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At the heart of the entertainment industry is one underlying and core belief, once very eloquently framed by Reed Hastings, CEO of Netflix: \u201cEntertainment is the most fundamental human want\u201d. This is an important distinction. Entertainment is not a need. In times of crises, the general public does not worry about how they\u2019ll be able to afford movie or theme park tickets; food, rent, utilities will always come first. Yet it tends to be (in various forms) what people first spend on once their basic needs are covered. Whether that be binging a TV show, watching sports, or organizing a trip, entertainment is what a vast majority of the population will want (even enjoy) spending on.<\/p>\n
COVID-19 is unlike any crisis the industry has ever seen. It presents unique challenges, yet at the same time, unique opportunities. Whilst movie chains and live events companies are likely to remain closed for at least months, and then face significant depressed demand, digital-based companies like Netflix and YouTube are actually seeing increases in revenue by benefiting from a larger time spent at home. The recommended actions for these 2 extremes vary greatly from getting ready to face bankruptcy to capitalizing and further fueling existing assets. The playbook in these two cases is mostly straight-forward, and their current situations are mostly a matter of luck. No one could have predicted that this could happen. When companies, like AMC, that have a highly undifferentiated portfolio of offerings, see the basic fundamentals they\u2019ve built their business on disappear overnight, there\u2019s really not much they can do other than pray for government or bankruptcy protection. Had internet service been the victim of a crisis, it would be the digital giants who would be facing impending doom. Which is why I would also caution against overvaluing companies in this time just because they inherently got lucky (Netflix, Amazon). While it is true that the temporary effect of an unprecedented amount of people spending and unprecedented amount of time at home will indeed increase their revenues in the short-term, it is unlikely that this trend will become permanent when people are once again no longer confined to their homes.<\/p>\n
Similar to what we\u2019ve experienced in many HBS cases before, the extremes are much easier to handle, it\u2019s the gray areas that get tricky. For entertainment, this means focusing on companies that have a diversified portfolio of consumer offerings, and none is more well-known or ubiquitous than The Walt Disney Company (TWDC).<\/p>\n
With a 2019 revenue (post Fox acquisition) almost at $70 billion and ownership over hundreds of subsidiaries entertainment offerings across four major business units (Studio Entertainment, Direct-to-Consumer & International, Parks, Experiences & Products and lastly Media Networks), TWDC is blessed with substantial portfolio. The key to COVID-19 survival (even improvement will be to deploy it in a smart, effective way, adapting to different and growing consumer trends and demands. Similar to the extreme cases we previously reviewed, TWDC has within its portfolio some clear winners and losers of the disruption cause by the global pandemic.<\/p>\n
Winners<\/strong><\/p>\n In a heavily anticipated move, TWDC launched their own streaming service, Disney+, on November 12, 2019 reaching 10 million subscribers on the day of launch. Only 6 months later, their highly successful offering has beat all forecasted projections to surpass 50 million subscribers (a number which Netflix fought 7 years to achieve). Most importantly, Disney+ still suffers from a limited geographical distribution (mostly North America and Europe-centric), so their numbers are poised to experience exponential growth as it becomes available globally throughout the rest of the year and 2021.<\/p>\n It is clear that like Netflix, Disney+ has greatly benefited from the abundance of people at home (particularly parents struggling to entertain their kids who are no longer attending school). But to just rest on the laurels of this great success would be a mistake. In order to truly capture the opportunities of this moment and ensure they become long-term impacts, I would highly recommend treating Disney+ as more than just TWDC\u2019s digital destination for TV, film and documentary content. A stronger play would be to evolve it into a destination for all<\/strong> Disney content.<\/p>\n By expanding further into digital offerings within the Disney+ platform, TWDC will be able to leverage the considerable data that they\u2019ve garnered from their 50 million subscribers and expand and monetize the entertainment content that they offer. Natural additions to this offering would be items like online games, educational content, and forums to allow users to connect. Whilst Netflix has shown to be incredibly successful in its very single-focus approach, Disney+ could expand and bring users what they\u2019re most craving during times of quarantines: the ability to connect with other people over their love of shared content.<\/p>\n Losers<\/strong><\/p>\n Whilst digital business is booming, it\u2019s not hard to predict that by far the most heavy-hit unit within the company will come from its significant Theme Parks and Cruises businesses. At 37% of Revenue and 44% of Operating Income for the whole company, there is no way to weather the storm, without significant interventions to these businesses.<\/p>\n A key thing to understand is that these businesses are not poised to just go back to normal the day they\u2019re legally allowed to open. On the contrary, because a vast majority of both Parks and Cruises guest have to travel in order to attend, the effects in demand are expected to depress the sector until consumer confidence is fully recovered. Guest will have to overcome their fears of not only being in highly crowded environments, but also engaging in travel and airfare in order to reach these destinations at all.<\/p>\n There is no easy answer, but with $24billion in revenue at stake, doing nothing is just simply not an option. So, in order to survive they\u2019ll have to focus on retooling their operating to continue bringing the magic, just at home. There\u2019s a myriad of options, from low-hanging fruit such as combining their consumer products shop with Disney+ and launching partnerships with key retailers such as Amazon in order to offer Disney Store experiences at home, to more ambitious proposals that redefine the way they bring live entertainment to life. Few moments are as magical as seeing your kid meet Mickey or the princesses for the first time. In times of stay at home orders, they could evolve this core moment into \u201cZoom meets\u201d, the food is also a key component of the Parks experiences. Instead of just totally shutting down they could partner with grocery stores in order to sell the ingredients and pair it with cooking videos where Disney characters teach families how to cook these at home.<\/p>\n Conclusion<\/strong><\/p>\n Creativity, magic and a mouse, the same 3 ingredients that have turned TWDC into an almost centennial leading global entertainment company should keep them alive and well through this crisis and the next 100 years. With the right objectives in mind they can focus on coming out the other end of this crisis even stronger than they went into it. It\u2019s just a question of how fast they can respond, and how open they are to delivering the same magic, just in a different format.<\/p>\n <\/p>\n","protected":false},"excerpt":{"rendered":" How The Walt Disney Company can adapt to be even stronger<\/p>\n","protected":false},"author":11790,"featured_media":12845,"comment_status":"open","ping_status":"closed","template":"","categories":[],"class_list":["post-12844","hck-submission","type-hck-submission","status-publish","has-post-thumbnail","hentry","hck-taxonomy-organization-disney","hck-taxonomy-industry-entertainment-and-recreation","hck-taxonomy-country-united-states"],"connected_submission_link":"https:\/\/d3.harvard.edu\/platform-digit\/assignment\/digital-innovation-and-transformation-during-the-covid-19-pandemic\/","yoast_head":"\n