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After Disney+ Day and D23, Disney (and ESPN) Is Ready for War

Netflix will be first with ads, but with discounts, synergy, and an activist investor off its back, Disney is ready for the long haul.

ANAHEIM, CALIFORNIA - SEPTEMBER 11: Disney cosplayer Emily Newton as Cinderella poses outside Disney's D23 Convention on September 11, 2022 in Anaheim, California. (Photo by Daniel Knighton/Getty Images)

ANAHEIM, CALIFORNIA – SEPTEMBER 11: Disney cosplayer Emily Newton as Cinderella poses outside Disney’s D23 Convention.

Getty Images

On September 7 — otherwise known as the Day Before Disney+ Day — Disney execs made a hard sell at the Bank of America Securities Media, Communications & Entertainment Conference for the studio’s advertising (coming soon to Disney+!), film slate, and parks. This weekend was three days of D23. Along the way, Mickey Mouse made a lot of cheese: $7.41 billion in market capitalization, to be exact.

The money will come in handy soon as Disney+ (market cap: $212.19 billion) takes on Netflix (market cap: $105.19 billion) in the next phase of the streaming wars: AVOD. It’s especially important Disney capitalize on the build-up, because it looks like its planned December launch for ad-supported Disney+ will come a month after Netflix ads make their debut. Disney+ may lose that sprint, but it may have an edge in the marathon for revenue — and the momentum.

Disney was “in a good position to begin with,” Whip Media’s research and insights lead Eric Steinberg told IndieWire. “Before they head into their price increase, I think they’re trying to get people in the tent one more time.”

Disney+ AVOD will cost what the SVOD version currently costs, $7.99, which means the ad-free price will hike. That means it’s time to pull out all the stops: Disney+ Day restored the annual promotional $1.99 introductory price tag for one month of the service, there’s discounts at Disney parks and cruises (buy 2, get 2!), as well as agreements with AMC Theatres and Uber.

“They’re bringing to bear the entire corporation here,” Steinberg said. “We’ll see if that can get more subscribers in the door.”

D23 EXPO 2022 - The Ultimate Disney Fan Event presented by VISA - brings together all the worlds of Disney under one roof for three packed days of presentations, pavilions, experiences, concerts, sneak peeks, shopping, and more. The event, which takes place September 9, 10, and 11 at the Anaheim Convention Center, provides fans with unprecedented access to Disney films, series, games, theme parks, collectibles, and celebrities. (The Walt Disney Company via Getty Images) D23 Expo

D23 EXPO 2022 – The Ultimate Disney Fan Event.

The Walt Disney Company via Gett

A major part of the corporation — and one that will remain that way — is ESPN. At Wednesday’s Bank of America Securities event, Disney CFO Christine McCarthy was asked about activist investor Daniel Loeb’s open letter from the spring that urged Disney to sell or spin off ESPN.

“As a management team, we always look at our assets. Is our portfolio made up of the right group of assets? Are we leveraging things across the business so it’s more than just a standalone business kind of barnacled onto a larger company?” she responded. “ESPN is a great business and it is fully integrated into how we think about delivering entertainment and compelling content to consumers.”

McCarthy’s boss Bob Chapek took it a bit further during D23. “If everyone wants to come in and buy it… I think that says something about its potential,” he told the Financial Times. “We have a plan for it that will restore ESPN to its growth trajectory. When the rest of the world knows what our plans are, they will be as confident about that proposition as we are.”

Loeb either got those plans early or he simply got the message, because on Sunday the Third Point hedge-fund CEO backtracked. “We have a better understanding of [ESPN’s] potential as a standalone business and another vertical for [Disney] to reach a global audience to generate ad and subscriber revenues,” he tweeted. “We look forward to seeing [ESPN President Jimmy Pitaro] execute on the growth and innovation plans, generating considerable synergies as part of The Walt Disney company.”

Equity analysts at Wells Fargo opined that, despite Loeb’s valued (and valuable) opinion, other key investors in Disney “viewed a spin(off) as unnecessary.”

“Value creation was not obvious,” Steven Cahall wrote in a Monday morning newsletter, “and sports’ role in [streaming] is yet to be determined.” But it is clear to Cahall that ESPN will serve “as a core piece to that strategy.”

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