As Bob Iger returns to helm Disney, media leaders share predictions for company’s future
A departure from bundled services and an investment in augmented reality (AR) could be on the horizon for Disney, experts say.
Disney is charting a new path forward / Adobe Stock
Less than a year after he stepped down from his post at Disney, Bob Iger is returning to head the $170bn media and entertainment conglomerate.
It’s been reported that the company’s board reached out to Iger last Friday – and by Monday morning, Disney had its old leader back. It was a move that effectively blindsided sitting chief exec Bob Chapek, about whom other senior leaders had expressed growing concerns. Namely, chief financial officer Christine McCarthy had told the board that she lacked confidence in Chapek following an earnings call on November 8 in which the company announced fairly dismal results, including a quarterly loss of $1.5bn associated with the Disney+ streaming service.
Now Chapek – alongside his right-hand man Kareem Daniel, who headed up media and entertainment – has been ousted. Experts believe the move had to do with financial concerns linked to the poor performance of the organization’s streaming stack, which includes Disney+, Hulu and ESPN+.
“Fundamentally, the financials just weren’t going in the direction they needed,” says Michael Goldstein, head of communications strategy and innovation at Omnicom-owned ad agency DDB North America. “Disney rarely misses projections and the latest they missed by a significant amount. Deep investment into streaming production was winning subscribers, but they hadn’t figured out how to translate subscriber growth into revenue to recover debts.”
Goldstein is certainly on to something: following the 2019 acquisition of 21st Century Fox – which put Disney out $71bn – debt is an especially salient concern for the company.
But what precisely caused Chapek’s downfall? And what will Iger’s reinstatement mean for the future of the entertainment titan?
Where Chapek fell short
It’s clear that some of Disney’s troubles over the last three years have been out of Chapek’s hands – the organization took major hits during the Covid-19 pandemic with the closures of theaters and amusement parks, and in light of restrictions that put entertainment production on pause.
But other failings fell squarely on Chapek, according to Goldstein: “He was so focused on winning the streaming wars that he didn’t stop to think if the war was worth winning. It wasn’t.” Plus, Goldstein says, getting Disney embroiled in highly-publicized political disputes with Florida governor Ron DeSantis was “ill-advised.”
Plus, Chapek – who had taken the chief executive post from his position as chairman of Disney parks, experiences and products – leaned heavily on his team in the parks department, including Kareem Daniel, in his efforts to bolster Disney’s streaming business. It was a move that didn’t pan out well. In spite of growing subscribers, the company’s streaming services incurred loss after loss, to the point where its 2022 Q3 losses in streaming were up $800m year-over-year.
Since Chapek took the reins in early 2020, Disney shares have plummeted approximately 19%, to a two-year low. (Meanwhile, the S&P is up around 34% for the same period). In the hours following the news that Iger would return, shares jumped 6%.
In a memo sent to employees Monday, Iger made clear his first priorities as chief executive. He reportedly wrote that a “reorganization of Disney Media & Entertainment Distribution” is needed and told staff that he intends to implement a “new structure that puts more decision-making back in the hands of our creative teams and rationalizes costs.”
It’s been widely speculated that, as part of Iger’s mission to restructure Disney’s media and entertainment distribution divisions, the executive will prioritize better monetization of the organization’s streaming stack.
This job is an especially crucial one: while some experts, like DDB’s Goldstein, don’t believe the effort is worthwhile, others believe the right leadership can make all the difference. Gijsbert Pols, director of connected TV (CTV) and new channels at media measurement firm Adjust, suggests that “the looming recession and a major growth in [ad-supported streaming] channels” creates new challenges for premium video providers. And with more supply, ad unit prices are dropping. So for providers, “if you don’t have the right person for the job right now, you are in trouble,” he says.
‘Disney should buy Snapchat’
As to how Iger’s return will impact Disney – and its streaming business more specifically – the jury is out. But experts have a few predictions.
Goldstein, for his part, anticipates that Iger may move away from bundling its services (under Chopek’s leadership, the company offered a bundled package of Disney+, Hulu and ESPN+) and shift to individual subscription offerings. “Streaming has taught audiences to be picky with what they watch and what they pay to watch. Instead of trying to sell bundled services, similar to cable structures, Disney should offer à la carte options where you pay a base for ad-free streaming and can pick and choose live and premier television and pay per event or series.”
He also believes Disney’s streaming business could make a U-turn and head back toward linear ad formats – a move that might appease brands. “Advertisers are screaming for more synchronous opportunities,” he says. “Amazon just offered linear style ad buys on its live Thursday Night Football [program], and Disney should look into creating opportunities to do the same. Offering high-reach ad formats in 30-second spots gives advertisers a rare opportunity to create emotional and narrative-led spots that are currently missing from the media mix.”
Finally, Goldstein predicts that Iger may attempt to create a unified tech platform that links all of its offerings and experiences under one roof. This model could help to cross-sell streaming, gaming, films, parks and more.
Other industry leaders say that renewed attention to original content may be a key priority for an Iger-run Disney. “In a world where streaming content is becoming more saturated, more premium and more competitive, Iger may see a return to creativity – which has long been Disney’s greatest asset – as a key initiative to turn the division around,” says Mike Seiman, chief executive officer and chairman of Digital Remedy, a tech company that specializes in ad performance.
And perhaps there are some curveballs on the horizon too. “Snapchat makes a lot of sense. It has a young audience, is a link between online and offline – think AR overlays at the parks, or added interactivity with a show – and can serve as a seamless e-commerce link between experiences and merchandise. Disney should buy Snapchat,” says Goldstein.
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If one thing is clear, it’s that Iger has his work cut out for him. “He certainly has a difficult road ahead as he seeks to obtain the profitability for the streaming segment that neither Chapek nor Daniel were able to,” says Hunter Terry, vice-president of solutions consulting and CTV commercial lead at data solutions firm Lotame. And he has a limited time to do so, considering the board has given Iger a timeline of just two years to find a successor.
Terry predicts that the days ahead will be turbulent: “We should expect to see even more swift and potentially harsh changes coming from Iger in the weeks to come.”
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