Strategic Shifts To Streaming And Profits

Michael Hedges May 15, 2023 Follow on Twitter

Everybody loved the streaming video business about three years ago. Subscribers globally were are astronomical levels. Streamers by the dozen were punching out blockbusters. Investors were also starstruck, pouring buckets of money into companies some had never heard of. The fun, they thought, would never stop. Except, it always does.

After a century of leading the media/entertainment pack, the Walt Disney Company (Disney) has more work to do. The company’s quarterly financial report issued last week brought out the choir of chirping critics. “The Streaming Wars are over,” wrote Alex Sherman for CNBC (May 10). He sees the future in gaming.

Those streaming wars ignited considerable attention, certainly among media watchers, when breaking out in a timely fashion roughly corresponding to the coronavirus pandemic. The fearful and home bound signed up to multiple services to alleviate the boredom. The whole of the film and video industry swung into action to fulfill consumer demand. It was just awesome.

For those firmly affixed to the streaming service box-scores the numbers released last week caused a few palpitations. The Disney+ streaming service globally dropped four million subscribers over the previous quarter, to 157.8 million. The biggest bite came from India, apparently snagged by JioCinema’s 6 months free offer we US$12 per month thereafter. North American subscriptions fell by 300,000. To illustrate the complex relationships - and competition - among streaming providers, JioCinema now offers HBO and Discovery+ shows to its premium subscribers. Disney Hotstar, the service to India, exited its relationship last year with the Indian cricket Premiere League.

Like every other media provider in the world, cost cutting is the mantra. Otherwise shareholders would revolt, or whatever they do. Shows have been cancelled quickly on Disney+. “Going forward,” said chief financial officer Christine McCarthy, quoted by Deadline (May 10), “we intend to produce lower volumes of content in alignment with this strategic shift.” Bluntly and emphatically, chief executive Bob Iger added that the company is “getting much more surgical about what we make. When you make a lot of content, everything needs to be marketed. You’re spending a lot of money marketing things that are not going to have an impact on the bottom line, except negatively due to the marketing costs.” The Disney share price dropped, briefly, anyway.

Unimpeded is the urge to expand the streaming services. To the eager ears on the earnings call, Mr. Iger revealed that “cordial” talks with Comcast, owner of NBCUniversal, about taking full control of streaming service Hulu are underway. "I can't really say where they end up, only to say that there seems to be real value in having general entertainment combined with Disney+.” The joint operating agreement expires next year. At the end of the presumptive process, it is likely that Hulu will disappear.

Mr. Iger is also tangling with the far-right Florida state governor over Disney’s inclusiveness commitments. The Florida Department of Public Instruction has opened a format investigation against an unidentified teacher for “inappropriate conduct,” reported the Guardian (May 13). The teacher showed the animated film Strange World, which features a gay character, to students and a parent complained. The Florida governor has ranted, raved and filed lawsuits against Disney over inclusiveness. Not intimidated, Mr. Iger shot back: “Does the state want us to invest more, employ more people and pay more taxes or not?” With its resorts and theme parks, Disney is Florida’s largest private employer.

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