Disney CEO Bob Chapek called Disney+ a “lifestyle portal for Disney fandom” and streaming the nexus of a “reengineered” company that would never have survived and thrived for a century if it didn’t take bold swings.
A Q&A at the Paley Center for Media’s International Council Summit in New York called “The Walt Disney Company: The Next 100 Years” took place as Disney stock tanked. The selloff followed the release of quarterly financials yesterday showing steep losses from streaming, as Wall Street is now looking for the opposite.
“Given our three year journey, we’re extremely pleased with where we find Disney+, going from nothing to over 160 million households, but at the same time realize that there is increasing desire by our investor base to make sure that there is some there there coming out of it,” Chapek said. And there is one, he promised. Pricing started low and can rise, boosting average revenue per user, and costs can be managed. An AVOD service is on the way. “Keep in mind we have only been in this for three years,” he said. “We are looking at making Disney+ all that it can be, but at the same time know that shorter term our investors expect us to have a return on that investment.”
Coming out of Covid, the company had to deal with a lack of new content, which was challenging but also limited expenses, the CEO reasoned. “Now, it’s sort of like the floodgates have opened and all that content is swarming at us. The good news is we’ve got lots of great content and it’s building a lot of subs for us. The bad new is that all that cost that had been greenlit years ago finally came through the gate and it is hitting us all at once. We are hoping to get that normalized very, very quickly.” The company has predicted profitability in streaming by the end of fiscal 2024.
The advent of streaming, Chapek said, has changed the nature of programming. “People don’t sort of think of the streaming business as programming, but it’s every bit as much programming because you’ve got to watch sub adds, you’ve got to watch churn, you’ve to to watch engagement. And each and every type of, piece of content reacts differently on all those levers.”
“Essentially we treated streaming — when we got into it, because we didn’t really know — much like the legacy media channels. If you had a movie, it was treated like theatrical. And something episodic was treated like television. But what were learned is that it’s its own thing.” Now the big lift is to “rationalize and optimize and learn from all that data and then try to cycle that back into what eventually gets made.”
“It’s no longer about what happens to be coming down the pipeline and where are we gong to put it. That was the first two years. Now it’s what needs to to be made that will come down the pipeline in three years. We haven’t even touched the benefit of that. But it’s coming.”
That’s connected with a host of initiatives linking streaming to Disney parks and products, connected by a tremendous amount of data and customer information. The aim is to create a lifestyle brand of the future including “next-generation” storytelling, the exec told the audience in midtown Manhattan. A push “has been going on in earnest for the last year or two” at the Disney tech group. It’s working on a set “customized and personalized” tools, optimized by engineers and designers, to be provided to execs like the heads of Lucasfilm, Marvel and Disney. “They will put these tools in the hands of the Kathleen Kennedys and the Kevin Feiges and the Dana Waldens to really create that next level of storytelling that is unique to you.”
On the movie front, Chapek reiterated his long-held view that theatrical is a safe zone for tentpoles and blockbusters, but “beyond that it gets a little more sketchy… I think the other genres, the other demographics are a bit more challenged and the question of will they ever come back in a significant way is, I think, to be seen.” Streaming gives flexibility. “If they come back, we would be more than glad go back to theaters because we have had a long and successful history of playing in more than one revenue stream. But if doesn’t, the good news is we’ve now got a very large streaming business.”
Chapek, who became CEO in early 2020 and has spent more than three decades at the company, had a metaphor for managing the company’s portfolio in the current landscape. “I equate it to a manual car,” he said, going between the gas pedal, brake and clutch.
The focus, he said, must be “customer lifetime value.” More than its media peers, Disney is able to look well outside of film, TV and digital media to enhance that customer value. On the drawing board, for example, is a new planned community outside Palm Springs for Disney fans aged 55 and older, aka “those who want to live the next chapter of their life in a Disney way.”
Chapek defended new pricing and reservations systems at theme parks developed during Covid while they were shut. They’ve helped manage attendance and improve the guest experience, but also generated some controversy. The old systems were antiquated “and treated everyone as one size fits all… We would wear it as a badge of courage,” he said. “The one thing that was clear is that people do not want to be treated the same,” he said. Some patrons are on a budget, others want a more “bespoke” experience.
He said virtual theme park visits are unlikely, even with the burgeoning metaverse. But some behind the scenes looks are possible. “People like to get off attractions and see exactly how those ghosts in the Haunted Mansion work. [They] say, ‘I want to check that out. It’s usually the reason why rides stop… We can give you that ability, to exit the theme park virtually and figure out what makes that tick.”
Then, when you’re watching Disney+, The Haunted Mansion movie will be served up as your first choice, not buried on page four.”
On a personal note, Chapek, soft-spoken and collected in public appearances, got a bit emotional recalling the Covid shutdown — of parks and everything else — just a few weeks into his tenure as Disney CEO. He’d run parks for years before and said the worst contingency until then had been shutting down for a few days during a hurricane, and even that had been “almost unimaginable.”