Disney wants to make a huge shift in its business model

By Aarthi Rayapura August 9, 2017

Excerpts from an article by Peter Kafka in Recode

The internet comes for every sector of the media business, eventually. No one has a moat.

So eventually, everyone in the media business has a choice: Change their business to adapt to the internet, or hang on to the old business, as long as they can.But the first option is really hard, and involves trading a business that works for one that’s unknown. And the second option usually pays well, until the end, when it doesn’t. Which is why almost everyone tries the second option, even if they say they want to do the first one.

So that’s the context for Disney’s announcement yesterday, when CEO Bob Iger said his company would start selling two kinds of streaming services: An ESPN-branded one, scheduled for 2018, and a Disney-branded movie service, set for 2019.

On his earnings call, Iger described the moves as a “major strategic shift in the way we distribute our content.” At the end of the call, he neatly summed up what that meant: Disney wants to move away from selling some of its most valuable content, like movies and live sports, to middlemen, and move toward selling them directly to customers.

Here’s his full description of the change. Note the part about the new model eventually making more money than the old model:

“We’ve got this unbelievably passionate base of Disney consumers worldwide, and [in] virtually all of our businesses except theme parks we’ve never had the opportunity to even connect with them directly and know [who] they are. And it’s high time that we got into the business, particularly with the technology available to us, to accomplish that.

Once we do, if this gives us the ability to do it, then I think the monetization possibilities are extraordinary for this company. There will be some sacrifices. Obviously, as you move product from … a licensed-to-third-party model to a self-distributed model, you’re foregoing the licensing revenue that you get for whatever revenues you generate by [selling it yourself].

We believe that ultimately — I can’t give you an idea of when or how long — the profitability, the revenue-generating capability of this initiative is substantially greater than the business models that we’re currently being served by.”

Read the full article in Recode.

And learn how Zuora helps Direct-to-Consumer companies monetize their subscriber relationships here.