“You should watch backstage,” actor Diego Luna told a D23 Expo audience on Saturday morning, while speaking about his new Disney+-branded “Star Wars” series “Andor” in front of the 5,000 loyal fans who thronged the Anaheim Convention Center.
The grouping of names in bold that were rolled out at the three-day Disney fan event for a wave and short chat about upcoming projects was a visual representation of the breadth of content the studio is producing these days. The list included Harrison Ford, Angela Bassett, Julia Louis-Dreyfus, Phoebe Waller-Bridge, Paul Rudd, Brie Larson, Tom Hiddleston, Don Cheadle, Owen Wilson, Zoe Saldana, Giancarlo Esposito, Christian Slater, Pedro Pascal, Gael Garcia Bernal, Anthony Ramos and more .
The star power on screen was impressive and so was the brand power that Disney showcased at D23 by releasing dozens of trailers, teasers and first looks at Disney+-related content and cinemas next year. The quick delivery of the “Coming Soon” messages was music to the ears of Disney CEO Bob Chapek, who was telling investors and others that Disney+ hadn’t yet fully strung out content delivery due to pandemic disruptions.
That will change by next year, meaning that Disney and Chapek will be under increasing pressure to assess the return on the billions of dollars invested in Disney+ to date. On the heels of a two-and-a-half hour show of firepower from Marvel Studios, Lucasfilm, and 20th Century Studios, a tangle with diverse Associate Editor-in-Chief Cynthia Littleton on the state of Disney’s direct-to-consumer transition, ESPN’s future in the larger Disney world and how the company is dealing with increased scrutiny from activist investors like Dan Loeb of Third Point.
You said we haven’t really seen Disney+ release on all discs yet. With all the content revealed in the past two days at D23 Expo, is the volume planned for 2023 about where you want to be?
When we launched in 2019, we had no idea the Disney+ audience’s appetite for new content. We underestimated what was to become the new steady state. I think that realization came during the first year, and it came at a time when we were quite restricted about providing new content, because everything has come to a halt because of COVID. So the only thing we could do with the little we had at the time was to reuse the content that was originally thought for theaters and bring it to Disney+, and after all, the theaters shut down. But then we came to the realization that in order to have a full expression of Disney for our audience, and satisfy all the demands that they had, we had to create the two distribution channels, we had to create the theaters, and we had to create it for Disney plus. This means we need content more than ever. …now that’s realizing it. Now these are not just title slides at the investor conference, but their embodiment. Shows were written, cast, produced, and debuted. This is the real realization of that.
What have I learned during the past three years of Disney+’s operation in terms of the relationship between new content and new subscribers who sign in. Can you draw a line between the launch of the show and the joining of new subscribers in Week 1, Week 2, Week 3? How do you calculate ROI on individual titles in a subscription environment?
We do it in a very thoughtful and very thoughtful way. This is the mission of the new Disney Media and Entertainment Distribution. When we announced DMED people were thinking, What is this? It is a distribution of the new modern world of entertainment where you have to plan not only what comes into the system in terms of new types of storytelling, and how much, but also where to go, when to go and how things are going. And that is basically the mission of this new distribution organisation.
What are your key metrics for rating Disney+ content?
We have more metrics, with Disney+ and our streaming companies measuring how much and when people are consuming more than ever. This provides a feedback loop on how much content we need. And remember, we’re only in this less than three years. We haven’t even done three years in the live broadcast business. But our evolution has grown exponentially in terms of knowing how to program this work. You know, we’ve been in the broadcast business forever. We’ve been in theatrical work forever. This is what we fully understand. With the flow, we’ve been wearing our navy legs for the first few years. Now with COVID in the rearview mirror, we’ve come to the full expression. We are now able to plan what our full expression of the play is and how much we want? How much do we need? What is our full expression for broadcast? How much do we want? How much do we need? And what is our full expression of our streaming services? How much do we want? How much do we need? Then if you’re a genius like (Marvel head of studios) Kevin Feige, how do you relate the content that goes into each of those with the myths? There is an inextricable connection not only with legends, but with distribution platforms so that (release) timing is critical. It all has to be puzzle pieces that fit together. This is the mission of this distribution organization.
Disney is facing calls from some prominent investors to turn things around more. Investor Dan Loeb of Third Point has invited you to sell or break up ESPN and devote more resources to streaming content. He’s not the only one who sees sports becoming a far cry from Disney due to the unprecedented range of entertainment content it is now producing. What do you say to those strategic suggestions?
