Disney (DIS) Reinforces Focus on International Streaming

The Walt Disney Company (DIS) is pulling out all stops to attract international viewers to its streaming platforms. The company recently announced a reorganization in its ranks and the formation of a new unit to produce local and regional content for Disney Plus. 

A newly formed International Content and Operations group will be led by Rebecca Campbell, who was previously president of Disneyland Resort. The group will be Disney's fourth content-creation engine. Campbell will be responsible for "expanding the international content creation pipeline [and] amplifying the Company's localized content strategy." Meanwhile, Michael Paull will transition to a new position as president of streaming from his former role leading Disney Plus. Jon Earley, formerly an executive at Disney Plus, has been promoted to president of Hulu.

The announcement further reinforces the importance of streaming to the entertainment behemoth's future. As the pandemic shuttered Disney's businesses, investors bid up its share price based on future expected gains for Disney Plus.

The move is also the first major reorganization announced by Disney CEO Bob Chapek after his predecessor Bob Iger's retirement on Dec. 31. "Disney's direct-to-consumer efforts have progressed at a tremendous pace in just a few short years, and our organization has continued to grow and evolve in support of our global streaming strategy," Chapek stated.

International subscribers are key to Disney's goal of reaching between 230 million and 240 million subscribers by 2024 for Disney Plus. At the end of its fourth quarter in October 2021, the service had 118.1 million subscribers. Its growth had slowed considerably after racking up new subscriptions at breakneck speed after release, with the fourth quarter accounting for only 2.1 million new users. Disney has committed to spending $33 billion on content in 2022.

A Push for International Content  

Disney's focus on ramping up its international content credentials is not surprising considering the growth of its international operations. New subscriptions from Hotstar—a streaming service focused on South and Southeast Asia—bumped up overall subscriber numbers for Disney's streaming division during the second and third quarters last year. But the company has been slow to cater to their tastes.

While other streaming services like Netflix, Inc. (NFLX) are raking in profits and new subscriptions from smashes like The Squid Game, Disney Plus has mostly banked on its existing library of new and legacy content. Chapek said the company was yet to "crank up the production machines for local-driven content" at Morgan Stanley’s Telecom Media Technology (TMT) conference last March. He said that local content would "augment" franchise-driven content in foreign markets and that the company was planning for 50 originals on Star—a content hub for international programming in Disney Plus—by 2024. In its press release making the reorganization announcement, Disney said that it had 340 titles at various stages of development and production. 

Last October, the company also unveiled its localization strategy for Asia—a big future market. Luke Kang, Disney's Asia-Pacific president, told Variety that it was planning to co-produce content with local production houses in Japan and Korea. But he added that the company's goal was to "lean more" toward original programming and was focused on "resonance play" rather than a "volume game" in which it produces many shows, one of which may or may not become a hit.  

That strategy is on display in Indonesia, the world's fourth-most populous country, where Disney has partnered with local wireless network provider and Hotstar to bundle and market its plans. Disney Plus is a leader in the country's nascent streaming market. According to a consultancy report, the [local] content acquisition strategy has "further emboldened" its attractiveness to Indonesian customers. It has followed a similar playbook in Malaysia, where it has partnered with Astro—a Pay TV platform—and plans to purchase local content from production studios in the country. 

The company's push to develop local content in international markets might weigh on its bottom line, however. Its average revenue per user (ARPU) in Asian markets, many of which do not have the broadband speeds necessary to support streaming services, is significantly lower compared to earnings in more lucrative markets like the United States and Europe. For example, Disney CFO Christine McCarthy revealed last August that the company's ARPU for its streaming services fell by $1.96 to $4.16 when Hotstar subscribers were included in the calculations.