Disney’s troubles show how technology has changed the business of culture

From The Economist:

“Why do we have to grow up?” Walt Disney once wondered. As it launches its centenary celebrations on January 27th, the Walt Disney Company has sustained its appeal to the young and young-at-heart. This year Hollywood’s biggest studio will invest more in original content than any other firm. It dominates the global box office, with four of last year’s ten biggest hits, and has more streaming subscriptions than anyone else. Its intellectual property (ip) is turned into merchandise ranging from lunchboxes to lightsabers, and exploited in theme parks that are churning out healthy profits even as covid-19 lingers. More than just a business, Disney is perhaps the most successful culture factory the world has ever known.

So the upheaval rocking the company today has relevance far beyond its empire. Uncertainty about the future profitability of Disney’s enormous entertainment portfolio has caused a rollercoaster ride in its share price. It threw out its chief executive in November and will soon replace its chairman. It also faces a rebellion from an activist investment firm that wants a board seat in what could turn into the biggest face-off since Michael Eisner, a previous ceo, was forced out in 2005. Disney’s trials are not just a boardroom drama. Similar crises are unfolding at other leading culture factories, from Warner Bros to Netflix. The reason is a technological revolution that is turning Hollywood upside down.

The continuing pre-eminence of a centenarian like Disney has confounded many predictions. Since the days of “Steamboat Willie”, Mickey Mouse’s first outing in 1928, there has been an explosion in the supply of video entertainment. Television, cable, home video and then the internet have offered increasing amounts of choice. Anyone with a phone can record video and make it accessible to billions of people, free of charge. More content is uploaded to YouTube every hour than Disney+ holds in its entire streaming catalogue.

Many predicted that this surge of niche content would bring down mainstream hit-makers. They were mostly wrong. Infinite choice in entertainment has ruined the companies which produced middling content that people watched because there was nothing else on—witness the collapse in broadcast-television ratings. But those at the very top of the business have thrived. When anyone can watch anything, people flock to the best. Global streamers like Netflix and Amazon have more than 200m direct subscribers, once an unimaginable number.

Those who have fared best at a shrinking box office are the owners of ip that is already popular. As people visit cinemas less often and competition intensifies, studios have pumped money into films people will turn out to see even when they go only three or four times a year. America’s ten biggest films last year were all sequels or parts of a franchise; Disney’s upcoming slate includes an 80-year-old Harrison Ford returning for a fifth outing as Indiana Jones. It has not been a golden age for cinema, but for those at the top it has been a profitable one.

Now technology is shaking things up again. Online distribution has enticed tech firms that make the hardware and software used for streaming. Silicon Valley is of a different scale from Tinseltown (Amazon’s growing advertising business is already three times bigger than Disney’s) and its moguls have no need to make money from streaming, which they see as an add-on to their main business. Hollywood initially wrote off the nerds. But the nerds have enough money to take creative risks. Last year Apple won the best-picture Oscar with “coda”, a comedy-drama partly in sign language, less than three years after it entered the film business. The more fine content these new producers make and sell below cost, the greater the risk that older studios will fall from the top tier of media into the perilous middle.

Link to the rest at The Economist and thanks to C. for the tip.

PG says all the traditional media companies are having their worlds rocked. And the rocking is far from over.

6 thoughts on “Disney’s troubles show how technology has changed the business of culture”

  1. 1- Disney isn’t in the business of culture. They’re in the entertainment business.

    2- Their recent troubles stem from forgetting that and forgetting their business model revolves on lowest common denominator content. Much of their creatives’ output of the past few years is niche content targetted at *themselves* not the paying public. Examples abound but STRANGE WORLD, MS MARVEL, and SHE-HULK are all case studies of what happens when “mass entertainment” fails to entertain the *masses*. Each one is worth a rant by themselves.

    3- Only one streaming service is run by a tech company: APPLE+. And it is in fact required to make a profit, just like all the others. Streaming services are expensive to run and exist to make a profit (not engage in a culture war. See above, Disney). Apple+ doesn’t make make a profit because Apple chose to launch the service without a backlist of owned content or an ad-supported tier. They are the only ones to have neither. Again, Apple+ failings are worth a long rant but are best summarized by pointing out that every owner of Apple hardware got a free year and so few chose to actually pay they had to offer a second year.

    Wrong example for a wrong thesis.

