This last week Disney CEO Bob Iger had a question and answer session at the Morgan Stanley Conference. During this session, he highlighted where Disney is and where it is going. The overarching message that Iger gave during this conference was that of optimism. Speaking about how Disney is poised for a strong future, “I feel the momentum,” Iger said.
During the conversation, Iger focused on his four main building priorities for Disney moving forward:
- Achieving significant and sustained profitability in streaming over the long term
- Building ESPN into the preeminent digital sports platform
- Improving the output and economics of Disney’s film studios
- Turbocharging growth in Disney’s Experiences businesses
“And when I talk about building, I’m not just talking about building things bigger. I’m talking about growing the company—turning building into real growth. What I mean by that is growth in our organic businesses, looking for growth outside of those businesses, other opportunities—and, of course, growing the capital that we return to shareholders in the form of dividends or stock buybacks.”
Iger also talked about the optimism for the future, he referenced Disney’s balance sheet. This strong balance sheet gives Disney the “wherewithal to invest in our businesses to create growth,” Iger said.
“When I talk about growth, it’s growing ESPN into a digital platform. It’s growing streaming as a business. It’s growing the studio again into great generation of IP and… growing Parks and Resorts beyond where it already is,” Iger continued.
Disney Streaming
In terms of streaming as a growth business, Iger laid out the timeline for when Disney’s streaming services would be profitable.
“We are on a path to profitability,” Iger said. “I think the results these last two quarters clearly demonstrate that. We’re extremely confident we’re going to get there by the fourth fiscal quarter of this year.”
But it’s “not just about profitability,” added Iger. “I believe that with all of the things that we’ve just discussed, all the steps that we’re taking, it will become a real growth business for us.”
Iger commended both Alan Bergman and Dana Walden, Co-Chairmen of Disney Entertainment, for their successful management of Disney’s entertainment streaming operations. He also said that bundling Hulu with Disney+ will lead to good outcomes for Disney.
“In putting basically Hulu into a Disney+ app experience—which we launched in beta in December and comes out of beta at the end of the month—we are not only increasing the volume of content that we have on the platform, but with that comes significantly more engagement,” he said. “And in bundling Hulu with Disney+, we’re finding wherever we bundle, churn rates are down significantly, so that’s a path to profitability.”
ESPN
“If you look at ESPN’s menu of sports today, it’s about right in terms of what we feel we need to continue to basically grow the business, but also to make the transition to a digital platform,” Iger said.
Despite a decline in linear television, ESPN has continued to show strength, Iger noted. Iger said that Disney will continue to “take advantage of linear in terms of the revenue and the profits that it generates,” while also making the transition to streaming.
“What we’re trying to do is be very, very pro-consumer… and that basically means making ESPN available in multiple ways so the consumer can enjoy the sports they want to watch,” he said. “The joint venture that we created with Fox and Warner Bros. Discovery is an example of that.”
He also shared that Disney plans to launch a stand-alone product that features ESPN’s flagship channels as a streaming offering alongside digital integrations and functionality, including sports betting. “Ultimately, way down the road, ESPN will be a full digital platform,” he said.
Disney Studios
Iger also shared about the amount of time and energy he has devoted to the company’s various studios. He acknowledged the legacy the company has with creative excellence and the importance of this moving forward.
“You have to look at everything you’re making that you do believe in and you have to take a position that good is not good enough,” he said. “You have to basically strive for perfection.” Iger went on to say, “You have to put into the pipeline things you really do believe in.”
He highlighted some of the movies that are in the pipeline that he is excited about. This includes 20th Century Studios’ Kingdom of the Planet of the Apes, Disney and Pixar’s Inside Out 2, Marvel Studios’ Deadpool and Wolverine, Disney Animation Studios’ Moana 2, and Walt Disney Pictures’ Mufasa: The Lion King.
He also addressed the recent transformation at the studios and the impacts the changes have. “We did make some management changes at the studio. I feel good about those. We’re also managing our costs more aggressively,” he said. “Most importantly in all of this discussion is focus. And that’s not just focus of management, it’s focus of your creative team.” He added, “I feel that we will return the studio to not only excellence creatively but excellence in terms of the bottom line,” noting, “The impact of that on our streaming globally is also significant.”
Experiences
Disney is looking to turbocharge its Experiences segment, which includes its theme parks, the Disney Cruise Line, video games, and also consumer products to name a few things. In the next ten years, Disney plans to invest $60 billion in its parks and cruise line. This is a business with a very strong record, Iger noted. He also shared about the possibilities moving forward. “We have thousands of acres of land still to develop. We could actually build seven new full lands if we wanted to around the world, including the ability to increase the size of Disneyland in California—which everybody thinks is kind of landlocked—by 50%. So, you look at the returns and where you’re going to place your bets in terms of capital to deliver value to shareholders.”
There are also plenty of stories to still be brought into the parks. Iger shared that there is “so much IP to mine that there’s opportunity there to create experiences that we know people would love to have in our parks.”
During the call, Iger noted that an Avatar land was coming to the Disneyland Resort. In a press release from Disney, it is now being called an Avatar experience. What exactly it will end up being remains to be seen. However, Iger said that if you “build it right, build it with excellence,” people will come to experience it.
“We opened up the Zootopia land [in Shanghai], which… is one of the most successful animated films we’ve ever released in China, and it’s phenomenal there. And success in terms of visitation is tremendous,” he said.
Disney is also investing in digital experiences, including a collaboration with Epic Games to bring Disney stories to Fortnite. “We were really impressed with what Epic had been able to accomplish with Fortnite,” Iger said. “This will be a deep, rich, fully immersive, engaging experience for consumers… And I think not only does it speak to how young consumers are spending their time, but it speaks to basically how much more we can leverage our IP in a completely different medium.”
Looking Forward
Bob Iger is looking to the future, this much is obvious. He noted the amount of progress that the company has made in the last year and how that gives him reason to be optimistic about what comes next. “It’s important when you lead any organization, you need to be an optimist,” Iger said. “But I also think it’s important that optimism is based on fact or reality. And I think I’ve cited a number of reasons why I should be optimistic. So, I am very optimistic.”
He continued on to talk about Disney’s leadership saying, “We have great people running our four key businesses and we’ve strengthened our executive team significantly.”
The question was also asked about activist investors to which Iger replied, “This discussion I think demonstrates or illustrates that this is a very complex company to run. There are many moving parts. There are different markets. There are different industries that we’re in—cruise ships and streaming and movies and TV and theme parks and you name it. There are different dynamics.”
He continued on saying, “It’s one that takes not only a significant amount of knowledge, but a tremendous amount of time and focus. And I’m not talking about just me, I’m talking about me and the entire senior management team of the company. We’re at this hard every day. And when you go from fixing—which was significant and heavy lifting—to building, to really creating meaningful growth for our shareholders, the only way you achieve that is by focus.”
Iger also noted, “I am working really hard to not let [activist investors] distract me because when I get distracted, everybody who works for me is distracted, and that’s not a good thing.”
The discussion concluded with Iger again voicing his optimism for the future of Disney, despite the company being in the midst of a period of disruption. “We’re in a business that is serving a global population in a very important and a very valuable way,” he said. “I don’t get daunted by disruption. I believe the best way to contend with disruption is to embrace it [and] actually become a disruptor.”
What do you think of where Disney is and where it is going? Are you optimistic about its future? Share your thoughts and opinions in the comments below!
