Disney CEO Bob Chapek called Disney+ a “lifestyle portal for Disney fandom” and streams the connection to a “reengineered” company that would never have survived and thrived for a century had it not taken bold swings.
A question and answer at the Paley Center for Media’s International Council Summit in New York called “The Walt Disney Company: The Next 100 Years” took place as Disney shares fell. The selloff followed the release of quarterly earnings yesterday that showed heavy losses from streaming, as Wall Street now looks for the opposite.
“Considering our three-year journey, we’re very pleased with where we’re finding Disney+, going from nothing to over 160 million households, but at the same time we recognize that there’s a growing desire from our investor base to make sure there’s someone there. it comes out of it,” Chapek said. And there is one, he promised. Prices started low and can increase, which increases average revenue per user and costs are manageable. An AVOD service is on the way. “Remember we’ve only been in this for three years,” he said. “We’re looking to make Disney+ all that it can be, but at the same time know that in the shorter term our investors expect us to have a return on investment.”
When the company came out of Covid, the company had to deal with a lack of new content, which was challenging, but also limited expenses, the CEO reasoned. “Now it’s as if the floodgates have opened and all the contents are swarming towards us. The good news is that we have a lot of great content and it builds a lot of subs for us. The bad new is that all those costs that had been greenlit years ago are finally coming through the gate, and it’s hitting us all at once. We hope to get that normalized very, very quickly.” The company has predicted profitability in streaming by the end of fiscal 2024.
The advent of streaming, Chapek said, has changed the nature of programming. “People don’t think of the streaming business as programming, but it’s just as much programming because you have to see subscriptions, you have to see churn, you have to see engagement. And each type of content responds differently to all these levers.”
“Essentially, we treated streaming — when we got into it, because we didn’t really know — much like the legacy media channels. If you had a movie, it was treated as theatrical. And something episodic was treated as TV. But what was taught is that it is its own thing.” Now the big promise is to “rationalize and optimize and learn from all that data and then try to cycle that back into what ultimately gets made.”
“It’s no longer about what happens that comes down the pipeline and where we’re going to put it. That was the first two years. Now it is what is to be made that will enter the pipeline in three years. We haven’t even touched the benefit of it. But it will come.”
It is tied to a series of initiatives that tie streaming to Disney parks and products, linked with a vast amount of data and customer information. The goal is to create a lifestyle brand of the future, including “next generation” storytelling, the executive told the crowd in Midtown Manhattan. A push “has really been going on for the last year or two” at the Disney technology group. It is working on a set of “custom and personalized” tools, optimized by engineers and designers, to be delivered to executives such as the heads of Lucasfilm, Marvel and Disney. “They want to put those tools in the hands of Kathleen Kennedys and Kevin Feiges and Dana Waldens to really create that next level of storytelling that’s unique to you.”
On the film front, Chapek reiterated his long-standing opinion that theatrical is a safe zone for tentpoles and blockbusters, but “beyond that it gets a little more sketchy … I think the other genres, the other demographics are a little more challenged and the question of do they want some time to come back in a significant way is, I think, to be seen.” Streaming provides flexibility. “If they come back, we’d be more than happy to go back to theaters because we’ve had a long and successful history of playing in more than one revenue stream. But if not, the good news is that we now have a very big streaming business.”
Chapek, who became CEO in early 2020 and has spent more than three decades at the company, had a metaphor for managing the company’s portfolio in the current landscape. “I liken it to a manual car,” he said, switching between the accelerator, brake and clutch.
The focus, he said, must be “customer lifetime value.” More than its media peers, Disney is able to look well beyond film, television and digital media to increase this customer value. On the drawing board, for example, is a new planned community outside Palm Springs for Disney fans 55 and older, also known as “those who want to live the next chapter of their lives the Disney way.”
Chapek defended new pricing and reservation systems in theme parks developed during Covid while they were closed. They have helped manage attendance and improve the guest experience, but also created some controversy. The old systems were antiquated “and treated everyone as one size fits all … We would wear that as a badge of courage,” he said. “The one thing that was clear is that people don’t want to be treated the same way,” he said. Some customers are on a budget, others want a more “tailored” experience.
He said virtual theme park visits are unlikely, even with the burgeoning metaverse. But some behind the scenes are possible. “People like to get off attractions and see exactly how these ghosts in the Haunted Mansion work. [They] say, ‘I want to check it out. That’s usually why the rides stop … We can give you that opportunity, to virtually leave the theme park and find out what makes it tick.”
So, when you watch Disney+, The Haunted Mansion the film will be served as your first choice, not buried on page four.”
On a personal note, Chapek, soft-spoken and collected in public appearances, got a little emotional when recalling the Covid shutdown — of parks and all — just a few weeks into his tenure as Disney chief. He had operated parks for many years before and said the worst preparedness until then had been to shut down for a few days during a hurricane, and even that had been “almost unthinkable”.