Walt Disney Co.’s story has a lot of moving parts these days, but perhaps none more critical than problems with the company’s “lifeblood.”
Content is what sustains Disney’s
DIS,
empire, but the company is struggling to find hits these days amid “sputtering” performance for recent releases, note LightShed Partners analysts led by Richard Greenfield. In fact, depending on the performance of animated film “Wish” later in 2023, the company might not have a movie this calendar year that hits $1 billion at the global box office.
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“Fixing the content is much easier said than done and takes time, which is likely only to be extended by the current WGA strike hampering Hollywood production,” the LightShed analysts wrote. That said, they see a few potential fixes for Disney.
In their view, the company should consider whether it’s pumping out too much content within its top franchises to the point of overwhelming viewers, like when “‘Who Wants to be a Millionaire’ went from weekly to daily and the oversaturation destroyed the ABC show.”
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“The challenge with fixing oversaturation is that it would mean cutting back on high budget productions that are already in various stages of development for release over the next 2-3 years,” they wrote. “It may be the right decision but it would be painful.”
On a related note, they question whether the company should scale back on connected content.
“Disney has worked hard to weave character and storylines through movie and TV shows,” the analysts wrote. “While that has excited existing fans of the Marvel and Star Wars franchises, it creates a growing barrier to entry for new fans as there is so much content that needs to be consumed to fully understand a new series or movie.”
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They wondered whether Disney should focus more, instead, on creating new intellectual property, flagging that “when you see live-action versions of ‘Little Mermaid’ and ‘Aladdin,’ you start to wonder whether Disney is stretching its franchises too far and diluting the value of the core franchises themselves.”
The LightShed team said they think one possible answer to Disney’s current woes is simply to give the business more time, since there’s no obvious acquisition the company can make to turn things around quickly. But such a wait could be painful, especially since Disney depends on theatrical success to drive interest in other areas of its empire, such as consumer products.
“This past year’s film and streaming miscues have already pressured profits and that pressure will likely continue into fiscal 2024,” the analysts noted.
Strategically, they said it seems ever more likely that Disney will have the option to start fully integrating Hulu into Disney+ given the increasing odds that the company will buy out Comcast Corp.’s
CMCSA,
stake in the service early next year.
That brings some dilemmas that Disney will have to weigh, however, as “a vertical silo called Hulu feels confusing, as Hulu has been a streaming platform, not an IP brand like Disney or Marvel.” But at the same time, Disney may worry about the optics of putting more mature content alongside beloved films like “Moana.”
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If the company doesn’t want to do a full integration, perhaps it should do a reevaluation of what Disney+ should be, according to the analysts. They floated a concept of Disney+ in which the service acts as a “vault” for past Disney content, like owning a library of DVDs back in the day.
“In this approach, Disney+ would be where all Disney+ content ends its life, but never where it starts its life,” the analysts said. “Movies would go to theaters and then maybe an output deal on Netflix or even offering the next Star Wars series to Max or Prime Video. After an initial licensing window, all content ends up on Disney+, where it lives forever and becomes a must-subscribe for families with young kids and Disney franchise superfans.”
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