Where is Disney heading next?

Over the last year Disney has  been making drastic changes as it adjust its business model. Following a restructure in management, a series of staff cuts and increased focus on content, Bob Iger has secured himself two more years as chief executive officer at the Walt Disney Company. Moving forward, the industry’s move to streaming is at the forefront of his mind, with the future of the company’s linear TV business including ABC, FX and Nat Geo and  ESPN, now under review.

Speaking to CNBC, Iger said on that returning to the company as CEO following Bob Chapek’s depature, he found the business was “facing a lot of challenges, some of them self-inflicted.”

He went on to say that Disney is being “open-minded and strategic about the future of those businesses”, with private equity firms – some of which are already invested in local linear operations in the US – providing one potential group of buyers.

“They may not be core to Disney. There is clearly creativity and content they create that is core to Disney, but the distribution model and the business model that forms the underpinning of that business – and that has delivered great profits over the years – is definitely broken.”

Iger comments signify for Disney the future is streaming and might be closer than ever, with its linear television business proving to be more of a Iiability than an asset to the company.

Omdia principal analyst Sarah Henschel tells DTVE, “Right now Disney and the studio-led streaming services are really focusing on profitability. We see them closing unprofitable businesses, adding advertising tiers, and dropping unpopular licensed content to save on spending. I think Iger extended his tenure as CEO because coming tides of profitability for Disney+ (and all streaming) are quite high.”

She adds, “Many streaming services are experiencing their highest losses this year due to how expensive streaming and content investments are. Iger needs to stay on longer to show Wall Street that he will bring these services to profitability before hiring a new CEO.

Asia Market

Questions over Disney’s streaming-focused strategy has been in evidence across its markets in Asia, with reports of with reports of the sale of its Indian TV and streaming business, or a search for a joint-venture partner to take a stake. It comes as Disney shuttered its remaining networks in South East Asia, Hong Kong

According to the US trade Wall Street Journal, which first broke on the news on the potential sale, Disney’s move to sell is current at a nascent stage, with no buyer yet found, but the company has approached at least one bank to advise on ways to make the Indian business grow.

Tim Westcott, Omdia Senior Principal Analyst comments “Disney already closed a lot of its linear channels, when it rolled out Disney+ so it would be consistent if it continued that strategy. For some types of channels, especially children’s, the audience is more prone to on demand and does not have the legacy habit of watching linear TV like older age groups. But it’s still the case that broadband infrastructure in some markets is too weak to support online.”

He adds that with the company drawing back from the linear television market, it raises the question of wheather Disney will follow its peers such as Paramount into the FAST market, where it has “so far it’s been very inactive.”

However, Disney’s focus on streaming might be premature for all of its markets, most importantly in regions where linear still has a strong presence and streaming has not become so dominant as in the West

Disney has also been under increasing competitive pressure in India since Reliance Industries-owned Viacom18 deprived it of the rights to Indian Premier League cricket, the biggest sporting tournament in the sub-continent, and decided to make the latter free to view on its JioCinema streaming platform.

Disney owns the Disney+ Hotstar streaming platform and TV and production outfit Disney Star, inherited from its acquisition of the media assets of 21^st Century Fox.

Henschel points out, “Losing IPL rights was a big loss to Hotstar in Asia. Selling off the service or bringing in a JV with more content will bring greater streaming and advertising revenue to the portfolio.”

Distribution deals

What does seem to be performing well for the Disney is its partnerships and distribution deals. Disney and Hulu Japan rallied together to launch a new bundle offering which pairs the respective streaming services in Japan in a new bundle. The offering is an extension of a strategic partnership between Disney Japan and Nippon Television Holdings which was announced last year. It follows Disney’s distribution agreement with UK broadcaster Channel 4 to acquire the streaming rights of 10 Disney titles.

These deals mark out a more nuanced approach of combining direct-to-consumer with licensing to third parties to maximise revenues.

Overall, Iger and Disney’s main priority amidst a global recession is the shedding of any loss-making activities and for the company that right now that likely means the linear division.