As Disney’s chief executive, Bob Iger led the company through a remarkable 14 years, peaking in 2019. This year alone, Disney Studios has set a box office record. The Disneyland Resort’s “Star Wars: Galaxy Edge” innovation park has opened the biggest expansion in history. Most importantly, of course, Iger completed a $71 billion deal to buy a majority stake in 21st Century Fox.
But none of this may make much sense if Disney’s upcoming streaming service, Disney Plus, doesn’t succeed. For Iger, this may be his last and most risky bet yet. He has previously said he will formally step down as Disney’s CEO in 2021.
The media industry is growing rapidly, and as one of the world’s largest media companies, Disney needs to stay ahead of the streaming circuit. Established media companies such as NBCUniversal and CNN’s parent company, Warner Media, are adding new streaming services. Tech giants such as Apple (260.14, 0.71, 0.27%) are doing the same to cater to changing consumers’ tastes, while digital disrupters such as Netflix and Amazon continue to build up more subscribers.
Disney has built a world-class entertainment empire in theme parks, commercial development, television and film, and now the nearly 100-year-old company is moving into new streaming video services. With competitive subscription prices, strong marketing power and Disney content treasure trove, Disney Plus is key to Disney’s future.
But it also marks a costly shift in Disney’s long-standing business model. Media Networkis is the company’s largest division, but its profits have fallen sharply in recent years. Streaming services could accelerate the decline of the sector.
For Iger, the launch of Disney Plus could be the culmination of his illustrious career. If the plan fails, Disney’s multibillion-dollar assets, along with Iger’s personal legacy, will be at risk.
Risks worth taking
Tripp Miller, managing partner at the hedge fund Gullane Capital Partners, called Iger “a very smart, well-thought-out risk-taking,” adding that throughout his tenure, Iger made a big push to acquire film studios and animation studios that produced a lot of popular content. These include the $4 billion acquisition of Marvel Entertainment in 2009, the $4.05 billion acquisition of Lucasfilm in 2012, and the acquisition of 21st Century Fox earlier this year.
It’s a smart move: Pixar’s acquisition revived Disney’s animation business.
Miller believes that Disney Plus is just another risk that Iger deserves to take, and that’s what he and Disney need to do.
Disney Will Launch a wide range of tv shows and movies on November 12, including Disney, Marvel, Pixar, Star Wars, National Geographic and The Simpsons. The monthly subscription fee for Disney Plus is $6.99.
In August, Disney said it would offer streaming bundles in November for $12.99 a month, including Disney Plus, sports services ESPN plus Hulu, which is similar to its rival Netflix.
The launch of Disney Plus may be a well-thought-out move, but Iger believes in the importance of risk-taking.
“Innovation is vital, and real innovation only happens when people have the courage,” says Mr Iger. “Fear of failure destroys creativity. ”
Larry Downes, who studies disruptive technology, says that as the world’s largest film studio, Disney “cannot ignore any new market that offers them the opportunity to take advantage of their vast library of content.” ”
Mr Downs added: “Like VCR and DVDs decades ago, the initial economic benefits of these new distribution channels are uncertain, even counter-cultural for Disney. ”
As with any major move, Disney will have to invest in streaming services and sacrifice profits in the short term.
Michael Nathanson, founder of Moffett Nathanson, an investment bank, points out that, at least initially, Disney Will suffer significant losses. That’s because Disney not only broke off its partnership with Netflix and competed with it, but it also lost about $150 million a year by stopping licensing Netflix.
Moffett Nathanson estimates that Disney streaming services, including Disney, Hulu and ESPN Plus, will lose $4.5 billion in fiscal 2020 and $3.6 billion in fiscal 2021.
In his memoirs, Bob Iger writes that the cost of developing applications and content for Disney Plus, “combined with the losses of our own traditional business”, will result in “billions of dollars in lost profits in the first few years.”
Disney wants Disney To grow quickly. The company expects the service to reach 60 to 90 million global subscribers by 2025. By then, the company plans to invest $2.5 billion a year in original programming.
Disney plans to make the streaming service profitable within five years. That means Bob Iger is embarking on the most ambitious plan of his tenure as Disney’s chief executive, nearing the end of his career as Disney’s chief executive.
So can Disney ? attract millions of subscribers to compete with Netflix, the king of streaming? Or is it too late for Disney – and other traditional media – to catch up?
Bob Iger will find the answer.