Challenges and Strategies for Walt Disney in Overcoming Market Disruptions
IF YOU WANT TO GO
WHERE YOU
NEED
TO BE
YOU CANNOT STAY
THE WAY YOU ARE
WALT DISNEY
“Blowing Up The Castle?”
Presented to:
Robert A. Iger, Chairman and CEO at The Walt Disney Company
Presented by:
Daniela, Minghao, Victor, Vishnu
11 January 2019
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1
Problem
2
Recommendations
3
Internal & External Analysis
4
Strategic Alternatives
5
Implementation
6
Financial Analysis
7
Contingency Plan
8
Conclusion
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Page 5
Problem
Recommendation
Analysis
Alternatives
Implementation
Financials
Contingencies
Conclusion
Post-Merger
Integration
Disruption from
OTT
How can you make best use of the Fox acquisition?
How can you disrupt your business model while mitigating for cannibalization?
How can you stay competitive?
Cannibalization
Threat
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Page 6
Problem
Recommendation
Analysis
Alternatives
Implementation
Financials
Contingencies
Conclusion
Integration
Strategy
Customer
Segment Strategy
Online-Offline
(O2O)
Strategy
Post-Merger
Integration
Cannibalization
Threat
Disruption from
OTT
Organizational Assets
Customer Acquisition
Customer Experience
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Page 7
Problem
Recommendation
Analysis
Alternatives
Implementation
Financials
Contingencies
Conclusion
Strengths
Weaknesses
Strong
reputation
and brand
Large
volume of content
(Pixar, Disney,
ESPN Sports)
Family-focused
image
Multiple streams of revenues
(e.g. theme
parks, merchandise)
M&
A experience
Revenues largely from
traditional
cable
TV (40%)
Traditional media
Large integration challenge
ahead
Lack of technology focus
in new media
(e.g. streaming, analytics)
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Page 8
Problem
Recommendation
Analysis
Alternatives
Implementation
Financials
Contingencies
Conclusion
Opportunities
Threats
Technological advancements
improving
customer experience
Exponential growth in
streaming services
Increased (mobile) connectivity
Globalization
Disintermediation
Strong competition
incl. new entrants
(e.g. Netflix, Amazon)
Rapid decrease in subscribers to cable TV
Customers looking for
“long-tail’ offerings
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Page 9
Problem
Recommendation
Analysis
Alternatives
Implementation
Financials
Contingencies
Conclusion
Large Content Volume
Low Content Volume
Standalone
Services
Diversified
Services
Walt Disney
Amazon
Prime
YouTube
Premium
Netflix
HBO
Hulu
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Problem
Recommendation
Analysis
Alternatives
Implementation
Financials
Contingencies
Conclusion
Chosen Strategies
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Page 11
Problem
Recommendation
Analysis
Alternatives
Implementation
Financials
Contingencies
Conclusion
What
Why
Develop and launch an integration strategy for Walt Disney & Fox
Reduce integration risks and fully exploit potential synergies despite differing cultures
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Page 12
Problem
Recommendation
Analysis
Alternatives
Implementation
Financials
Contingencies
Conclusion
How
Determine content
from Fox that will be integrated
into Disney’s offerings vs. standalone
Progressively
integrate Fox franchises
, e.g. Marvel
into Disney
theme parks and merchandise
Leverage on HR
from both organizations (integration
team)
Form a
dedicated future technologies team
across
both organizations for e.g. AR/VR, gamification
Operations & HR
Culture
Invite an
experienced integration consultant
to the
company (e.g. focus groups, workshops)
Initiate
quarterly culture events
, e.g. dinner and
dance, movie nights
Install
cross-organizational communication channels
,
e.g. Skype for Work
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Page 13
Problem
Recommendation
Analysis
Alternatives
Implementation
Financials
Contingencies
Conclusion
What
Why
Develop a coherent customer segmentation strategy to convert non-payTV users in the US and
international subscribers to Disney DTC (direct-to-consumer channel)
Avoid cannibalization of cable TV subscribers in the US and increase DTV subscribers from
international Disney fan base
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Page 14
Problem
Recommendation
Analysis
Alternatives
Implementation
Financials
Contingencies
Conclusion
How
Conduct
market research
on international OTT
subscribers
Hire a
local marketing team
(Paris, London,
Tokyo) for SNS (social networking service)
Hire a
US digital marketing team
to focus OTT-
users marketing, targeting cable TV leavers
Operations & HR
Marketing
Sponsor a
family-related script-writing contest
at Universities, e.g. HEC Paris
Give-away
free-trials
to e.g. Millennials through
partnerships
, e.g. Grab Rewards, Deliveroo
Leverage on
digital marketing channels
(e.g.
