Disney doubles down on "franchise flywheel" strategy
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Disney on Wednesday said it will move most of its consumer products business from its experiences segment to its entertainment division, bringing its expensive intellectual property closer to lucrative merchandise sales.
Why it matters: The change, which goes into effect this October at the start of Disney's fiscal year, supports the company's efforts to build higher-margin flywheels from its marquee franchises.
Zoom in: On an earnings call with investors Wednesday, Disney CEO Josh D'Amaro and CFO Hugh Johnston told investors that the strength of Disney's consumer products business performance last quarter benefited from the success of its intellectual property, including its theatrical slate.
- D'Amaro emphasized efforts to streamline its streaming strategy around Disney+ as its broad access window to its IP.
- "The appeal of our IP across multiple consumer touch points is central to our strategy, and Disney+ is the digital centerpiece for that," he said."We're the only entertainment company with global scale in both the physical and digital worlds."
State of play: Disney is now focused on finding more ways to create fan touch points with its intellectual property after it appears on TV or in theaters.
- The company announced a major global partnership with TikTok that gives fans and creators access to audio and video clips from an agreed-upon list of hundreds of films and TV shows to create short-form videos.
- The deal is somewhat similar to the one Disney struck with OpenAI last year before OpenAI shuttered Sora in March.
Zoom out: In addition to the restructuring and the TikTok deal, the company also announced new efforts to divest non-core assets that are not easy to monetize across consumer goods and theme parks.
- Disney on Wednesday confirmed plans to sell its 50% equity stake in A+E Global Media to its long-time joint venture partner, Hearst, for roughly $1.2 billion in cash.
- A+E Global Media houses cable networks such as A&E, The History Channel and Lifetime.
The big picture: Earnings results delivered Wednesday make it clear that streaming and experiences will continue to be Disney's core growth drivers, but executives said those businesses can only be as strong as the underlying IP that supports them.
- "The theatrical window, in a lot of ways, is just one data point," Johnston said. "The real value of that IP is the cumulative benefit of decades-long storytelling and our ability to take that IP and play it into the entirety of the Disney flywheel."
