Disney – Streaming love

LUSEM Consulting Group

Lund University School of Economics and Management
Ella Zhao, Hanna Rasmusson, Samuel Spjuth & Erik Mansson
1/11/2019
Presenting to:
The Board and Management Team of Disney
 Disney – Streaming love

Situation Analysis Alternatives Recommendation Implementation Financials Risks Conclusion

The customer is already in love with you, it’s
time you fall in love with your customers
The recommendation in short

Build a streaming
ecosystem to Create proactive Customer centric
engage with timeless content internal organization
customers

Getting to know your customer base and leverage within

Agenda

Situation

Analysis

Alternatives

Recommendation

Implementation

Financials

Risks

Conclusion
 Where do we start?

Timeless magical experiences

Multi brand
$55,1 billion Ongoing
Heritage corporation
revenue acquisition
since 1923 with skilled
(2017) of Fox
artists

Situation Analysis Alternatives Recommendation Implementation Financials Risks Conclusion

 The current challenges for Disney ahead

Leverage Internal
Face the OTT
streaming Costumer insight organization post
competition
synergies acquisition
• Strong • How to use size • Get to know the • Cultural
competition in to leverage customer base integration
place growth needed

Situation Analysis Alternatives Recommendation Implementation Financials Risks Conclusion

 Main challenge

• How can Disney position it’s OTT offering to find

sustainable competitive advantage in the market and
develop creative internal synergies?

Recommendation

• Drive customer centricity through data-driven but

content focused unified OTT brand, betting on corporate
culture as completive advantage

Situation Analysis Alternatives Recommendation Implementation Financials Risks Conclusion

 Getting to know the costumer

• 3 hours recreational
screen time/day

• Average 2
accounts per
person
Attention

• Brand and content

driven

Situation Analysis Alternatives Recommendation Implementation Financials Risks Conclusion

 Forces in the OTT market

12M US
Pay TV
households
-1,6% churn rate
(3x,2013)
2017

OTT market

40% viewing
81,1 million non
hours occupied
viewers (linear
by Netflix
TV) 2021

Situation Analysis Alternatives Recommendation Implementation Financials Risks Conclusion

 Navigating the digital transformation

Omnichannel
Integrated brand Ecosystem
(ex H&M)
experience (ex Netflix)

Supplier Modular
Superior product
(ex Unilever) Drive Plug n Play
(ex PayPal)

Situation Analysis Alternatives Recommendation Implementation Financials Risks Conclusion

 Understanding the customer centricity in OTT

Customer
Reactive Timeless
centric

Situation Analysis Alternatives Recommendation Implementation Financials Risks Conclusion

 Navigating the competitive landscape
On-demand

Hulu Netflix

On-demand TV Amazon
HBO
OTT

Singular Ecosystem

Traditional
cable

Linear
Situation Analysis Alternatives Recommendation Implementation Financials Risks Conclusion
 Navigating the strategic landscape
Content driven

Disney

HBO

Revenue centric Customer centric

Amazon
On-demand TV

Data driven
Situation Analysis Alternatives Recommendation Implementation Financials Risks Conclusion
 Alternatives routes forward

Daughter • Develop separate daughter brands for OTT

brands aimed at different target audiences

Acquire • Acquire HBO now to develop mature target

audience offering

Customer • Drive consumer centricity through internal

restructuring and unite offering under one OTT
centricity brand

Situation Analysis Alternatives Recommendation Implementation Financials Risks Conclusion

 Evaluation the alternative routes

• Stay true to brand identity

1

• Drive customer bas

2

• Develop and sustain creative culture

3

Situation Analysis Alternatives Recommendation Implementation Financials Risks Conclusion

 Evaluating the possible routes

Daughter Acquire Customer

brands HBO centricity

• Stay true to brand

1 identity

• Drive customer bas

2

• Develop and sustain

3 creative culture

Situation Analysis Alternatives Recommendation Implementation Financials Risks Conclusion

 Main challenge

• How can Disney position it’s OTT offering to find

sustainable competitive advantage in the market and
develop creative internal synergies?

Recommendation

• Drive customer centricity through data-driven but

content focused unified OTT brand, betting on corporate
culture as completive advantage

Situation Analysis Alternatives Recommendation Implementation Financials Risks Conclusion

 Explaining the recommendation in three steps
Key objectives

Unify offering under one Higher brand awareness

OTT brand and customer data

Leverage data to drive

Building content as
creative process and
competitive edge
build timeless content

Internal restructure to
deliver customer centricity Acquiring top talent
and build employer brand

Situation Analysis Alternatives Recommendation Implementation Financials Risks Conclusion

 Three main building blocks of implementation

Higher brand Building content

Acquiring top
awareness and as competitive
talent
customer data edge

Proactive Customer
Build streaming
Timeless centric internal
ecosystem
content reorganization

Situation Analysis Alternatives Recommendation Implementation Financials Risks Conclusion

Redesign Disneyflix & Launch integrated platform

Building
streaming
ecosystem

? People Action
$
Cost
Purpose

• Design one • Bamtech • One account with • 100 m

interface wit varied subscription
all subsidiary • Marketing package
content • Collecting
customer data
• Data center • Media campaign

Situation Analysis Alternatives Recommendation Implementation Financials Risks Conclusion

 Capitalize customer data through proactive contet making

Proactive
Timeless
content

? People Action
$
Cost
Purpose

• Remain • Data analysts • Analyze • 2,8 million

competitive subscription/time
advantage on • Editors/Animation /klicks per day
timeless content teams / Parks &
through data resorts/ Studios • Use data in
analysis creating
innovative
content in all
segment

Situation Analysis Alternatives Recommendation Implementation Financials Risks Conclusion