    Streaming *is* changing the *entertainment* business but the proper examples of how tech is changing that business are the CableCosm

    • Apple+ doesn’t make make a profit because Apple chose to launch the service without a backlist of owned content or an ad-supported tier.

      Well, that was dumb of them. They should have just annexed an existing streaming site, like Rupert Murdoch did when he bought Tubi, which already had a library of 20,000 movies and TV shows. And since he owns HarperCollins, he can integrate the IP to make adaptations for “original” content on his channel. The HarperCollins factor is yet another reason for authors to pay attention when negotiating their contracts.

      • Apple is ridiculously conservative with its cash stash. It’s what you’d expect when you make a COO CEO and he keeps the same mindset.
        In any given year they only spend a few tens of millions in M&A, unlike Google and MS. Mind you, most of Google’s buys don’t move the needle in diversifying their revenues (Facebook is the same) but MS is very busy and effective in identifying complementary companies worth buying or investing in. Like the $10B they are putting into OpenAI or today’s deal with a Korean Solar panel vendor to power their datacenters.

        As for Apple+, rumors were they looked into buying MGM but found the price too high. Which is good: Amazon bought it for $9B and now own Stargate. Latest rumor is the showrunners of THE EXPANSE want Stargate. Apple is the last outfit I’d trust to do good SF after the abomination they made of FOUNDATION.

        Instead of buying MGM, LIONSGATE, or COLUMBIA– the last libraries still available–they instead throw a couple million at every Hollywood name that comes calling. They’ve scored a couple of successes but most of their content ranges from meh to painful to horrible. Nothing anybody would subscribe to and stay subscribed more than a month. You can watch the handful of tolerable stuff in a week or so.

        They were equally…unwise…in betting 100% on China, ignoring the workers abuses, genocide, IP theft… And now are scrambling and overpaying to move 25% of iPhone production to India. Which, if things play out as they are trending, means their iPhone production will drop 70% or more pretty soon.


        Samsung closed all the China operations in 2019. October, no less.
        COVID was rampaging by November.

        Apple is facing a well earned reckoning.

        • I remember hearing about Samsung and hoping ever since that it would accelerate a trend of decoupling from China. I thought Covid was what prompted Samsung to move operations, but I might misremembering the timeline. As for Apple … they need that reckoning. Maybe it will prompt them to re-think their leadership.

          As for Stargate, I thought it had been removed from Prime, but your comment prompted me to investigate. It seems SG-1 has two “playlists,” that come up in the search results. The one I was watching is still available after all. The second playlist with the pastel thumbnails says the show is not available, which tricked me into thinking the show was gone altogether from Prime. Perhaps the people in charge of keeping that straight have been laid off like all the other tech workers.

          I’m behind on the Expanse; my mother is hooked on a particular storyline on that show. Expanse showrunners I will give the benefit of the doubt to, but Amazon made a huge mistake hiring J.J. Abrams’ incompetent disciples to make the Rings of Power. A lot of people need to be fired.

          • Samsung started leaving China well before the pandemic. The reason being that China ran out of cheap workers back around 2008 and that’s when their economy peaked. It’s been cooking the numbers all along but especially since 2008 they have been running on debt. They got old before getting rich or getting advanced tech. The country is too opaque to know exactly how bad it is but good things aren’t happening.

            Stargate: a friend of mine was belatedly watching STARGATE UNIVERSE when it vanished on him but it was a one day thing. The original showrunners had a new series proposal on the table at MGM when Amazon bought them. No action since so they moved on and are launching THE ARK for SyFy/Peacock. Feb 1st:


            I’m getting SGU vibes.

            And yes, a lot of showrunners need firing but it’s not just AMAZON STUDIOS over RINGS and WHEEL. It’s especially true at Disney, where to save money and maximize control, they’ve turned to neophytes and (apparently) Film School dropouts. Bad, bad, bad writing in serious need of revising or trashing has been filmed. It seems like peak TV has outstripped Hollywood’s supply of competent writers.

            APPLE’s reckoning is going to hit harder than most because, while the rest of big tech mostly froze hiring last spring and started “pruning” marginal endeavors, Apple has blythely ignored the “winds of winter”. Zero adjustments. Not a very proactive company. (Latest reports are the new $600 Mac Mini runs rings around their $6000 Mac Pro. Not that the mini is even close to perfect, but it shows their usual neglect of the Mac business.)

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