Instagram) with strong video content
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Page 15
Problem
Recommendation
Analysis
Alternatives
Implementation
Financials
Contingencies
Conclusion
What
Why
Leverage Disney’s US and international theme parks to promote streaming subscription service
Use real estate as strategic angle to increase the subscriber base rapidly
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Page 16
Problem
Recommendation
Analysis
Alternatives
Implementation
Financials
Contingencies
Conclusion
How
Hire a
dedicated team
focusing on
cross-marketing
strategies
Train hotel staff
on usage of streaming service in
hotel rooms at Disney resorts
Establish an
analytics team
to focus on optimizing
customer conversion rate
Establish a
dedicated customer satisfaction team
Operations & HR
Marketing
Focus on live sports
as a key differentiator
Sponsor
University sports competitions
, e.g. MBA
Olympics
Offer a
2-month free trial
with entry ticket to
theme parks
Promote streaming service at
merchandising spots
Offer
free subscription service at hotel rooms
and
Disney resorts
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Problem
Recommendation
Analysis
Alternatives
Implementation
Financials
Contingencies
Conclusion
Key Performance Indicator
Target
1
2
3
4
5
6
7
Attrition rate of employees
Employee satisfaction level
Customer satisfaction level (DTC)
Number of DTC subscribers
Cannibalization rate of cable TV with DTC
Pace of introduction of Fox franchises into theme parks
Conversion rate of free-trials to paid service
Less than 10%
90%
92%
32.5 million by 2023
Below 2%
2+ p.a.
40%
8
Number of DTC sign-ups due to theme park trials
5 million p.a.
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Problem
Recommendation
Analysis
Alternatives
Implementation
Financials
Contingencies
Conclusion
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Problem
Recommendation
Analysis
Alternatives
Implementation
Financials
Contingencies
Conclusion
F
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Page 20
Problem
Recommendation
Analysis
Alternatives
Implementation
Financials
Contingencies
Conclusion
F
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Page 21
Problem
Recommendation
Analysis
Alternatives
Implementation
Financials
Contingencies
Conclusion
F
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Page 22
Problem
Recommendation
Analysis
Alternatives
Implementation
Financials
Contingencies
Conclusion
C
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Page 23
Problem
Recommendation
Analysis
Alternatives
Implementation
Financials
Contingencies
Conclusion
Anticipated Risk
Mitigation
1
2
3
4
5
6
7
Top talent leaving the firm
Below forecasts sign-up for DTC
Resistance from staff on
integration
Slow technological progress
Accelerated cannibalization
Inability of offline channels to
drive DTC subscribers
Family-friendly brand image
dilution
Close satisfaction tracking
Increase marketing efforts
Strong feedback culture
Hire “fresh” staff, e.g. incubate talent
Reexamination of marketing channels
Offer better packaging of free-trials
Careful content selection
Probability
Medium
Low
Medium
Medium
Low
Low
Low
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Page 24
Problem
Recommendation
Analysis
Alternatives
Implementation
Financials
Contingencies
Conclusion
Integration
Strategy
Customer
Segment Strategy
Online-Offline
(O2O)
Strategy
Post-Merger
Integration
Cannibalization
Threat
Disruption from
OTT
Organizational Assets
Customer Acquisition
Customer Experience
THANK YOU
FOR YOUR ATTENTION
We now welcome any questions you may have.
Kindly turn this page for the
appendix
.
APPENDIX
Kindly turn this page to access supporting material.
