Disney CEO Bob Iger is acknowledging that the company is behind when it comes to streaming technology. Iger wants Disney to be on Netflix’s level in terms of technical capabilities, and that means Disney has some catching up to do.
“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. “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 mentioned 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.” Hulu fits “very well” into Disney’s streaming plans, Iger commented, “even though we may not turn it into a global brand.” Hulu has “built a good brand” with “great content,” Iger said, calling out FX’s “The Bear” and “Shōgun.”
When it comes to the joint sports streaming venture by Disney, Fox Sports, and Warner Brothers Discovery, Iger said “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 continued saying, ‘We want them in… We’re trying to provide them a less expensive, more focused opportunity. 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 that when he returned as CEO in November 2022 following the departure 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 also mentioned that 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.” (The films were not identified.) Additionally, Iger noted that Disney has been the number one studio at the box office for seven of the last eight years, with the exception of 2023, when Universal took the top spot.
Iger also discussed Disney’s $1.5 billion investment into Epic Games, and said he was motivated to do that agreement after seeing “stunning” data on how much time Gen Z spends playing games. In the next 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 Nelson Peltz’s Trian released a lengthy paper detailing strategic changes on Monday that 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.
What do you think about this? Do you feel Disney’s streaming services are where they should be in terms of technology? Let us know in the comments below.
