March 1, 2021
Walt Disney Co. CEO Bob Chapek has seen the direct-to-consumer future and he’s not looking back. Speaking March 1 on the virtual Morgan Stanley Technology, Media and Telecommunications Conference, Chapek said that while Walt Disney Studios embraces the theatrical market, consumer reality — with or without the pandemic — has altered the playing field.
“I think the consumer is probably more impatient than they’ve ever been before because now they’ve had the luxury of an entire year of getting [movies] at home pretty much when they want them,” Chapek said. “I’m not sure there’s a going back, but we certainly don’t want to cut the legs off a theatrical exhibition run.”
The executive doubts consumers will have much tolerance for the traditional theatrical window keeping a movie out of the marketplace for months with another distribution model “just sitting there getting dust.”
On March 5, Disney will offer Raya and the Last Dragon to consumers via Premier Access, only the second Disney title since Mulan afforded the more-expensive PVOD retail distribution model.
“It makes a lot of sense right now in a COVID world to have [another] option,” Chapek said. “Theaters are not going to be 100% back. It’s nice to know that people have that choice. But we like to let the consumer be our guide in almost all situations.”
Disney survived a calamitous 2020 — a year that saw the company’s legacy parks and amusements, cruise business and studio shuttered overnight a year ago due to the pandemic. Switching gears, the company focused on streaming video, specifically Disney+, Hulu (Hulu+Live TV) and ESPN+, ending last year with upwards of 150 million combined subscribers when excluding India.
“We essentially had to make a decision: Are we going to stay the course? Are we going to slow down investment and reserve cash? As you know, we stepped on the throttle pretty heavily and accelerated, figuring this was the time to make a giant leap forward,” Chapek said.
The former home entertainment executive contends Disney’s addressable DTC market is 1.1 billion people. As a result, he said the company chose investing “dramatically” in content and restructuring the company to better deal with the direct-to-consumer challenges in the pandemic era and beyond.
When asked about Disney’s move toward engaging consumers directly rather than through retail, Chapek said the company is well-versed with the strategy from its amusement and hospitality businesses. He said that unlike those legacy businesses, direct-to-consumer affords increased “frequency of engagement” and number of touch points.
“There’s an exponential benefit when you take the deep knowledge of our parks guest and … the direct-to-consumer, and put it all together by technology,” he said.
The executive said management has been surprised by the global appeal of Disney+, especially among non-families. Indeed, 50% of Disney+ subs worldwide do not have children, which he said opens up the possibility for more-expansive content offerings.
“That’s a big difference,” Chapek said.
He dismissed suggestions about a streaming war with Netflix, Amazon Prime Video, HBO Max and Peacock, saying there doesn’t have to one winner, but rather several.
“We think we’re tremendously positioned for DTC services,” Chapek said, alluding to the company’s planned $8 billion to $9 billion in streaming video investment through 2024. Disney unveiled 100 new titles at its recent investor day event in December.
Disney earned $11 billion at the global box office in 2019, which Chapek said remains “a big deal to us.” Notably, the CEO finds “more profound” the changes in consumer behavior towards movie consumption. To meet the rapidly evolving changes, Chapek said Disney has to be a “a nimble organization,” while acknowledging that the “sands under our feet” are shifting.
“Consumer behavior is shifting,” he said. “Consumer preferences are shifting. We want to make sure that as that happens, we are on the front of those waves, anticipating those changes.”