4 Tips for Iger as Disney Enters ‘Building’ Phase
At Disney’s employee town hall this week, CEO Bob Iger, just over a year following his surprise return to the House of Mouse, assured his troops that a new era for the company is just around the bend.
“I had spent the year with the team fixing a lot of things,” Iger said at the virtual event. “But I feel that we’ve just emerged from a period of a lot of fixing to one of building again.”
Those comments echoed the CEO’s remarks on Disney’s most recent earnings call, during which Iger laid out his plans for carrying the company out of its current fallow period.
“As we look forward, we are focusing on four key building opportunities that will be central to our success,” he explained at the time. “And they are: achieving significant and sustained profitability in our streaming business, building ESPN into the preeminent digital sports platform, improving the output and economics of our film studios and turbocharging growth in our Experiences business.”
These are all worthy goals. But Iger’s strategies to achieve them, at least as far as he’s detailed, don’t quite get at the problems under the surface at Disney.
Judging by his comments on the earnings call, the plan is mostly to lean into what’s worked in the past: Double down (literally) on theme parks, invest heavily in ESPN, concentrate on “core brands and franchises” while reducing film output overall and reinforce Disney’s streaming bundle offering by integrating Disney+ and Hulu.
But if Iger wants to successfully rebuild Disney for the future, there are other key aspects of the company’s strategy that need attention. My thoughts on ESPN are already on record, so here are four additional opportunities, or perhaps adjustments, I’ve identified that should be central to Iger’s plans.
1. Singles and doubles
Way back in the pre-Disney Renaissance era, Michael Eisner and Jeffrey Katzenberg began their reign at the Mouse House with a mandate for the film studio to create “singles and doubles” — low-cost, high-concept movies that would have a relatively easy road to profitability.
This philosophy would likely get you thrown out of most Hollywood boardrooms these days, given the studios’ focus on IP-driven blockbusters. But a look at tentpole titles’ struggles this year shows ever larger cracks in that strategy. The much-discussed religious thriller “Sound of Freedom” managed to outgross big-budget Disney plays including “Indiana Jones and the Dial of Destiny” (budget: $295M), “Elemental” ($200M) and likely “The Marvels” ($275M) at the domestic box office.
Making every film at such a high cost places untenable pressure on every title to achieve monster-hit status. Disney has more or less exclusively been in the blockbuster business for years now, and it could benefit from not just reducing tentpole output but shifting dollars from those to some smaller projects. After all, what’s more sustainable, singles and doubles or $300 million “Indiana Jones” movies?
2. Don’t turn Disney IP into streaming series
Remember that “National Treasure” series released on Disney+ about a year ago? I thought not. That should have been a slam dunk: a series based on a popular, much-memed property with a passionate fanbase that has long awaited a subsequent franchise entry. Instead, the show was canceled after a single season.
What went wrong? The absence of franchise star Nicolas Cage was probably a factor, but this series’ failure is illustrative of a larger trend: Original content, outside of “Star Wars” and Marvel series, has struggled to break out on Disney+.
Of course, the financial return on a big-budget streaming series, even a successful one, is always going to be limited, hence my second recommendation for Disney: Stop trying to use expensive, IP-based shows to juice Disney+, and mine your library for theatrical plays instead.
A third “National Treasure” film (which, not for nothing, might have secured Cage) could very well have had a healthy box-office run in the paltry theatrical market, whereas the series struggled to stand out in the crowded streaming field. And theatrical movies with theatrical marketing campaigns have also been shown time and again to generate substantial SVOD viewership, something Iger himself noted on the recent earnings call.
“One thing that we have recently really come to appreciate is the performance of our big-title films, the so-called pay 1 window films, on the [Disney+] service,” the CEO said. “The numbers are huge. That's a differentiator for us, certainly when it comes to competing with Netflix, for instance, which is the gold standard.”
3. Games, games, games
I can’t say this enough: Iger needs to expand Disney’s presence in video games, and he needs to start yesterday.
The Mouse House has had success recently licensing its properties to outside game developers, while Iger in 2019 remarked that Disney hasn’t “been particularly good at the self-publishing side,” adding, “We’ve just decided that the best place for us to be in that space is licensing and not publishing.”
But Iger may end up regretting that play, as the gaming sector continues to grow while the film and TV business contracts. Disney will see a limited financial upside from its licensing strategy, while publishing games itself would open a lucrative new revenue stream — provided the product is successful, of course.
It would probably be unwise for Disney to try to build a games studio on its own; therefore, if there’s one last acquisition Iger should make to close out his tenure, it’s an existing game publisher. Indeed, other execs have reportedly pushed Iger to consider buying video game publisher Electronic Arts, which has a longstanding licensing deal with Disney to create and publish “Star Wars” games.
Such a purchase would come with plenty of risk, but if Iger wants to build Disney into a truly modern media conglomerate, remaining without an in-house gaming division seems like a far greater risk.
4. Focus on the customer experience
Parks have remained a bright spot for Disney amid its recent struggles, but as Iger plans to invest $60 billion in the Parks, Experiences and Products segment over the next decade, it’s worth asking, How much of that will go toward maintaining and improving the customer experience?
Under Iger’s successor/predecessor Bob Chapek, Disney grew operating income for its parks above pre-pandemic levels, and revenue reached record highs, while parkgoers spent more money per visit than ever before. These financial successes are unsurprising, as Chapek focused intently on driving profit and monetizing every aspect of the Disney park experience, raising ticket prices multiple times during his less than three-year reign.
Chapek also replaced Disney’s free line-skipping system FastPass with new Genie+ and Lightning Lane offerings, which charge guests for reduced wait times. While guests proved willing to shell out for these options, close observers of the theme park industry have argued the new systems are excessively complicated and may have actually contributed to increased wait times.
It's unclear if these experiences contributed to the slowdown in Disney parks attendance seen this summer, which seems attributable to several factors including record-breaking heat waves. But with the cost of attending Disney theme parks now higher than ever, the customer experience must be maintained at a high level to justify these prices and restart admissions growth. Iger might do well to reexamine those line-skipping offerings, for instance, to determine the most effective way to control crowd flow at the parks.
Some of these points may seem like granular concerns, but Iger should be taking a detail-oriented approach if he hopes to right the ship. The CEO obviously has a vast array of concerns as he steers Disney into the future, but he should not, to reverse the common axiom, lose sight of the trees for the forest.