Bob Chapek’s Sun Valley Challenge: Define Your Vision for Disney

Bob Chapek’s Sun Valley Challenge: Define Your Vision for Disney

Walt Disney Co. CEO Bob Chapek, along with dozens of other business and political elites, is in Sun Valley, Idaho, this week for the annual Sun Valley Conference hosted by investment bank Allen & Co.

Instead of operating alongside the wood-paneled walls of the bank’s New York offices (many of which are decorated with delicate Western artwork), they gather at the foot of the Rocky Mountains to assess the situation. world and your business.

Since becoming Disney’s CEO in February 2020, Bob Chapek has been excited for the company’s 100th anniversary next year.

Chapek used the anniversary to rally troops and urge the company to build on its strengths while reinventing what it can do. He also looked to create his own vision for the company following the departure of former CEO Bob Iger (also at Sun Valley this year).

“I think our mission this year is clear: we created the foundation second and ensure Disney’s next 100 years are as successful as the first,” Chapek wrote in a Jan. 10 memo to employees.

While there were certainly obstacles in the way (I’m looking at you, Florida), Disney’s board of directors reaffirmed its support for the CEO with a new three-year deal starting July 1, 2022. And the unanimous decision was on The Chapek’s desire to plan Disney for the next century.

Tuesday’s board decision left little doubt that he was committed to his vision for the company, adding that Chapek set Disney on a path to lead the entertainment industry into the company’s next century, with a strong focus on storytelling. Brilliance, innovation and audience,” wrote Steven Cahal, an analyst at Wells Fargo, in a June 29 note.

It’s no small decision, and Chapek will have to deal with some critical business challenges as he explores new areas for Disney to invest in. The Disney CEO is mingling with the global elite this week at the annual Sun Allen & Co. Valley, this is a topic that could very well come up during a talk.

streaming

In one of Chapek’s first big moves as CEO, he reorganized the company to focus on broadcasting. He created a new division, media and entertainment distribution, headed by his deputy head, Karim Daniel, who would be responsible for profit and loss and have the final say on distribution decisions.

“Given the incredible success of Disney+ and our plans to accelerate our direct-to-consumer business, we are strategically aligning our company to more effectively support our growth strategy and increase shareholder value,” Chapek said at the time.

Disney’s streaming efforts remain its biggest bets for the future, with Disney+ surpassing 138 million subscribers, Hulu with 45.6 million and ESPN+ reaching over 22 million subscribers.

And it has a two-pronged strategy to continue its growth trajectory: add more generic entertainment to Disney+ and launch a cheaper, ad-supported tier.

“Given how poorly monetized Disney Plus is today, we think we’re seeing [advertising] As a means of accelerating revenue growth and winning business over time. However, it’s unclear how incremental this will be to additional subscriber growth,” Morgan Stanley’s Benjamin Swinburne wrote in a June 30 report. As for the overall entertainment ticket: “It could be a key variable in determining Disney’s ability to provide streaming guidance.”

But with Netflix’s subscriber base slowing and Disney poised to lose the rights to broadcast cricket matches in India next year, there are already concerns about how quickly Disney could grow in the space. The company has long estimated between 230 million and 260 million global Disney+ subscribers by the end of fiscal 2024, but cricket rights will cripple that growth.

“The loss of IPL cricket digital rights could cause more disruption than expected for subscribers in India,” added Swinburne.

As it stands, negotiations for Čapek’s next contract renewal are expected to begin in late 2024, which is conveniently in line with the company’s long-term subscriber target, although the company may choose to lower expectations and your goal in the coming months.

covid recovery

While the worst of the COVID-19 pandemic may be behind us, it continues to have a huge impact on Disney’s business. (Disney chairman Suzanne Arnold said in Chapek’s settlement update that the company “not only weathered the storm, it emerged strong”.) to handle crowds, and some international parks are still under stricter restrictions (Disney Shanghai reopened on June 30 after being closed for months).

“We believe pent-up demand is clearly playing a role in the parks’ current strength, which combined with Disney’s revenue management investments can boost business even in a modest downturn,” Swinburne wrote.

While US parks are unlikely to see closures in the future, COVID spikes could affect attendance, and closures in China, Japan or France are not out of the question.

On the cruise front, Disney this month launched its newest ship, Disney Wish, which could tap into this segment of its business.

