Latest / The Pivot Podcast with Fexingo: How Businesses Change Direction and Survive Disruption / How Disney Pivoted From Theme Parks to Streaming
Transcript
- Lucas: There is a statistic from Disney's latest annual report that I can't stop thinking about. In 2019, the year Disney Plus launched, the company spent about nine billion dollars on content across all its businesses. By fiscal 2025, that number had tripled to roughly thirty billion. Thirty billion dollars a year on content. Luna: That is an enormous bet. And it's not like Disney was struggling before streaming. They had the theme parks, the studio, cable networks — they were printing money. Lucas: Exactly. And that's what makes this pivot so interesting. Disney didn't pivot from a position of weakness like a lot of the companies we talk about on this show. They were dominant. In 2018, the year before Disney Plus, the parks division alone generated over twenty billion dollars in revenue. The studio had seven of the top ten box office hits. Cable was still cash-flow positive. But Bob Iger saw the writing on the wall. He saw that cable subscriptions were declining about two to three percent per year, and that the linear bundle was slowly unwinding. Luna: So he decided to cannibalize his own business before someone else did. That takes a rare kind of conviction. Lucas: It does. And the move that really signaled the depth of the pivot was the acquisition of 21st Century Fox's entertainment assets in 2019 for seventy-one billion dollars. At the time, a lot of analysts scratched their heads. Why buy a legacy studio with declining cable channels? But Iger's play was about content libraries — Fox gave Disney control of 'The Simpsons', 'Avatar', the X-Men and Fantastic Four film rights, and a huge back catalog of TV shows that could feed a streaming service for years. Luna: It was a content land grab. And it locked up decades of intellectual property for Disney Plus. Lucas: Right. And then you combine that with Disney's own vault — the animated classics, Marvel, Lucasfilm, Pixar — and suddenly you have the deepest content moat of any streaming service. By the end of 2025, Disney Plus had over 170 million global subscribers. That's still behind Netflix, but it's a remarkable figure for a service that didn't exist six years earlier. Luna: What about the internal resistance? I imagine the cable executives weren't thrilled about a streaming service that was essentially stealing their lunch. Lucas: You're right to ask. There was definitely friction. The Disney Channel, Freeform, and the ABC network had been profitable for decades. But Iger made a strategic decision to give the streaming division priority on content and talent. For example, the 'Star Wars' series — 'The Mandalorian', 'Andor' — those all went to Disney Plus, not to cable. That sent a clear message inside the company. Luna: And it worked. 'The Mandalorian' was a tentpole that drove millions of sign-ups. But the pivot wasn't cheap. Disney's direct to consumer segment lost money for years — something like four billion in 2020 alone. Lucas: The losses were staggering. In fiscal 2020, the streaming losses were about 2.8 billion. By 2022, they peaked at over four billion. But by 2024, the segment finally turned profitable. That's a long runway and a lot of patience from the board. If the theme parks hadn't recovered as strongly as they did after COVID, the whole strategy might have been in jeopardy. Luna: So the parks essentially subsidized the streaming pivot during its loss-making years. That's a fascinating dynamic — one old business funding the new one. Lucas: Exactly. And it's not just Disney Plus. They also own Hulu, which they fully consolidated in 2024, and ESPN Plus. The ESPN piece is interesting because live sports is one of the few things that still drives cable subscriptions. Disney's been experimenting with a direct to consumer ESPN streaming bundle, and early 2026 numbers show it's gaining traction — north of 25 million subscribers. But it's a delicate balance because the cable operators still pay huge carriage fees for ESPN. Luna: So they're walking a tightrope — trying to transition viewers to streaming without killing the cash cow entirely. Lucas: That's the central challenge of the next few years. Iger stepped down as CEO in 2020, then came back in late 2022, and he's been very clear that streaming is the future. Under Bob Chapek, there was some strategic confusion — Chapek prioritized parks and theatrical windows. Iger's return refocused everything on direct to consumer. Luna: And you can see the results in the 2025 numbers. Disney's revenue from direct to consumer was over 35 billion, compared to about 28 billion from parks. That's the first time streaming has surpassed the core park business. Lucas: It's a huge milestone. And it validates the pivot. There are still questions about profitability — Disney's overall operating margins are still below where they were a decade ago — but the strategic direction is clear. They are now a streaming company that also happens to own theme parks and movie studios, rather than the other way around. Luna: That reframing is everything. And you know, thinking about these conversations we have on this show — if they move your own thinking forward even a little, one way listeners have supported the show is at buy me a coffee dot com slash fexingo. It's a small thing, but it helps keep things ad-free and independent. And honestly, it's just a nice signal that people find value in this. Lucas: Yeah, I appreciate that. It lets us keep the focus purely on the story, which is how I think both of us prefer it. So back to Disney — one of the less discussed aspects of the pivot is how it changed Disney's relationship with talent. Streaming requires a massive volume of content, which means more shows, more deals, more risk. Luna: And more competition for talent. Netflix was already poaching top creators with huge upfront deals. Disney had to adapt. They started paying premium rates to keep people like Jon Favreau and the Russo brothers in-house. Lucas: That's right. And they also had to learn how to release content in a streaming-first world. The theatrical window shrank — from ninety days to forty-five to sometimes zero, like with 'Soul' and 'Turning Red' during the pandemic. That created tension with theater chains, but Disney decided the long-term value of building a streaming subscriber base was worth the short-term friction. Luna: And now in 2026, we're seeing the results of that. Disney Plus has a richer, deeper catalog than almost any competitor. The question is whether they can maintain the growth rate. Subscriber growth in mature markets like North America has slowed to single digits. Lucas: That's the next chapter. Disney is leaning into international markets — India, Latin America, Southeast Asia — where penetration is lower. They've also bundled Disney Plus, Hulu, and ESPN Plus at a discount to reduce churn. The average revenue per user is still lower than Netflix's, but the bundling strategy seems to be working. Churn rates for the bundle are under two percent a month, which is industry-leading. Luna: So the pivot is not just about getting big fast — it's about building a sticky ecosystem. That's a smart play for the long haul. Lucas: Absolutely. And in many ways, Disney's pivot mirrors what we've seen from other media giants, but on a much larger scale. They had the most to lose — the most valuable theme parks, the most beloved intellectual property, the most powerful brand in entertainment. And they chose to disrupt themselves anyway. That's the hallmark of a genuinely strategic pivot. Luna: I think it also shows the importance of leadership conviction. Iger didn't have to do this. He could have milked the cable business for another decade. But he saw the trend lines and he acted. Lucas: That's the lesson for any business leader, really. The most dangerous thing you can do is fall in love with your own business model. Disney was in love with theme parks and animated movies, but Iger loved the customer more. He followed where they were going, not where they had been. Luna: And that's probably the most important takeaway. Whether you're running a media conglomerate or a small startup, the question is always: are you willing to burn the boats for the future? Lucas: Disney burned the boats. And now they're sailing on a streaming ocean. It'll be interesting to see where the current takes them over the next five years.