IF YOU WANT TO GO

WHERE YOU NEED TO BE

YOU CANNOT STAY
THE WAY YOU ARE
N Nanyang
Consulting

WALT DISNEY
“Blowing Up The Castle?”

Presented to: Robert A. Iger, Chairman and CEO at The Walt Disney Company
11 January 2019
Presented by: Daniela, Minghao, Victor, Vishnu
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: Walt Disney is facing three key challenges that need to
be overcome to compete in an increasingly disrupted market Page 5

Post-Merger Cannibalization Disruption from

Integration Threat 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: 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
Integration Customer
(O2O)
Strategy Segment Strategy
Strategy

Post-Merger Cannibalization Disruption from

Integration Threat OTT

Problem Recommendation Analysis Alternatives Implementation Financials Contingencies Conclusion

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: 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: The following positioning map illustrates
the competitive landscape Walt Disney competes in Page 9

Large Content Volume

Walt Disney

Netflix
Hulu HBO

Standalone Diversified
Services Services
YouTube
Premium Amazon
Prime

Low Content Volume

Problem Recommendation Analysis Alternatives Implementation Financials Contingencies Conclusion
 Strategic Alternatives: Six key strategies have been considered
and analyzed to identify the best-fit recommendations Page 10

Strategic Customer Innovation

STRATEGY Fit Fit
Profitability Feasibility
Level DECISION

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): 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): Integration Strategy
Page 12

How
Operations & HR
 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
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

Problem Recommendation Analysis Alternatives Implementation Financials Contingencies Conclusion

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): Customer Segment Strategy
Page 14

How
Operations & HR Marketing

 Conduct market research on international OTT  Sponsor a family-related script-writing contest

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
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

Problem Recommendation Analysis Alternatives Implementation Financials Contingencies Conclusion

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): 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: The following metrics should be
used to monitor the success of the suggested strategies Page 17

Key Performance Indicator Target

1  Attrition rate of employees Less than 10%

2  Employee satisfaction level 90%

3  Customer satisfaction level (DTC) 92%

4  Number of DTC subscribers 32.5 million by 2023

5  Cannibalization rate of cable TV with DTC Below 2%

6  Pace of introduction of Fox franchises into theme parks 2+ p.a.

7  Conversion rate of free-trials to paid service 40%

8  Number of DTC sign-ups due to theme park trials 5 million p.a.

Problem Recommendation Analysis Alternatives Implementation Financials Contingencies Conclusion
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 Develop Launch

International marketing team and campaign Develop Launch

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: The following costs are associated with the
proposed strategies Page 19

in Mil $ 2019 2020 2021 2022 2023

Integration Strategy
Integration Costs 35 25 20 20 20
Technology Development 700 800 900 950 1,000
Additional Salary & Admin 20 25 30 40 45
Customer Segment Strategy
Markeitng Team 40 40 40 40 40
Contests 20 20 20 20 20
Digitial Marketing Cost 1,400 1,200 1,200 1,200 1,200
O2O Strategy
Anlytics Team 4 4 4 4 4
Offl ine Marketing 133 133 133 133 133
Training 5 5 5 5 5
Loss of Revenue from Licensing 500 550 555 580 600
Total Aditoinal Costs 2,857 2,802 2,907 2,992 3,067

Problem Recommendation Analysis Alternatives Implementation Financials Contingencies Conclusion

Financial Analysis: DTC is expected to be profitable in the 4th
year of implementation Page 20

2019 2020 2021 2022 2023 Trends

Subscribers 17.9 20.5 23.1 28.6 32.5
Monthly Avg Cost ($) 8.99 8.99 8.99 8.99 9.99
Revenue (Mil $) 1,931 2,217 2,497 3,088 3,893

Profit (957) (616) (441) 65 795

Problem Recommendation Analysis Alternatives Implementation Financials Contingencies Conclusion

Financial Analysis: DTC is expected to be profitable in 5th year
with a low subscriber take up scenario Page 21

2019 2020 2021 2022 2023 Trends

Subscribers 11.2 16.0 18.0 21.1 26.1
Monthly Av Cost 8.99 8.99 8.99 8.99 9.99
Revenue 1,207 1,724 1,942 2,278 3,134

Profits (1,650) (1,078) (965) (714) 67

Problem Recommendation Analysis Alternatives Implementation Financials Contingencies Conclusion

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: The following risks are underlying the
suggested strategies and need to be mitigated in a timely manner Page 23

Anticipated Risk Probability Mitigation

1  Top talent leaving the firm Medium Close satisfaction tracking
 Below forecasts sign-up for
2 DTC
Low Increase marketing efforts
 Resistance from staff on
3 integration
Medium Strong feedback culture

4  Slow technological progress Medium Hire “fresh” staff, e.g. incubate talent

5  Accelerated cannibalization Low Reexamination of marketing channels

 Inability of offline channels to
6 drive DTC subscribers
Low Offer better packaging of free-trials
 Family-friendly brand image
7 dilution
Low Careful content selection

Problem Recommendation Analysis Alternatives Implementation Financials Contingencies 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
Integration Customer
(O2O)
Strategy Segment Strategy
Strategy

Post-Merger Cannibalization Disruption from

Integration Threat OTT

Problem Recommendation Analysis Alternatives Implementation Financials Contingencies Conclusion

N Nanyang
Consulting

THANK YOU
FOR YOUR ATTENTION

We now welcome any questions you may have. Kindly turn this page for the appendix.
N Nanyang
Consulting

APPENDIX

Kindly turn this page to access supporting material.

Financial Analysis: The following subscriber number
assumptions are underlying the financial model Page 27

2019 2020 2021 2022 2023

TV Users US 188.1 191.6 194.4 196.5 199.8

OTT Viewer US 202.7 206.1 209.4 211.5 215.5

OTT viewer UK 19 20 22 24 27
OTT viewer India 2.1 2.2 2.4 3 3.5
Total 223.8 228.3 233.8 238.5 246
Conversion 8% 9% 10% 12% 13%
Subscribers 17.9 20.5 23.1 28.6 32.5

Problem Recommendation Analysis Alternatives Implementation Financials Contingencies Conclusion