create new opportunities for both Disney and its subscribers.
Since retaking the helm at Disney, Iger has aggressively made changes at Disney’s streaming division. Iger got rid of the Bob Chapek-era Disney Media and Entertainment Distribution division, a division that oversaw what content went where. Iger’s return for streaming marked price increases, more tech investment, and giving power back to the creatives.
The streaming division will also focus on opportunities in marketing and advertising. Disney+ is heavily pushing its ad-tier. I’d also expect more pricing power to be at play. Disney will likely offer deals or bundles for Disney+, but I continue to see them raising the price. For programming, it seems like Disney is spending less and will now rely on even fewer titles and just focus on its theatrical titles and franchise power.
When Disney acknowledged that streaming was a building opportunity. They mentioned that they built a leading direct-to-consumer platform in only four years and that they are continuing to improve with quality content, advertising tools, and a more unified experience. Disney has built a powerful streamer in Disney+ but did it wait too long to combine it with Hulu and ESPN? Did Disney miss its window to become the biggest victor of the streaming wars? However, we have to consider the business model of streaming is pretty broken and so far it’s only has worked for one company (Netflix) and that company had to adopt drastic measures like advertising and cracking down on account sharing (Disney is also boosting advertising and cracking down on account sharing).
Disney hopes its streaming division will be profitable by the end of fiscal 2024. Disney also has told shareholders that they want to deliver attractive profit margins in the future.
ESPN’s Future
Disney also sees a building opportunity with ESPN and it’s primarily about making it more of a digital sports platform that utilizes ESPN Bet while having other partners in the business. Disney’s ultimate dream would be to have the NFL or NBA take a stake in ESPN, which would further de-risk the business. Then Disney would love a tech company to help provide further distribution for ESPN, so think Apple or Amazon. Verizon has been thrown out but it seems like Verizon may be out of the entertainment/content world.
Disney wants to make ESPN the preeminent digital sports platform while reaching fans in new ways. So think more sports betting and more things along the lines of Apple Vision Pro. If Disney can get the NFL to invest in ESPN, and they can get access to NFL RedZone (seven hours of commercial-free football, watch every touchdown on Sundays) that would be a heck of a product to add under the ESPN umbrella.
Disney is accelerating ESPN’s future. Iger used to tease that a full-fledged ESPN service would come to streaming in the future but that timetable has rapidly moved up. Industry insiders have speculated that the ESPN streamer could arrive in 2025. The pricing for an ESPN streaming service with all the sports rights would be at least $35 a month possibly more.
ESPN is a building opportunity but I wouldn’t consider it a Disney-centric one. The future of ESPN will be determined by the partners they get to invest in it. Those partners whether that be the NFL or Apple or the NBA and Amazon will determine ESPN’s future more than Disney will. Yet Wall Street is so enamored with ESPN that Disney has to act, and Iger knows it.
Studio Creativity and Improving Economics
Disney sees a key building opportunity in its studios’ business. Disney’s historic Hollywood division has been a creative engine that powers the synergy machine. Yet in 2023, that creative engine stalled. The building opportunity lies in how to improve both the creative and economics behind Disney’s storied studio business.
Iger is determined to fix it although his strategy sounds startlingly similar to the strategy that got us here in the first place. Disney will focus on brands and franchises while making less. That’s always been the Disney mantra and Iger also boasts that Disney will focus on quality over quantity. Which makes you wonder in the short Chapek Era did they emphasize quantity over quality? Only the people who worked at Disney can answer that.
The one aspect of Iger’s plan to revive the Walt Disney Studios that everyone likes is the fact he wants Disney to create fresh and compelling IP. Iger likely understands that Disney fans love Star Wars, Marvel, Pixar, and Walt Disney Animation. He also understands fans love it and will follow franchises like Toy Story, Frozen, Thor, and Star Wars spinoffs without hesitation. Although I think he realized Disney has to continue to explore and create original IP. Whether that be something like an Encanto or a Percy Jackson.
Iger knows that’s by making fewer projects and spending less as well. Disney’s content slate was already small and it’s going to get smaller. The theatrical slate is pretty bare but it seems like 2025 and 2026 will be big years if Disney takes their time. With spending less, Disney announced that they were reducing its entertainment content spend by at least $4.5 billion. That’s a decent amount of money and quite frankly they should reroute that to the Experiences division (another building opportunity).
Turbocharging Parks & Experiences
Disney has thrown around the word “turbocharging” a lot.
Disney has been teasing that it will be turbocharging its parks and experiences division for a while now. The company says it is a key building opportunity as well. Disney states that turbocharging the experiences division makes sense because they have a wealth of intellectual property, technology, buildable land, unmatched creativity, and strong returns on invested capital.
That last reason is the one Wall Street cares about.
Yet Disney has been pretty mum on how it plans to do this large-scale, turbocharging investment. Disney plans to spend $60 billion over the next 10 years. Which comes out to be $6 billion per year. Disney says the investment will enhance and expand domestic and international parks, as well as cruise line capacity.
So, I sincerely hope they spend the money and use the buildable land to make new experiences. The Disney Parks has been coasting on replacing lands and attractions and now is the time to expand the parks and add capacity. Disney wants to grow this division into an even bigger and more successful cash-flow-generating business. The Disney Parks and the Disney Cruise Line are excellent businesses but they need constant investment in order for people to continue coming back.
Iger says the Parks and Experiences division remains a growth story and that Disney is managing their portfolio exceptionally well. Hopefully, Iger and D’Amaro bring news at D23 in August about how they plan to spend the $60 billion. Also, I wouldn’t rule out if that $60 billion becomes a bigger sum. That’s only if Disney is truly serious about turbocharging its Experiences division. Maybe $100 billion over 10 years (2025–2035) becomes the new plan? That would be $10 billion a year. For what it’s worth Disney will likely spend $25 billion on content this year. I think it can throw a bone to its parks & experiences division.
The Disney Parks remain a bright spot for the company despite potential headwinds.
Out of Disney’s four key building opportunities, which one should Disney focus on the most? Also, is there another building opportunity that Disney isn’t paying attention to? Gaming? Software? Movie Theaters? Consumer Products? AI?! Let me know in the comments below.
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Zach Perilstein is the Editor-in-Chief of the Boardwalk Times
