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CEO reiterates that the company is weighing the Hulu decision in a “very, very difficult environment.”
Disney CEO Bob Iger just over three months ago spoke about major organizational changes he’s made at the company — and his optimism in making streaming, particularly Disney+, a profitable part of the empire.
“I’m generally optimistic about streaming as a great consumer proposition and a really robust platform for delivering quality content,” Iger said Thursday at the 2023 Morgan Stanley Technology, Media and Telecom Conference in San Francisco. He later said, “Eventually I think everything will migrate to streaming,” including (as he previously said) ESPN as a direct-to-consumer offering.
But, Iger said, “we need to rationalize our costs better” and “obviously we need to attract more subscribers.” In addition, Disney + needs a “reasonable pricing strategy”.
“In our rush to grow global subscribers, I think we were wrong in terms of our pricing strategy, and we’re now starting to learn more about it and adjust accordingly.” Iger also said that Disney overall is having a “pause” between editions for content and its monetization – and that the company needs to be “more thoughtful” about investing in content as production costs have skyrocketed.
Regarding Hulu’s fate, Iger reiterated that the company is still evaluating whether Disney will attempt to buy up Comcast’s 33% stake in Hulu or whether it will attempt to exit the streamer. “We study the business really, really carefully,” he said. He called Hulu “a solid platform” with strong original programming and library content that’s also a very attractive platform for advertisers. “But the environment is very, very difficult right now and before we make any big decisions about our investment levels and commitment to this business, we want to understand where things might be going,” Iger said.
Iger, previously Disney’s CEO from 2005 to 2020, returned as interim CEO of Mouse House after Bob Chapek’s ouster last November. At the Morgan-Stanley conference, Iger said, “Succession is high on the list between me and the board.”
“My goal is basically to leave here in two years with a career… that’s very optimistic and positive,” Iger said.
In one of Iger’s biggest moves since his return, Disney said last month it would cut 7,000 jobs in a mass layoff as part of a $5.5 billion effort to cut costs. Disney is targeting a $3 billion annual reduction in non-sports content costs. Iger said that the goal is “achievable” albeit “not immediately” and that “the support from the content side of our business is real and we will deliver it”.
Also last month, Iger reorganized the company into three core business segments — Disney Entertainment, led by co-chairs Dana Walden and Alan Bergman; ESPN, led by Jimmy Pitaro; Disney Parks, Experiences and Products, led by Josh D’Amaro – Dissolution of former Disney Media & Entertainment Distribution (DMED) division. The goal of the reorganization, Iger said in a statement, is to “bring creativity back to the heart of the company.”
“The company was restructured after I stepped down as CEO to essentially create one huge, revenue-generating division… [and] It was completely separate from the content side, where all the money was spent,” Iger said Thursday. “I happen to think there has to be a direct link between what is spent and what is earned. It’s about accountability.”
Disney’s previous organizational structure also resulted in a split on the marketing side, according to Iger. “We’ve been spending too much on marketing platforms and not enough marketing the programs on the platforms, and I think that may have had a negative impact on our sub-growth,” he said. Iger also said Disney has a discrepancy between the programs it produces for international markets and the US; as part of the reorganization, rebecca campbell, president, international content and operations, left the company.
Iger has previously stressed that the media conglomerate is focused on streaming profitability — signaling a retreat from Chapek’s heavy investments in content and its quest to gain subscribers. In the last three months of 2022, Disney+ lost 2.4 million subscribers, its first drop since launch in late 2019, driven by a sequential drop of 3.8 million at Disney+ Hotstar, the version of the service served in India and Parts of Southeast Asia is offered. At the end of 2022, Disney+ had 161.8 million subscribers.
Under Iger’s leadership, Disney is re-evaluating window and exclusivity strategies. “I think we already realize that the exclusivity that we thought would be so valuable is growing [streaming] subs, while it has some value, wasn’t as valuable as we thought it was,” Iger said. “And content can actually exist quite well on the traditional platform and on the streaming platform without harming either one because a very, very large audience is actually consuming it [on] those platforms.” He noted that the average age of the audience for “Abbott Elementary” on ABC is about 30 years older than on Hulu, “so why not watch them live on both?”