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Page 27
Problem
Recommendation
Analysis
Alternatives
Implementation
Financials
Contingencies
Conclusion
Walt Disney is encountering key challenges such as post-merger integration, cannibalization threat, and disruption from over-the-top (OTT) services. The presentation discusses strategies focusing on organizational assets, customer acquisition, experience, online-offline strategy, and integration to tackle these challenges. Internal analysis reveals strengths like a strong reputation and brand, M&A experience, and multiple revenue streams, but weaknesses include a lack of technology focus in new media. Overall, the recommendations aim to help Walt Disney stay competitive in the evolving media landscape.
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Presentation Transcript
IF YOU WANT TO GO WHERE YOU NEED TO BE
YOU CANNOT STAY THE WAY YOU ARE
Nanyang Consulting N WALT DISNEY Blowing Up The Castle? Presented to: Robert A. Iger, Chairman and CEO at The Walt Disney Company Presented by: Daniela, Minghao, Victor, Vishnu 11 January 2019
Agenda Agenda Page 4 1 Problem 2 Recommendations 3 Internal & External Analysis 4 Strategic Alternatives 5 Implementation 6 Financial Analysis 7 Contingency Plan 8 Conclusion
Problem: Problem: Walt Disney is facing three key challenges that need to be overcome to compete in an increasingly disrupted market Page 5 Post-Merger Integration Cannibalization Threat Disruption from OTT How can you make best use of the Fox acquisition? How can you disrupt your business model while mitigating for cannibalization? How can you stay competitive? Problem Recommendation Analysis Alternatives Implementation Financials Contingencies Conclusion
Recommendation: Recommendation: Three strategies will enable Walt Disney to overcome the identified challenges and prepare for the future Page 6 Organizational Assets Customer Acquisition Customer Experience Online-Offline (O2O) Strategy Integration Strategy Customer Segment Strategy Post-Merger Integration Cannibalization Threat Disruption from OTT Problem Recommendation Analysis Alternatives Implementation Financials Contingencies Conclusion
Internal Analysis: Internal Analysis: Walt Disney exhibits extensive experience and strong core competencies in the media industry Page 7 Strengths Weaknesses Strong reputation and brand Revenues largely from traditional cable Large volume of content (Pixar, Disney, TV (40%) ESPN Sports) Traditional media Family-focused image Large integration challenge ahead Multiple streams of revenues (e.g. theme Lack of technology focus in new media parks, merchandise) (e.g. streaming, analytics) M&A experience Problem Recommendation Analysis Alternatives Implementation Financials Contingencies Conclusion
External Analysis: External Analysis: Walt Disney exhibits extensive experience and strong core competencies in the media industry Page 8 Opportunities Threats Technological advancements improving customer experience Strong competition incl. new entrants Exponential growth in streaming services (e.g. Netflix, Amazon) Increased (mobile) connectivity Rapid decrease in subscribers to cable TV Globalization Customers looking for long-tail offerings Disintermediation Problem Recommendation Analysis Alternatives Implementation Financials Contingencies Conclusion
Competitor Analysis: Competitor Analysis: The following positioning map illustrates the competitive landscape Walt Disney competes in Page 9 Large Content Volume Walt Disney Netflix HBO Hulu Standalone Services Diversified Services YouTube Premium Amazon Prime Low Content Volume Problem Recommendation Analysis Alternatives Implementation Financials Contingencies Conclusion
Strategic Alternatives: Strategic Alternatives: Six key strategies have been considered and analyzed to identify the best-fit recommendations Page 10 Strategic Fit Customer Fit Innovation Level STRATEGY DECISION Profitability Feasibility + + + License Content to Competitors + Stimulate a Content War + + Go All-In on OTT Chosen Strategies + + + + + Integration Strategy + + + + + Customer Segment Strategy + + + + + + Online-Offline (O2O) Strategy Problem Recommendation Analysis Alternatives Implementation Financials Contingencies Conclusion
