Disney Working to Get Streaming Platforms on Technical Par With Netflix, Iger Says: ‘We Need to Be at Their Level’

Disney CEO Bob Iger acknowledged that the company is behind Netflix in terms of technical capabilities and that the Mouse House is in the process of catching up.

We need to be at their level in terms of technology capability, Iger said about Netflix, speaking Tuesday at the 2024 Morgan Stanley Technology, Media Telecom Conference.

When we launched Disney+ in 2019, our goal was to have basically robust video experiences at scale, Iger said. What we didnt have was the technology that we needed to basically lower customer acquisition and retention cost, to increase engagement, to essentially grow our margins by reducing marketing expenses.

Iger continued, Were now in the process of creating and developing all of that technology, and obviously the gold standard there is Netflix. He said Netflixs technology prowess is one of the reasons its margins are so much higher than Disneys, and that Disneys streaming churn rates are higher than they need to be.

Iger reiterated that Disney is on track to achieve profitability in the streaming business which includes Disney+, Hulu and ESPN+ by the fiscal quarter that ends September 2024. But, he said, Its not just about profitability. Its about turning [streaming] into a real growth engine for the company.

Long term, Hulu fits very well into Disneys streaming plans, Iger commented, even though we may not turn it into a global brand (outside the U.S., the company distributes Hulu content under the Star brand). Hulu has built a good brand with great content, Iger said, calling out FXs The Bear and Shgun. Disney is in the midst of finalizing its buyout of NBCUniversals 33% stake in Hulu. In November,Disney paid $8.61 billion to Comcastwith the final price tag (which could be higher) to be based on an assessment of Hulus market value by each parties bankers.

Iger also touched on the joint venture Disney, Fox Corp. and Warner Bros. Discovery announced last month to create a streaming platform pooling ESPN+ and the companies linear TV networks that carry sports programming with the Disney CEO characterizing the sports bundle as pro-consumer.

Youve got a lot of young people who have not subscribed to the multichannel fat bundle, and you have a lot of people that used to be subscribers that lapsed, Iger said. We want them in Were trying to provide them a less expensive, more focused opportunity. The as-yet unnamed joint venture is aiming to launch in the fall of 2024; pricing hasnt been announced. The JV plans to sell the sports package directly to consumers in the U.S. and as an add-on to services like Disney+, Hulu and Max.

Our plan is to continue to take advantage of linear [TV] in terms of the revenue and profits that it generates, but at the same time making the transition to a fully streaming world, Iger said.

Users of the ESPN flagship standalone app, aimed for a fall 2025 launch, may be able to upgrade to the JV sports bundle, Iger said. Ultimately, way down the road, ESPN will be a fully digital platform, he said, integrating features like sports betting.

A front-burner issue for Iger is the proxy battle being waged by two activist investors Nelson Peltzs Trian Partners and Blackwells Capital who are seeking to displace some of Disneys board members with their own candidates. Disney is urging investors to vote for its own slate of 12 nominees at the April 3 shareholders meeting, which will take place online.

Asked about Peltzs agitation, Iger responded, This campaign is designed to distract us. I am working really hard to not let this distract me, because when I get distracted everybody who works for me gets distracted, and thats not a good thing.

Iger said that discussion surrounding the activist investors demonstrates that this is a very complex company to run, encompassing cruise ships and streaming and movies and TV. Disneys different operations, he said, require a significant amount of time and focus. Were at this hard every day.

Iger, as he has commented before, said that when he returned as CEO in November 2022 following the ouster of Bob Chapek, I came back and discovered right away that it was a company in a lot of need of fixing. According to Iger, under Disneys previous leadership, Creativity wasnt really at the center Most importantly, there wasnt enough accountability specifically from creative executives.

Iger said Disneys studio group has killed a few projects already that we just didnt feel were strong enough but has the company not been that public about it. (He didnt identify the axed films.) He noted that Disney was the No. 1 studio at the box office for seven of the last eight years with the exception of 2023, when the Mouse House was topped by Universal. Iger gave props to Universals Oppenheimer blockbuster, calling it a fantastic film.

To date, he said, Marvel has released 33 films totaling nearly $30 billion in box office receipts: That is not an accident, he said, adding, We have to return to something like that, saying the company needs to cultivate a culture of excellence and respect with the creative community.

Ive spent a tremendous amount of time on the studio [and] feel very excited about the slate, Iger said. He reeled off Disneys upcoming movies this year, including Kingdom of the Planet of the Apes, the sequel to Pixars Inside Out, Deadpool and Wolverine (which I think will be one of the more successful Marvel films weve had in a long time), Moana 2, which was originally imagined as a TV series and Lion King prequel Mufasa.

Iger, discussing Disneys $1.5 billion investment into Epic Games, said he was motivated to do that agreement after seeing stunning data on how much time Gen Z spends playing games. Within a few years, Epic will launch a Disney universe that will let users engage with Marvel, Pixar, Star Wars and Disney intellectual property, as well as watch short-form content and purchase merch, he said. You need a foot in the future, Iger said.

Igers appearance at the conference comes after Peltzs Trian on Monday released a lengthy white paper detailing strategic changes the hedge fund argues will improve Disneys financial performance and boost its stock price. Among its suggestions: Disney should revamp its streaming-content strategy to take more shots on goal consolidate Disney+ and Hulu operations; and produce fewer movie sequels.

Trian also wants Disneys board to fix the companys chronic succession problems for the 73-year-old Iger, whose renewed CEO contract expires at the end of 2026.

Pictured above: Disney CEO Bob Iger at the 96th annual Oscars nominees luncheon at the Beverly Hilton on Feb. 12