Disney – Streaming Developments, Ad-tier Roll-out & Leadership Changes

What’s your overview of Disney’s operating environment? Which 2-3 trends or drivers are impacting the business?

You alluded to Disney being in transition and that’s certainly been the case if we look at the leadership. Bob Iger returned to replace Bob Chapek as CEO in Q4 2022, which seemed to catch many people by surprise, while others have been calling for change following the company’s more recent results. What is your view on Iger’s return?

What would you highlight as Iger’s top priorities over the next couple of quarters? In looking at the remit over the next two years, there will certainly be a focus on succession and a future plan.

One thing Iger has highlighted since his return to Disney is prioritising streaming profits vs growing subscriber numbers, which you highlighted had historically been one of the major priorities. How do you expect this to play out in terms of the company strategy?

What other levers can Disney pull to prioritise profits? You mentioned this idea of deepening the engagement model, but in terms of the other areas, do you think it will translate to cuts in content spend, marketing or customer acquisition efforts? How might the company try to drive engagement and grow its audience, but also be a bit more cost-conscious?

You highlighted Disney's relationship with Hulu and the dynamic, of course, where Comcast still has a minority ownership. What is the likelihood of Disney taking the option to buy Hulu outright in 2024?

In looking at this idea of building an expanded catalogue and suite for the future, potentially having Hulu integrated with Disney+, what does that look like for the next two years? You could argue that if Disney plans to invest in Hulu for the next 1-2 years and the company decides to buy it outright, this will ultimately drive up the cost it has to pay to Comcast in 2024. On the flip side, by not investing in it, there won’t be any major changes with the Hulu platform. As you mentioned, although it has been successful with its ad-supported offering and the technology behind that, it is also an older system and certain areas could be upgraded.

How exactly do you see Hulu sitting with Disney’s overall audience and content approach in the longer term? Disney has a variety of franchises and a legacy of more family-friendly content. Hulu is aiming a bit more towards adult audiences, but Disney+ is also starting to expand its offering to include more R-rated content. How might the company approach the content strategy for both properties? What could it look like if combined?

Could you elaborate on ESPN being a major area or decision that needs to be made for Disney’s strategy? What is the importance of ESPN to Disney? There was a suggestion of divesting ESPN in August 2022. What are your thoughts here?

Another aspect that was highlighted when Iger came back as CEO was the ballooning cost of the D2C segment at Disney, at almost USD 1.5bn in Q4 2022. Considering the cost for something like ESPN+ and the rising cost for content, do you think there might be a little more pressure in terms of the ability for Iger and Disney to build out ESPN+ and add properties and streaming rights, or also to keep it part of the bundle? It is also the smallest audience base in relation to Disney+ and Hulu.

What do you make of the recent news of a looming proxy fight with an activist investor looking to join the board? One point seems to be that a lot of Disney’s current problems are related to the pivot to streaming and while those are not unique to the company, there are also issues stemming from actions Disney has individually made. Do you think it’s fair criticism of how the company has made this pivot?

What are your thoughts on the move towards ad tiers? Disney+ Basic launched in December 2022 and we’re seeing a proliferation of ad-supported tiers across the industry – Netflix rolled out its Basic with Ads tier in November 2022. What is your assessment of Disney’s launch so far?

Disney has a wealth of experience with ads on Hulu. How much of an advantage do you think the company’s legacy experience offers over Netflix figuring it out as it goes? What does this translate to in terms of implementation and having an effective platform?

Netflix’s ad tier is targeting 40 million subscribers by Q3 2023. What are your expectations for the company’s ability to deliver on that subscriber growth?

What do you make of the streaming landscape overall given the discussion about potential impact from a recession and consumers tightening budgets for entertainment, streaming and the number of sites or platforms they are willing to pay for? How might things evolve over the next couple of quarters?

What is your assessment of a player such as Warner Bros Discovery with HBO and Discovery+? Could you comment on the company’s positioning and efforts to be among the streaming platforms typically chosen by consumers?

What are your expectations for the smaller platforms? You highlight some potential risk, but a player such as Peacock is part of NBCUniversal and Comcast, so it has a large body supporting it. Peacock also has an ad-supported tier already. Why do you pull it out as a platform that could be part of consolidation or is on shaky footing for the next 12 months?

Paramount has seen some subscriber growth with Paramount+. The company also has Showtime and a couple of other properties – certainly a strong IP background given the successes of films such as Top Gun Maverick in 2022. What are your thoughts about its positioning and ability to drive near-term subscriber growth?

Netflix has been very vocal about its efforts to crack down on password sharing and rolled out steps in certain markets. What are your thoughts on the ability of platforms to do this? How might Disney approach this?

What are your thoughts about who Disney may be looking towards for its next CEO? Do you think the company is primarily looking at internal candidates? What chief characteristics might be focused on?

We’ve discussed dynamics such as the ad tier roll-out and overall macroeconomic environment, but what are your expectations for subscriber growth in 2023?

How important is Disney’s international presence to growing its subscribers? What is your assessment of the roll-out so far across Disney+ in various markets?

You mentioned an issue around the rights for what is on Hulu and how currently that is all in the US. How much of a hurdle is that to become part of the global offering? Is that not much of a near-term priority, considering the transitory period Disney is in? How much of a challenge is that?

How might Disney approach its content spend, especially given the audiences that have proven successful and the backdrop of needing to see cost reductions under Bob Iger’s tenure? What are priorities for potential projects being approved?

What do you see as the biggest risk or opportunity for Disney in the next 1-3 years?

What benchmarks or indicators should we look towards to see if Disney’s streaming strategy is landing? Are these primarily continuing on subscriber growth metrics, or more along the lines of seeing improvements in fundamental financial performance?