Implementation (1/3): Implementation (1/3): Integration Strategy Page 11 What Develop and launch an integration strategy for Walt Disney & Fox Why Reduce integration risks and fully exploit potential synergies despite differing cultures Problem Recommendation Analysis Alternatives Implementation Financials Contingencies Conclusion
Implementation (1/3): Implementation (1/3): Integration Strategy Page 12 How Operations & HR Culture Determine content from Fox that will be integrated into Disney s offerings vs. standalone Invite an experienced integration consultant to the Progressively integrate Fox franchises, e.g. Marvel company (e.g. focus groups, workshops) into Disney theme parks and merchandise Initiate quarterly culture events, e.g. dinner and Leverage on HR from both organizations (integration dance, movie nights team) Install cross-organizational communication channels, Form a dedicated future technologies team across e.g. Skype for Work both organizations for e.g. AR/VR, gamification Problem Recommendation Analysis Alternatives Implementation Financials Contingencies Conclusion
Implementation (2/3): Implementation (2/3): Customer Segment Strategy Page 13 What Develop a coherent customer segmentation strategy to convert non-payTV users in the US and international subscribers to Disney DTC (direct-to-consumer channel) Why Avoid cannibalization of cable TV subscribers in the US and increase DTV subscribers from international Disney fan base Problem Recommendation Analysis Alternatives Implementation Financials Contingencies Conclusion
Implementation (2/3): Implementation (2/3): Customer Segment Strategy Page 14 How Operations & HR Marketing Conduct market research on international OTT Sponsor a family-related script-writing contest subscribers at Universities, e.g. HEC Paris Hire a local marketing team (Paris, London, Give-away free-trials to e.g. Millennials through Tokyo) for SNS (social networking service) partnerships, e.g. Grab Rewards, Deliveroo Hire a US digital marketing team to focus OTT- Leverage on digital marketing channels (e.g. users marketing, targeting cable TV leavers Instagram) with strong video content Problem Recommendation Analysis Alternatives Implementation Financials Contingencies Conclusion
Implementation (3/3): Implementation (3/3): Online-Offline (O2O) Strategy Page 15 What Leverage Disney s US and international theme parks to promote streaming subscription service Why Use real estate as strategic angle to increase the subscriber base rapidly Problem Recommendation Analysis Alternatives Implementation Financials Contingencies Conclusion
Implementation (3/3): Implementation (3/3): Online-Offline (O2O) Strategy Page 16 How Operations & HR Marketing Focus on live sports as a key differentiator Hire a dedicated team focusing on cross-marketing Sponsor University sports competitions, e.g. MBA strategies Olympics Train hotel staff on usage of streaming service in Offer a 2-month free trial with entry ticket to hotel rooms at Disney resorts theme parks Establish an analytics team to focus on optimizing Promote streaming service at merchandising spots customer conversion rate Offer free subscription service at hotel rooms and Establish a dedicated customer satisfaction team Disney resorts Problem Recommendation Analysis Alternatives Implementation Financials Contingencies Conclusion
Key Performance Indicators: Key Performance Indicators: The following metrics should be used to monitor the success of the suggested strategies Page 17 Key Performance Indicator Target 1 2 3 4 5 6 7 8 Less than 10% Attrition rate of employees 90% Employee satisfaction level Customer satisfaction level (DTC) 92% 32.5 million by 2023 Number of DTC subscribers Cannibalization rate of cable TV with DTC Below 2% 2+ p.a. Pace of introduction of Fox franchises into theme parks 40% Conversion rate of free-trials to paid service 5 million p.a. Number of DTC sign-ups due to theme park trials Problem Recommendation Analysis Alternatives Implementation Financials Contingencies Conclusion