And then there’s the company’s theatrical strategy.

While movie theaters appear to be making a comeback, mixed results for Pixar one light year Leave it to the possibility that Disney will continue to move some titles to live streaming. However, no one doubts that the future Marvel tents (Thor: love and thunder opens this weekend) and other franchises will have an exclusive window in theaters, Pixar and other Disney studio movies have yet to prove themselves or use them for Disney+ subscribers.

And, of course, it’s unclear whether this summer’s theatrical screening will continue into the fall or winter if there’s another spike in COVID cases.

The future of ESPN and LIVE SPORTS

For years, ESPN has been a staple of pay television. Its live coverage of the NFL, MLB, NBA and dozens of other sports, along with its strong studio shows, have fueled tremendous viewership growth and generated billions of dollars in annual revenue for Disney.

On the content front, ESPN has been aggressively innovating, adding multicasts produced by Peyton Manning. Monday night footballcollege golf and sports and investing in new media, such as podcasts, to strengthen relationships with sports fans.

ESPN’s television networks remain a critical part of the package and, in Chapek’s words, “a big moneymaker” for the company, but rather than reducing Disney’s profits, that money is reinvested in broadcasting. Chapek said during the recent call on earnings of the company that the company is open to launching ESPN completely direct to the consumer (“It will be the best offer for the fanatics”, he said, suggesting that there is a general scheme), but this is not the case. A launch appears imminent.

Instead, Disney adds sports to the fold through its ESPN+ service, which primarily features events not available on linear channels. The NHL deal also makes certain games available to Hulu subscribers.

For a company that is a “world leader in sports”, figuring out where sports fit into the broader broadcast ecosystem will be a critical challenge for years to come.

metaverse

A recurring theme of earnings calls and talks was Chapek’s interest in exploring the “metaverse,” the idea that the digital world and the real world can somehow connect, or that digital worlds can be so fun and engaging. as the real world. No company has supported the effort more than Meta (formerly Facebook), but Disney, which knows a thing or two about transporting people to other worlds for entertainment purposes, is actively considering the idea.

In his January memo, Chapek touted Metaverse as a “new canvas… on which to paint,” but it’s not yet clear whether that means creating virtual experiences that feel real, or upgrading the company’s theme park attractions to create even better experiences. more engaging. . A clue can be found in Chapek’s memo announcing Mike White as the executive in charge of the effort. White will report to Kareem Daniels and Josh D’Amaro; The latter manages the Disney parks and runs the business.

“While the story that defines our existence in the metaverse obviously comes from our creative teams, Mike will shape our overall vision and strategy for the consumer journey through these news universes,” Chapek wrote.

Expect more clarity in the years to come.

Is it necessary to make a “transforming agreement”?

When people talk about Bob Iger’s Disney career, they often mention the “life-changing” deals he made. Pixar Acquisition of Steve Jobs Acquisition of Marvel for just $4 billion Acquisition of Lucasfilm (owner) war of the galaxies and Indiana Jones), the purchase of Major League Baseball’s BAMTech video broadcasting division and, of course, the purchase of 21st Century Fox for $71 billion.

And while the mergers and acquisitions market has been frothy for the past couple of years (despite the pandemic), Chapek’s Disney hasn’t done much of a business, preferring to invest primarily in its own parks and streaming services. It is unlikely to continue like this. At the very least, Disney would be forced to reach an agreement with Comcast over the future of Hulu, and the cable giant could force Disney to buy its 33% stake at market value in 2024. Given Chapek’s ambitions in streaming, an advance purchase could give Disney more discretion in its plans.

“Operationally, we expected more product and marketing convergence from Hulu to Disney Plus in the US after the acquisition,” Swinburne wrote. “This includes offering Hulu content on the Disney Plus app, for example. Over time, we could see Disney moving to a single app for Disney Plus, Hulu, and ESPN Plus.

But Chapek is also critical of the company’s “franchise ecosystem” that has made Marvel a giant. war of the galaxies He is relevant in pop culture (despite the theatrical strategy) and has made films like frozen s Charm In basic household products.

Of course, Chapek and his team are looking for other IPs that might be available for the company to contribute to this ecosystem. And that could be Chapek’s permanent stamp on Disney’s legacy of content.

Sun Valley might be the ideal place to start these conversations.

Source: Hollywood Reporter

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