Disney Needs A New Hero, And It Isn’t A Price Hike

So, let’s get this straight. Disney+ subscriber levels dropped again, streaming operations incurred another nine-figure loss, a bunch of little-watched shows have been mothballed, and further programming cuts are coming. Oh, and while doing less, providing less, and losing subscribers, Disney said it will raise Disney+ and Hulu subscriber fees.

That would be….not what the economists normally suggest. It is possible that the revamped pricing structure for standalone subscriptions will make the new Disney+/Hulu bundle so irresistible hat it will quickly lead to lower churn and more revenue. Given the uninspiring state of Disney’s streaming business, it’s worth a try.

The price hike has the slightly uncomfortable smell, much like that $2 billion ESPN-Penn Entertainment gambling deal announced the day of earnings, of CEO Bob Iger trying to scrape together a pile of (relative) nickels to pay off the month’s rent. You might get there, but not quickly, and maybe not permanently.

In his first run as CEO, Iger repeatedly goosed Disney’s story-telling capabilities with well-timed, transformative deals: LucasArts, Marvel, Pixar, and most of Fox.

Those first three were home runs, in hindsight especially for the modest prices Iger paid for each. But turns out the Fox deal cost a lot, $69 billion, and wasn’t so great. It’s left Iger with a debt hangover that complicates his revival efforts in his second tour as CEO.

Worse, the Fox acquisition brought a lot of assets, but didn’t clear up that complicated Hulu ownership. Nor did it add much in the way of blockbuster franchises, other than Avatar and some stray Marvel rights. John Landgraf and FX’s terrific programming are a gift to the universe, but nothing they make is made for a mass audience. There’s no big franchise beast here.

At the same time, Disney+ is seeing the effects of Iger’s decision to super-serve Star Wars and Marvel fans with far too much stuff. Even many hard-core fans have seemingly wearied of the endless wave of Star Wars side tales and Marvel installments, whatever the charms of any given series or feature.

That’s led to declining returns on very expensive investments, and a big hole in the company’s overall content strategy. The audience for these projects probably needs a bit less of all these franchises and more of….something different.

So if the Star Wars and Marvel franchises are getting a little long in the tooth, just go create some new ones. Easy, right? Not so much. Developing mega franchises takes years.

And buying something, Iger’s previous strategy, isn’t as easy as it used to be. The list of independent companies with durable franchises worth plugging into the Disney machine is a lot shorter than in the early 2000s.

Worse, unlike back in the early 2000s, Disney must compete with the deep pockets of Netflix, Amazon and Apple.

The Big Three tech streamers have scooped up franchises such as Jack Ryan, The Wheel of Time, Lord of the Rings, Jack Reacher, Stranger Things, and all those Russo Bros. projects like The Gray Man. And in case you missed it, when Amazon bought my former employer MGM, it also acquiredJames Bond and Rocky. Bond’s post-Daniel Craig future is a bit murky, but MGM has artfully updated Rocky, enlisting Michael B. Jordan in a string of well-regarded Creed movies.

To get an idea how slim the franchise pickings are, simply look at how hard Lionsgate and its Starz streaming channel have been trying to get bought the past couple of years, using a variety of mechanisms to further entice buyers. No dice. The mini-major that owns The Hunger Games and The Twilight Saga can’t buy a buyer, even with a market capitalization of less than $2 billion. Starz, which has Outlander and the Power franchise, is similarly underappreciated.

What else is out there that might work for Disney’s family-friendly brand needs that doesn’t already belong to someone else? Not much.

I’ve written in the past about Hollywood’s relative indifference to the game industry and the Metaverse, the forever-approaching next generation of immersive experiences. Last year, Disney was among the players circling Electronic Arts after Microsoft began an $69 billion acquisition of big game publisher Activision-Blizzard.

But an EA deal never quite came together, perhaps in part because of Microsoft’s long regulatory road (the deal now appears likely to close before the end of 2023, nearly two years after Microsoft announced it).

That doesn’t mean there aren’t deals out there to be done, regardless of what FTC Chair Lina Kahn thinks about extending antitrust regulation in new directions.

EA has big franchises such as Battlefield, The Sims, and Madden NFL, and terrific studios such as Bioware and Dice. Not all of its holdings could obviously translate to a different screen. Then again, no one thought The Super Mario Bros. Movie would gross more than $1.3 billion either.

You could say much the same about Take-Two Interactive, the long-time publisher behind Grand Theft Auto. GTA is why you’ll never see Disney under Iger buy that company. That said, Take-Two has other major franchises, such as Red Dead Redemption and Take-Two’s thriving 2K Sports division, which like EA Sports would pair nicely with ESPN.

The real opportunity might lie ever so slightly lower on the league table for big game publishers. I’m talking about Roblox, which is far more beloved by millions of tweens and teens than just about anything on Disney+, never mind its fading linear TV operations.

Roblox has tens of millions of user-created games and averages 56 million users per day. The games are largely created and built out by Roblox’s own players. Brands have discovered the ardent audiences too, and are commissioning talented player/creators to help build brand experiences on the service. And Roblox is well situated for the Metaverse, whenever that future does arrive.

Best of all, Roblox stock is cheap these days after a big run-up during the pandemic’s early days. Shares are less than $30 a piece, down roughly three-fourths since a November, 2021 peak. The market capitalization these days is less than $18 billion. That’s more than, say, Paramount Global, but it’s also not controlled by single person who seems to enjoy being a mogul.

Disney needs a couple of things badly: new sources of franchise-worthy intellectual property that can draw in audiences for years to come, and a way to keep younger viewers around once they age out of the kiddie shows on Disney+.

Would buying Roblox fix everything facing Disney? Not by a long shot. But for Buy-Side Bob, it might be one of the few transformative deals out there that he could actually make happen in this complicated new media landscape.