Timeline: Timeline: The following schedule illustrates how the suggested strategies should be implemented Page 18 2019 2020 2021 2022 2023 H1 H2 H1 H2 H1 H2 H1 H2 H1 H2 INTEGRATION STRATEGY Integration consultant, culture events Consultant Events Integrate Fox franchises Future technologies team Hire Develop CUSTOMER SEGMENT STRATEGY Market research US marketing team and campaign Launch Develop International marketing team and campaign Launch Develop ONLINE-OFFLINE STRATEGY Hire cross-marketing team and launch initiatives Hire Launch Train hotel staff Train Analytics team Hire Work Problem Recommendation Analysis Alternatives Implementation Financials Contingencies Conclusion
Financial Analysis: Financial Analysis: The following costs are associated with the proposed strategies Page 19 in Mil $ Integration Strategy Integration Costs Technology Development Additional Salary & Admin Customer Segment Strategy Markeitng Team Contests Digitial Marketing Cost O2O Strategy Anlytics Team Offline Marketing Training Loss of Revenue from Licensing Total Aditoinal Costs 2019 2020 2021 2022 2023 35 700 20 25 800 25 20 900 30 20 950 40 20 1,000 45 40 20 40 20 40 20 40 20 40 20 1,400 1,200 1,200 1,200 1,200 2,857 4 2,802 4 2,907 4 2,992 4 3,067 4 133 133 133 133 133 5 5 5 5 5 500 550 555 580 600 Problem Recommendation Analysis Alternatives Implementation Financials Contingencies Conclusion
Financial Analysis: Financial Analysis: DTC is expected to be profitable in the 4th year of implementation Page 20 2019 2020 2021 2022 2023 Trends 32.5 9.99 3,893 Subscribers Monthly Avg Cost ($) Revenue (Mil $) 17.9 8.99 1,931 20.5 8.99 2,217 23.1 8.99 2,497 28.6 8.99 3,088 Profit (957) (616) (441) 65 795 Problem Recommendation Analysis Alternatives Implementation Financials Contingencies Conclusion
Financial Analysis: Financial Analysis: DTC is expected to be profitable in 5th year with a low subscriber take up scenario Page 21 2019 11.2 8.99 1,207 2020 2021 2022 2023 Trends 26.1 9.99 3,134 Subscribers Monthly Av Cost Revenue 16.0 8.99 1,724 18.0 8.99 1,942 21.1 8.99 2,278 Profits (1,650) (1,078) (965) (714) 67 Problem Recommendation Analysis Alternatives Implementation Financials Contingencies Conclusion
Financial Analysis: Financial Analysis: Two profits scenarios have been evaluated and unveil the profitability of the strategies Page 22 1,000 500 - 2019 2020 2021 2022 2023 (500) (1,000) (1,500) (2,000) Profits Predicted Profits Slow subscriber Take up Scenario Problem Recommendation Analysis Alternatives Implementation Financials Contingencies Conclusion
Contingency Plan: Contingency Plan: The following risks are underlying the suggested strategies and need to be mitigated in a timely manner Page 23 Anticipated Risk Probability Mitigation 1 2 3 4 5 6 7 Medium Close satisfaction tracking Top talent leaving the firm Low Increase marketing efforts Below forecasts sign-up for DTC Resistance from staff on integration Medium Strong feedback culture Medium Hire fresh staff, e.g. incubate talent Slow technological progress Low Reexamination of marketing channels Accelerated cannibalization Inability of offline channels to drive DTC subscribers Family-friendly brand image dilution Low Offer better packaging of free-trials Low Careful content selection Problem Recommendation Analysis Alternatives Implementation Financials Contingencies Conclusion
Conclusion: Conclusion: Three strategies have been introduced and outlined that will allow Walt Disney to manage the disruption it is undergoing Page 24 Organizational Assets Customer Acquisition Customer Experience Online-Offline (O2O) Strategy Integration Strategy Customer Segment Strategy Post-Merger Integration Cannibalization Threat Disruption from OTT Problem Recommendation Analysis Alternatives Implementation Financials Contingencies Conclusion
Nanyang Consulting N THANK YOU FOR YOUR ATTENTION We now welcome any questions you may have. Kindly turn this page for the appendix.
Nanyang Consulting N APPENDIX Kindly turn this page to access supporting material.
Financial Analysis: Financial Analysis: The following s subscriber number assumptions are underlying the financial model Page 27 2019 188.1 2020 191.6 2021 194.4 2022 196.5 2023 199.8 TV Users US OTT Viewer US OTT viewer UK OTT viewer India Total Conversion 202.7 206.1 209.4 211.5 215.5 19 2.1 20 2.2 22 2.4 24 3 27 3.5 246 13% 223.8 8% 228.3 9% 233.8 10% 238.5 12% 32.5 Subscribers 17.9 20.5 23.1 28.6 Problem Recommendation Analysis Alternatives Implementation Financials Contingencies Conclusion
