Harvard Case - The Walt Disney Company: The Perils of Streaming
"The Walt Disney Company: The Perils of Streaming" Harvard business case study is written by Ram Subramanian. It deals with the challenges in the field of General Management. The case study is 15 page(s) long and it was first published on : Aug 1, 2023
At Fern Fort University, we recommend that The Walt Disney Company (Disney) adopt a multi-pronged strategy to address the challenges posed by the streaming landscape. This strategy involves restructuring its streaming business, leveraging its vast intellectual property, enhancing its content offerings, and optimizing its operational efficiency.
2. Background
The Walt Disney Company, a global entertainment giant, faced a critical juncture in its history as the streaming landscape rapidly evolved. The case study highlights Disney's aggressive foray into streaming with the launch of Disney+, Hulu, and ESPN+, aiming to compete with established players like Netflix and Amazon Prime Video. However, the company's ambitious expansion led to several challenges, including:
- Increased competition: The streaming market became increasingly crowded, with new entrants and existing players aggressively vying for subscribers.
- Rising content costs: The need to produce high-quality, original content to attract and retain subscribers significantly increased production costs.
- Subscription fatigue: Consumers faced growing subscription fatigue, leading to churn and reduced willingness to pay for multiple streaming services.
- Changing consumer preferences: Shifting audience preferences towards diverse content and shorter-form entertainment challenged Disney's traditional content strategy.
The case study focuses on Bob Chapek, Disney's CEO, who inherited these challenges and had to navigate the company through this turbulent period.
3. Analysis of the Case Study
This case study can be analyzed through the lens of several frameworks, including:
Strategic Analysis:
- SWOT Analysis: Disney possesses significant strengths, including its vast intellectual property portfolio, strong brand recognition, and global reach. However, the company faces weaknesses like high content costs, potential subscription fatigue, and competition from established players. Opportunities lie in expanding into emerging markets, developing innovative content formats, and leveraging technology advancements. Threats include increased competition, evolving consumer preferences, and regulatory changes.
- Porter's Five Forces: The streaming industry exhibits high competitive rivalry, with numerous players vying for market share. The threat of new entrants is moderate, considering the significant capital investment required. The bargaining power of buyers is high, as consumers have numerous alternatives. The bargaining power of suppliers (content creators) is also high due to the demand for high-quality content. The threat of substitutes is moderate, with other forms of entertainment like gaming and social media posing potential alternatives.
Financial Analysis:
- Financial Performance: Disney's financial performance was impacted by the increased investments in streaming, leading to higher operating costs and lower profitability. The company's focus on subscriber growth over profitability posed a challenge, as the streaming business was not yet consistently generating positive returns.
Marketing Analysis:
- Brand Management: Disney's strong brand equity and iconic characters offered a significant advantage in the streaming market. However, the company needed to adapt its marketing strategies to attract a wider audience and cater to changing consumer preferences.
Operational Analysis:
- Operations Strategy: Disney's operational efficiency was impacted by the rapid expansion of its streaming services. The company needed to optimize its content production processes, improve its distribution channels, and enhance its customer service capabilities to effectively manage its growing subscriber base.
4. Recommendations
To navigate the perils of streaming, Disney should implement the following recommendations:
1. Restructure the Streaming Business:
- Consolidate Streaming Services: Consider merging Disney+, Hulu, and ESPN+ into a single platform to reduce costs and improve user experience. This consolidation can offer bundled packages with tiered pricing options to cater to diverse consumer needs.
- Optimize Content Strategy: Develop a more focused content strategy that prioritizes high-quality, original content that aligns with the strengths of each platform. This strategy should leverage Disney's iconic characters and franchises while exploring new genres and formats to attract a wider audience.
- Enhance User Experience: Improve the user interface and functionality of the streaming platforms to provide a seamless and personalized experience. Introduce features like personalized recommendations, offline viewing options, and multi-device compatibility.
2. Leverage Intellectual Property:
- Develop Franchise-Based Content: Capitalize on Disney's vast library of iconic characters and franchises to create a robust pipeline of original content. This can include live-action adaptations, animated series, and spin-offs, leveraging the existing fan base and brand recognition.
