Disrupted Media – Is it Goofy to think Disney is too big to fail?

SUMMARY:

The Walt Disney Company is one of the biggest brands in the world. But is it too big to fail in a world of digital media disruption? CEO Bob Iger reckons so.

Whoops

I think we stand a chance of doing really well no matter what the environment is from a disruption perspective because of that name, Disney, and what it means to the consumer.

That’s the confident view from Bob Iger, CEO of The Walt Disney Company, when challenged on the threat to established media and entertainment brands from the likes Netflix or the new breed of MVPD (Multichannel Video Programming Distributor) providers.

It’s a ‘too big to fail’ that in itself fails to take into account the fate of the Sony Walkman or Blockbuster Video or Kodak in the face of digital challengers. But is Disney the one company that really just might be too much a global brand to be toppled?

Iger certainly isn’t resting on his laurels. We’ve written before about the company’s investment in sports network ESPN and how it’s looking to digital channels to shore up that business. That’s still the case today:

We continue to address a dynamic evolving media environment. We’re certainly well aware of the attention paid to ESPN and we’re pleased with our implementation of strategies aimed at further strengthening ESPN’s position and expanding its growth opportunities. These include launching ESPN on all new multi-channel services, including Sling TV, PlayStation Vue, DIRECTV NOW, and the-soon-to-be launched Hulu.

We’re continuing to invest in ESPN’s industry-leading programming and we’re improving and growing ESPN’s presence on mobile devices with new and compelling apps. We’re also investing in technology platforms to enable direct to consumer products.

Last year Disney splashed out $1 billion to take a one third stake in BAMtech, which is now working with ESPN to create a standalone, cable-free digital streaming service. Iger says that work is proceeding well:

I’m very impressed and excited about the various initiatives being implemented to grow that business and to leverage its capabilities for our media businesses. Great content will continue to drive opportunities and growth in this changing environment. And given our incredible portfolio of high-quality, in-demand branded content, we’re extremely well positioned to strategically and successfully navigate the dynamic marketplace and generate value for our consumers.

He adds:

I was at BAMTech a couple of weeks ago and the quality of that technology has just blown us away and the potential that we believe that has for us is enormous. We’ve invested so that we own a third, we have a path to control [and] we are extremely excited about the prospects of what BAM is going to be doing near-term. We will be launching a direct-to-consumer sports service sometime in probably calendar 2017, but we’re also very excited about what the potential of this is long-term, both for the company and for third-parties who can use the product because the technological side of it is so strong in ways that are value enhancing for them as well.

Partnering

Disney has also been partnering with other providers on ‘over-the-top’ distribution deals on MVPD services. Iger says he can see a proliferation of providers emerging:

It seems like we’re on the cusp of some significant growth for new entrants in the multi-channel marketplace. What we like about them is they are mobile friendly or mobile first, their user interfaces tend to be very strong, and their pricing is priced substantially lower than the expanded basic bundle that most of the MVPDs are offering.That obviously we think gives us a chance to both attract consumers that may not sign-up for multi-channel service or hold consumers into multi-channel subscriptions.

What’s really important is the deals that we’ve negotiated for distribution, particularly for ESPN, are to be in all subs or all households launched. These are light packages that offer us 100% penetration from those packages. So we think that this wave that we’re seeing is really a signal of what is to come and what the future will be.

Pricing is an issue here. A relatively small increase in the price of a monthly Netflix subscription attracts lots of negative headlines and has caused temporary slowdowns in new sign-ups or renewals in the past. Iger though thinks that if a relatively low cost package can be offered, then there are upset and cross-sell opportunities to be met:

If we end up with a world where the $40 to $50 a month package becomes more and more popular, that means that some consumers may obviously take the savings that they may have from that and spend it on other things or save it. It could mean they spend it on other video services and some of those services are services that we might offer. When we talk about going with our own direct-to-consumer product, it is possible that the first product that goes into the marketplace will be in effect add-on or adjunct product that consumers can buy on top of what is their normal multi-channel package.

So if the multi-channel package is less expensive, consumers, you could argue, could have more spendable income or more money to spend on other video services, whether it’s Netflix, whether it’s Hulu, or whether it’s other Disney-owned products that we’re selling direct to the consumer.

As for the threat from digital disruptors, Iger remains confident that Disney has the clout and the capability to take on challengers:

In reality, we believe that the best approach to doing well in a world that is disruptive, in a world that has far more digital distribution, is to have great content and tell great stories….You have to be willing to either create or experience some disruption as we migrate from what has been a more traditionally distributed world to a more modern or more non-traditional distribution world. And some of that we’re going to end up doing to ourselves, meaning we understand that there is disruption, but we believe we have to be a disruptor, too.

That means going to the consumer direct in the future – and that’s what’s on Iger’s radar:

We have to be careful because we have existing agreements and existing relationships and a lot of value still being reaped from the traditional distribution relationships. But I can tell you that it is our full intent to go out there aggressively with digital offerings direct to the consumer for ESPN and other Disney-branded properties.

He concludes with the bravado boast:

We’re seeing a world where disruption is definitely on the table and real. But it’s not something that we feel is daunting in terms of the task ahead.

My take

Is Iger being goofy here? Or is his confidence justified? Disney has fingers in so many pies that it’s hard to imagine it being brought low any time soon. But the actions it’s taken to date on the digital media front indicate that even for the biggest of giants, it’s necessary to be ready to innovate and disrupt your own business model.

Image credit - Disney/Pinterest