Redesign workspace in combining data and content building

Customer
centric internal
reorganization

? People Action
$
Cost
Purpose

• Redesign • Managers • Everyday

• 85 million
floor space • Employees interaction
• Redesign • Workshops
• Facilitate working • Employer
data driven space branding
content
making

Situation Analysis Alternatives Recommendation Implementation Financials Risks Conclusion

Redesign workspace in combining data and content building

Panel/Studio desing

Adult professionals
Data
College students Board

Cool kids in school

Children

Situation Analysis Alternatives Recommendation Implementation Financials Risks Conclusion

 Timeline

Costs 2018 2019 2020 2021 2022 2023

Streaming Ecosystem $100m

Content Building $2.8m

Reorganization $85m

Situation Analysis Alternatives Recommendation Implementation Financials Risks Conclusion

 Implementation costs
Costs 2018 2019 2020 2021 2022 2023

Streaming Ecosystem $100m

Build ecosystem 2018 2019 2020 2021 2022 2023

Redesign of system 100.0 80.0 20.0 20.0 20.0 20.0
Marketing 273.6 161.8 178.5 205.1 256.5
Data collection 10.0 10.0 10.0 10.0 10.0

Total 100.0 363.6 191.8 208.5 235.1 286.5

$1.4BN

Situation Analysis Alternatives Recommendation Implementation Financials Risks Conclusion

 Implementation costs
Costs 2018 2019 2020 2021 2022 2023

Content Building $2.8m

Proactive timeless content 2018 2019 2020 2021 2022 2023

Data analysts 2.8 2.8 2.8 2.8 2.8 2.8

Total 2.8 2.8 2.8 2.8 2.8 2.8

$17MN

Situation Analysis Alternatives Recommendation Implementation Financials Risks Conclusion

 Implementation costs
Costs 2018 2019 2020 2021 2022 2023

Reorganization $85m

Reorganisation 2018 2019 2020 2021 2022 2023

Redesing working space 60 60
Workshops 25 25

Total 0 85 85 0 0 0

$170MN

Situation Analysis Alternatives Recommendation Implementation Financials Risks Conclusion

 Implementation costs

Total 2018 2019 2020 2021 2022 2023

Build ecosystmem 100.0 363.6 191.8 208.5 235.1 286.5
Proactive timeless content 2.8 2.8 2.8 2.8 2.8 2.8
Reorganisation 0.0 85.0 85.0 0.0 0.0 0.0

Total 102.8 451.4 279.6 211.3 237.9 289.3

Total funds needed: $1.5 billion Fund with internal funds

Situation Analysis Alternatives Recommendation Implementation Financials Risks Conclusion

 Driving revenues

Revenues from streaming services

16,000.00
Revenue of $15 BN
14,000.00
12,000.00
10,000.00
8,000.00 Streaming
6,000.00 accounting for over
4,000.00 40% of revenue in
2,000.00 Media Network
-
2018 2019 2020 2021 2022 2023

Streaming ESPN+ Streaming Disney

85 million subscribers
2023

Situation Analysis Alternatives Recommendation Implementation Financials Risks Conclusion

 Increasing profits

Operating profits Growing operating

2,500.00 margins: 10-15%
2,000.00

1,500.00

1,000.00
Profit $2 BN 2023

500.00

-
2018 2019 2020 2021 2022 2023
Covering profits
lost on 7%
Streaming ESPN+ Streaming Disney
decrease in
cable networks

Situation Analysis Alternatives Recommendation Implementation Financials Risks Conclusion

 Investments paid back in two years

Payback
2000.0

1500.0

1000.0

500.0

0.0
2018 2019 2020 2021 2022 2023

-500.0

Situation Analysis Alternatives Recommendation Implementation Financials Risks Conclusion

 Gaining a market share

2023
Hulu today: 17%
 Disney 2023: 35%

35%

65%
Total market value 2023:
$82 billion (17% CAGR)
Disney Others

Situation Analysis Alternatives Recommendation Implementation Financials Risks Conclusion

 Risks and mitigations

Likeliness Risk Mitigation

1. Speed of market Bamtech and Fox

entry to slow giving early move
3 advantage
2. Data Integrate market
mismanagement driven and creative
1 leading to slow forces for balanced
creative process results
2 3. Employee resistance Betting corporate
to change culture work through
in-depth workshops
driving urgency for
change
Impact

Situation Analysis Alternatives Recommendation Implementation Financials Risks Conclusion

 Main challenge

• How can Disney position it’s OTT offering to find

sustainable competitive advantage in the market and
develop creative internal synergies?

Recommendation

• Drive customer centricity through data-driven but

content focused unified OTT brand, betting on corporate
culture as completive advantage

Situation Analysis Alternatives Recommendation Implementation Financials Risks Conclusion

 The current challenges for Disney ahead

Leverage Internal
Face the OTT
streaming Costumer insight organization post
competition
synergies acquisition
• Take content • Pushing insight • Interaction and • Customer
driven consumer through rest of data collection centric internal
centric postion the organization through organization
streaming
ecosystem

Situation Analysis Alternatives Recommendation Implementation Financials Risks Conclusion

 Navigating the strategic landscape
Content driven

Disney

HBO

Revenue centric Customer centric

Amazon
On-demand TV

Data driven
Situation Analysis Alternatives Recommendation Implementation Financials Risks Conclusion
The customer is already in love with you, it’s
time you fall in love with your customers
 Appendix - Change management process for restructure

Develop Build intra- Communicate

urgency for managerial and Form task-force the vision for
customer centric key player to lead change changing office
change coalitions landscape
Appendix - SWOT
• Timeliness
product
S • Talents
• Scale
• Diversified
company
• Synergies from • Fierce
BEMtech and competition
Fox O T
• Lower fees in the
• Increasing industry
screentime

W • Data
insufficiency for
low number of
subscribers