- Explore New Content Formats: Experiment with innovative content formats like interactive storytelling, immersive experiences, and short-form video content to appeal to younger generations and cater to evolving consumer preferences.
3. Enhance Content Offerings:
- Expand Content Diversity: Increase the diversity of content offered on the streaming platforms to attract a broader audience. This includes expanding into new genres, languages, and cultural perspectives to cater to global audiences.
- Partner with Independent Creators: Collaborate with independent filmmakers, writers, and creators to access fresh perspectives and diverse voices. This can help diversify the content offerings and attract new audiences.
4. Optimize Operational Efficiency:
- Streamline Production Processes: Improve the efficiency of content production by leveraging technology advancements like AI and machine learning for script development, casting, and post-production.
- Enhance Distribution Channels: Explore new distribution channels like mobile apps, gaming platforms, and social media to reach a wider audience and reduce reliance on traditional cable networks.
- Optimize Customer Service: Invest in customer service technologies and training to provide personalized support and address customer concerns effectively.
5. Basis of Recommendations
These recommendations are based on the following considerations:
- Core competencies and consistency with mission: The recommendations leverage Disney's core strengths, including its intellectual property, brand recognition, and global reach, while aligning with its mission to entertain, inform, and inspire audiences.
- External customers and internal clients: The recommendations prioritize customer satisfaction by offering a diverse range of content, improving user experience, and providing personalized support. They also consider the needs of internal stakeholders, including content creators, employees, and investors.
- Competitors: The recommendations aim to differentiate Disney's streaming offerings from competitors by focusing on quality content, innovative formats, and a superior user experience.
- Attractiveness: The recommendations are expected to enhance Disney's competitive advantage by attracting new subscribers, increasing customer loyalty, and driving long-term profitability.
6. Conclusion
The Walt Disney Company faces significant challenges in the evolving streaming landscape. By implementing the recommended strategy, Disney can navigate these challenges and emerge as a leader in the streaming market. The company's vast intellectual property, strong brand recognition, and global reach provide a solid foundation for success. By focusing on content quality, user experience, and operational efficiency, Disney can attract new audiences, retain existing subscribers, and drive sustainable growth in the streaming era.
7. Discussion
Alternatives Not Selected:
- Abandoning the streaming business: This option would be detrimental to Disney's long-term growth prospects, as the streaming market is a key driver of future revenue.
- Continuing with the current strategy: This approach would likely lead to increased competition, rising content costs, and declining profitability.
Risks and Key Assumptions:
- Consumer preferences may continue to evolve: The success of the recommendations depends on Disney's ability to anticipate and adapt to changing consumer preferences.
- Competition may intensify: The streaming market is highly competitive, and new players may emerge, posing a threat to Disney's market share.
- Content costs may continue to rise: The cost of producing high-quality content is expected to remain high, requiring careful management of resources.
8. Next Steps
- Develop a detailed implementation plan: Outline specific actions, timelines, and resource allocation for each recommendation.
- Conduct market research: Gather data on consumer preferences, competitive landscape, and technological trends to inform decision-making.
- Pilot test new initiatives: Launch pilot programs to test the effectiveness of new content formats, distribution channels, and customer service strategies.
- Monitor performance metrics: Track key performance indicators (KPIs) like subscriber growth, churn rate, and customer satisfaction to assess the effectiveness of the implemented strategies.
By taking these steps, Disney can effectively address the perils of streaming and solidify its position as a leader in the entertainment industry.
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Case Description
In July 2021, Scarlett Johansson, the star of the Marvel Cinematic Universe (MCU) film Black Widow, sued The Walt Disney Company (Disney), the producer of the film, for breach of contract when it simultaneously released the movie in theatres and on Disney+, the company's streaming platform, which resulted in a reduction of her compensation. The film saw a sharp drop in ticket sales in weeks two and three and ended its theatrical run with a much lower box-office take than many of the other MCU films. The lawsuit alleged that Disney's vertical integration into streaming had caused a conflict of interest that had adverse consequences for talent compensation. Disney's chief executive officer, Bob Chapek, was faced with the difficult decision of how to address talent compensation in light of streaming's growing popularity, as Disney+ competed on the quality and availability of content.
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