Disney Working to Get Streaming Platforms on Technical Par With Netflix, Iger Says: ‘We Need to Be at Their Level’
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Disney CEO Bob Iger acknowledged that the company is behind Netflix in terms of technical capabilities — and that the Mouse House is in the process of catching up.
“We need to be at their level in terms of technology capability,” Iger said about Netflix, speaking Tuesday at the 2024 Morgan Stanley Technology, Media & Telecom Conference.
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“When we launched Disney+ in 2019, our goal was to have basically robust video experiences at scale,” Iger said. “What we didn’t have was the technology that we needed to basically lower customer acquisition and retention cost, to increase engagement, to essentially grow our margins by reducing marketing expenses.”
Iger continued, “We’re now in the process of creating and developing all of that technology, and obviously the gold standard there is Netflix.” He said Netflix’s technology prowess is one of the reasons its margins are so much higher than Disney’s, and that Disney’s streaming churn rates “are higher than they need to be.”
Iger reiterated that Disney is on track to achieve profitability in the streaming business — which includes Disney+, Hulu and ESPN+ — by the fiscal quarter that ends September 2024. But, he said, “It’s not just about profitability. It’s about turning [streaming] into a real growth engine for the company.”
Long term, Hulu fits “very well” into Disney’s streaming plans, Iger commented, “even though we may not turn it into a global brand” (outside the U.S., the company distributes Hulu content under the Star brand). Hulu has “built a good brand” with “great content,” Iger said, calling out FX’s “The Bear” and “Shōgun.” Disney is in the midst of finalizing its buyout of NBCUniversal’s 33% stake in Hulu. In November, Disney paid $8.61 billion to Comcast with the final price tag (which could be higher) to be based on an assessment of Hulu’s market value by each parties’ bankers.
Iger also touched on the joint venture Disney, Fox Corp. and Warner Bros. Discovery announced last month to create a streaming platform pooling ESPN+ and the companies’ linear TV networks that carry sports programming — with the Disney CEO characterizing the sports bundle as “pro-consumer.”
“You’ve got a lot of young people who have not subscribed to the multichannel fat bundle, and you have a lot of people that used to be subscribers that lapsed,” Iger said. “We want them in… We’re trying to provide them a less expensive, more focused opportunity.” The as-yet unnamed joint venture is aiming to launch in the fall of 2024; pricing hasn’t been announced. The JV plans to sell the sports package directly to consumers in the U.S. and as an add-on to services like Disney+, Hulu and Max.
“Our plan is to continue to take advantage of linear [TV] in terms of the revenue and profits that it generates, but at the same time making the transition” to a fully streaming world, Iger said.
Users of the ESPN “flagship” standalone app, aimed for a fall 2025 launch, may be able to upgrade to the JV sports bundle, Iger said. “Ultimately, way down the road, ESPN will be a fully digital platform,” he said, integrating features like sports betting.
A front-burner issue for Iger is the proxy battle being waged by two activist investors — Nelson Peltz’s Trian Partners and Blackwells Capital — who are seeking to displace some of Disney’s board members with their own candidates. Disney is urging investors to vote for its own slate of 12 nominees at the April 3 shareholders meeting, which will take place online.
Asked about Peltz’s agitation, Iger responded, “This campaign is designed to distract us. I am working really hard to not let this distract me, because when I get distracted everybody who works for me gets distracted, and that’s not a good thing.”
Iger said that discussion surrounding the activist investors demonstrates that “this is a very complex company to run,” encompassing “cruise ships and streaming and movies and TV.” Disney’s different operations, he said, require “a significant amount of time and focus. We’re at this hard every day.”
Iger, as he has commented before, said that when he returned as CEO in November 2022 following the ouster of Bob Chapek, “I came back and discovered right away that it was a company in a lot of need of fixing.” According to Iger, under Disney’s previous leadership, “Creativity wasn’t really at the center… Most importantly, there wasn’t enough accountability” specifically from creative executives.
Iger said Disney’s studio group has “killed a few projects already that we just didn’t feel were strong enough” but has the company “not been that public about it.” (He didn’t identify the axed films.) He noted that Disney was the No. 1 studio at the box office for seven of the last eight years — with the exception of 2023, when the Mouse House was topped by Universal. Iger gave props to Universal’s “Oppenheimer” blockbuster, calling it a “fantastic film.”
To date, he said, Marvel has released 33 films totaling nearly $30 billion in box office receipts: “That is not an accident,” he said, adding, “We have to return to something like that,” saying the company needs to cultivate a “culture of excellence and respect with the creative community.”
“I’ve spent a tremendous amount of time on the studio [and] feel very excited about the slate,” Iger said. He reeled off Disney’s upcoming movies this year, including “Kingdom of the Planet of the Apes,” the sequel to Pixar’s “Inside Out,” “Deadpool and Wolverine” (“which I think will be one of the more successful Marvel films we’ve had in a long time”), “Moana 2,” which was originally imagined as a TV series and “Lion King” prequel “Mufasa.”
Iger, discussing Disney’s $1.5 billion investment into Epic Games, said he was motivated to do that agreement after seeing “stunning” data on how much time Gen Z spends playing games. Within a few years, Epic will launch a “Disney universe” that will let users engage with Marvel, Pixar, Star Wars and Disney intellectual property, as well as watch short-form content and purchase merch, he said. “You need a foot in the future,” Iger said.
Iger’s appearance at the conference comes after Peltz’s Trian on Monday released a lengthy white paper detailing strategic changes the hedge fund argues will improve Disney’s financial performance and boost its stock price. Among its suggestions: Disney should revamp its streaming-content strategy to take “more shots on goal”; consolidate Disney+ and Hulu operations; and produce fewer movie sequels.
Trian also wants Disney’s board to “fix” the company’s “chronic succession problems” for the 73-year-old Iger, whose renewed CEO contract expires at the end of 2026.
Pictured above: Disney CEO Bob Iger at the 96th annual Oscars nominees luncheon at the Beverly Hilton on Feb. 12
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