Disney’s Downfall: The Rise and Fall of an Entertainment Giant
Oct 3, 2023
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Join Julia Alexander, a media strategist with Parrot Analytics, and Matthew Ball, author of 'The Metaverse,' as they dissect the unexpected decline of Disney. They explore the tumultuous shift from Disney's golden age of acquisitions and profitability to its current struggles in the streaming era. Key insights include the impact of the pandemic on viewer preferences, the challenges of adapting to digital competition, and Disney's evolving strategy towards the metaverse. Tune in for a riveting analysis of an entertainment giant's fall from grace.
Disney's remarkable run under CEO Bob Iger was fueled by their focus on sequels, franchises, blockbusters, and intellectual properties (IPs) across all elements of their business.
The entertainment industry, including Disney, faced challenges as streaming platforms grew in popularity, leading to fractured attention and a decline in quality perception.
To ensure future success, Disney should focus on leveraging their core strengths, raising the price of Disney Plus, and prioritizing creative expertise while balancing their direct-to-consumer strategy with traditional strengths like theme parks.
Deep dives
Disney's Golden Age and Bob Iger's Leadership
In the early 2000s, Disney experienced a remarkable run under CEO Bob Iger. They focused on sequels, franchises, blockbusters, and intellectual properties (IPs) as the future of the entertainment industry. With successful execution and creative excellence, Disney achieved profitability and widespread success across all elements of their business. Their theme park division and ESPN also contributed significantly to their cash flow. However, the landscape shifted with the rise of streaming, and Disney's focus shifted to direct-to-consumer business models, including the launch of Disney Plus. While there are debates about the execution of their direct-to-consumer strategy and the expansiveness of their acquisitions, Disney's future prospects lie in leveraging their scarcity and monetizing their franchises through experiences like theme parks and licensed partnerships.
Challenges Faced by Disney and the Entertainment Industry
The entertainment industry, including Disney, faced challenges as streaming platforms grew in popularity. The abundance of content led to fractured attention and a decline in quality perception. Disney's efforts to compete in the streaming space, while neglecting the traditional cable bundle, posed challenges. Additionally, the competition increased with tech giants like Google, Amazon, and Apple, which Disney cannot easily acquire. The industry also struggled with excessive content production, declining cinema scores, and increasing costs. The quantitatively driven strategy, focusing on growth and subscriber numbers, did not always align with the qualitative aspect of delivering high-quality content. The COVID pandemic accelerated the adoption of streaming services, but the underlying economics of the market remained a challenge, with many players underpricing their services and eroding profit margins.
Strategies for Disney's Future Success
To ensure future success, Disney should focus on leveraging their core strengths and catering to their dedicated fan base. They should consider raising the price of Disney Plus and emphasizing scarcity to increase revenue. The strategic licensing of content and forging partnerships with top Disney creators on platforms like YouTube can widen their reach and monetize their intellectual properties. Disney should also prioritize creative expertise and avoid overproduction of content, while recognizing that quantity does not always equate to quality. The company needs to balance its direct-to-consumer strategy with its traditional strengths, such as the theme park division. Leveraging new technologies like AI and generative content may also present opportunities for Disney's future growth and expansion.
The Challenges Faced by Disney
Disney faced structural challenges with the rise of Netflix and decline of cable TV. They also struggled with the high cost of building a direct-to-consumer business. Additionally, creative failures in producing content contributed to their decline.
Disney's Approach and the Metaverse
Disney reevaluated their strategy and focused on leveraging their parks and finite experiences. They reduced content volumes and increased prices, targeting families with children. As for the metaverse, Disney shut down its centralized metaverse division, but their long history of investments in augmented reality and virtual production continues through their product units.
Hollywood has been decimated by the rise of streaming. At Disney, Warner Bros. Discovery, Paramount, and Sony, profits on TV, film, and streaming went from $23 billion in 2013 to about zero in 2023. Nothing tells this story more clearly than a brief history of Disney. In the early 2000s, Disney under CEO Bob Iger went on one of the most extraordinary runs in modern business history. ESPN was the most valuable network in the cable bundle. They acquired Pixar, Marvel, LucasFilms, and Fox. As the company shifted to streaming, it seemed set up to lap Netflix and eat the box office at the same time. But today, Disney’s stock is at a nine-year low. Operating margins are down 75 percent. Disney+ lost $4 billion last year.
What happened to America’s greatest entertainment company? To discuss, we have two great guests: Julia Alexander, director of strategy for Parrot Analytics and a writer with Puck News, and Matthew Ball, a writer and investor and author of the book ‘The Metaverse.’
If you have questions, observations, or ideas for future episodes, email us at PlainEnglish@Spotify.com.
