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Bob Chapek is pivoting toward profitability, even as he continues to prepare The Walt Disney Co. for an uncertain digital future.
With shares in the company falling on Wednesday after it missed Wall Street estimates (but added more Disney+ subscribers than anticipated), Chapek took the stage at the Paley Center for Media in New York, where he addressed the company’s most significant near-term maneuvering: Making Disney+, and streaming generally, into a profitable business.
“There is an increasing desire by our investor base to make sure there is something there, there, to get something out of it,” Chapek said, adding that while the company is investing long-term in Disney+ to make it “the hub” of the Disney lifestyle, in “the shorter term, our investors expect us to have a return on that investment.”
He also reiterated what he told analysts Tuesday afternoon, noting that price increases and the upcoming Disney+ ad tier will help bring the company closer toward its goal, and that the service should be able to continue adding subscribers thanks to its content pipeline and new international launches.
He was particularly bullish on advertising, noting that “we have been in the ad business a long, long time, we know what we are doing, we have established clientele, we believe we can win,” and adding that in a “recessionary environment,” more “price-sensitive” consumers could opt for ad-supported plans.
But Chapek was more cautious with regard to another of Disney’s core businesses: Theatrical films.
When asked if theatrical films are poised for a comeback, Chapek replied that “it’s hard to have an answer yet, but from our observation the tentpole, big, blockbuster films are certainly back. Beyond that it gets sketchy.”
“That’s good for us, by the way, because most of our box office films are those blockbusters, and whether they’re Lucas and Marvel and Pixar or Disney that’s where we play,” he said. “The other genres, the other demographics are a bit more challenged. And the question of will they ever come back in a in a significant way, is, I think, to be seen, and that’s why one of our distribution strategies is always flexibility.”
“If they come back, we will be more than glad to go back to theaters because we’ve had a long successful history of playing in more than one revenue stream, but if it doesn’t, the good news is we’ve now got a very large streaming business that we can go ahead and redirect that content towards those channels,” he added.
Chapek also, however, painted a picture of Disney’s future.
“More and more we look at Disney as what it is already recognized as being to the consumer: A lifestyle brand,” he said, mentioning Disney’s upcoming adult community in Palm Springs, targeting consumers that “have more time and discretionary spend.”
And he framed Disney+ as the “hub” of the lifestyle, once that will change and evolve “based on how you participate.”
And that personalization appears to be a centerpiece of Disney’s “next generation storytelling” division, which is developing a “set of tools” that will be used by Disney’s studios to create personalized content experiences.
Disney wants to “put these tools in the hands of the Kathy Kennedys and the Kevin Feiges and Dana Waldens and help them really create that next level of storytelling, that is unique to you,” Chapek said.
But he was a little more bearish on the metaverse, or at least the vision seemingly preferred by Meta Platforms Inc.
“I don’t think you will ever be able to have a substitute for the theme park experience,” he said, noting that a day-long experience with food, shopping and live experiences is unlikely to be replicated in a virtual environment.
He did, however, offer one potential example of how Disney could play in the space.
He noted that guests sometimes decide to get off Disney World and Disneyland rides during the attraction, spurring closures or delays.
“Through the magic of technology, we can give you the ability to exit your ride vehicle virtually … And see what makes the Haunted Mansion tick,” he said, adding that a user could then be served the new Haunted Mansion movie on Disney+.
It’s all part of a strategy to keep Disney relevant, as it gets ready to kick off its 100th anniversary in 2023.
“If we only rigidly adhere to that old model, we know what’s going to happen, right? You become extinct,” Chapek said. “And so our challenge inside Disney is always trying to respect the past, keep as much of the past as you can. But when the consumer is telling you, it’s time to move on to something new and fresh. You have to take that cue.”
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