Disney in the next 100 years will be more extensive than Disney in the first 100 years. The brand’s flexibility is amazing – the capital of D Disney. Every component of our company – whether it’s Marvel, Lucasfilm, Pixar, ESPN or ABC – has their own identity. But they all play into a more holistic view of what Disney is. The ultimate arbiter of what Disney can and cannot be is the fan, the viewer, and the guest. They are the final judge. Now, you can look at this from two different ways, from a guest’s point of view or from a business point of view or a shareholder’s point of view. Does this really make sense? And I think in Dan’s case he was asking the question more, is this the right business mix for the company? Our investors only know what we have shared with them so far. They don’t really know what our plans are for the future. We have very ambitious plans for the sport. Nearly 95 of the last year’s top 100 (most watched) shows on TV were live sports. So if you’re in advertising, if you’re in the business of talking to people, that’s a big deal.
Feel confident that ad and referral fees will keep ESPN healthy even as sports rights continue to rise?
Advertising demand on ESPN speaks volumes. But what also speaks volumes is that when word came out on the street that Disney would probably be kicked out of ESPN, we had at least 100 inquiries from people who wanted to buy it. What does that tell you? This says we have something really good. And if you have a strategic plan, and a vision of where it fits into the company over the next 100 years, you don’t want to get rid of it completely. And we have that plan. We did not share that plan.
Do you have a timeline to share this plan?
We haven’t revealed yet… We’ll, at some point, have another investor day. And we will have a brighter expression not only of that, but a brighter expression of our ambitions for membership.
Can you give me a working example of how ESPN and ESPN+ collaborate with Disney and Disney+ – how do all of these entities benefit from being under one roof?
Today this value is expressed by a package. And as you know, the package offers tremendous value and benefits to the consumer. But it also delivers tremendous value and benefits to our shareholders because the rate of change is very low. You know the term soft package and hard package, right? The soft package is, hey, the purchase of all three services at a low price for X. The hard package is when things go smooth and frictionless. Now, if you want to go from Hulu to ESPN+ to Disney+, you have to checkout from one app to another. In the future, we may have less friction (smiles).
You also have a lot going on right now with Hulu. The service is approaching an amazing year with original content, but the bigger question remains how Hulu fits into Disney’s fledgling package?
Well, the first request we received from Disney plus subscribers is for more general entertainment. We still have plenty of leeway to go from Marvel fans who haven’t signed up yet. Lucasfilm fans have plenty of leeway, and Pixar has plenty of leeway. But the first opportunity we have is to add more public entertainment. When people watched Dumbo with their kids and put them to bed, and now it’s 7:30 – those same people might not want to watch Bambi, right? They want to see something else, something that is still Disney’s “D” capital. And the flexibility of that is much broader than we would have imagined, as shown by our experience in Europe, on Disney+, where we have a lot of public entertainment on (the platform). The appetite for public entertainment is enormous. We have a lot of public entertainment content within The Walt Disney Company, and we don’t have the full ability to use it due to the complex ownership situation we’re facing (on Hulu), at least for the next 16 months.
To that end, there is an agreement in place for you to buy Comcast’s remaining 33% stake in Hulu by 2024. Are there any talks underway now to speed up the acquisition timeline?
It is possible. But this depends on the inclination of the other partner to be ready for discussions that will come to fruition early. We will be fully prepared to do so.
Are you in active negotiations now?
We have been in discussions for a long time. This is not a new idea. There were continuous and sporadic conversations for a long time.
I have a lot of questions but our time is tight. Let’s wrap up the department of parks closest to your heart, where you led the department before you were promoted to CEO in February 2020. We’ve heard a lot from consumers about changes to the Disney parks annual pass holders program. This is clearly not what you want to hear. What is your solution?
We like to make sure we cater to all of our guests, and we absolutely love our fans. The balancing factor is that you also want to cater to the family from Topeka, KS that shows up with their family of four. And they want to be able to enter the park and experience the magic of Disney once every five years. We have to make sure we have space in the garden to meet their needs as well. So it is a balanced business. And since the demand for our parks exceeds our ability, in a quality way, to deliver that experience because the demand is so much higher than our supply, we need to provide balancing factors over time to make sure that we not only meet the needs of the discerning fans, but the needs of the fans that can only come Once every five years from a far place.
This is the definition of a high degree problem. thanks for your time.
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