Key themes from these mailings play out in a surprising move.

Outline of Newsletter #213

Argument: It is easiest, and most helpful, to look at Kevin Mayer’s Disney departure through the themes from past newsletters:

  1. Fiduciary vs Visionary executives;
  2. Legacy media model vs DTC Conversion Funnel;
  3. Curse of the Mogul;
  4. Value Proposition Design/Product-Market Fit;
  5. Scripted vs Unscripted marketplaces.

1. Fiduciary vs Visionary

Kevin Mayer is a perfect example of a fiduciary executive.

I also think there are very good reasons Mayer was not named CEO, mainly because Chapek has managed a majority of the Operating Income for Disney via Parks, and that source of income is now at risk. Mayer built the Disney+ rocket-ship, but Disney is still a business that sees 95% of its revenue from theme parks and Media Networks.

Only yesterday was Mayer in the same company as Reed Hastings and Ted Sarandos, Jason Kilar and Richard Stankey, and a rotation of executives at every other major streamer. Today, he is now in same elite company as Instagram’s Adam Mosseri, Snapchat’s Evan Spiegel, and YouTube’s Susan Wojcicki.

2. Legacy media model vs DTC Conversion Funnel

I think Disney+ is still a rocket-ship, but a fragile rocket-ship, at best. Mayer leaving, now, reveals just how broken Disney’s creative pipeline is.

I also think COVID has ruined Disney’s “flywheel” business model for the foreseeable future, and in particular, it has ruined a new flywheel effect they were building out for Disney+.

3. Curse of the Mogul;

I do not believe the Curse of the Mogul fairly applies to Disney, given its ability to continue to extract value from IP it owns: the value of the IP is proven, and pre-COVID, the operations continued to deliver returns to shareholders.

I think Mayer leaving hurts Disney in that it loses a voice who was trained to be a potential Disney CEO who understands the DTC marketplace unusually well.

4. Value Proposition Design/Product-Market Fit;

There is no doubt Disney+ will continue to be a priority for Disney. But. because the streaming business relies so heavily on the production of new original content, and there are few new productions able to emerge from the global shutdown of all productions anytime soon, the value proposition of Disney+ for now and the foreseeable future is an older library.

The enormous size of the original content marketplace reflects that audiences stay for new and original content. A legacy library, at scale, is not the win Disney, or Kevin Mayer, set out to accomplish.

5. Scripted vs Unscripted marketplaces

Mayer is making a fascinating trade of a limited, high-quality library of extraordinarily popular brands worldwide to an exponentially large library of lower quality, unscripted user-generated content. That opportunity is being driven almost entirely by the cheaper economics and extraordinary existing scale of unscripted video on TikTok.

Conclusion

A core lesson of my time at Viacom is how fragile digital businesses run by fiduciary executives can be. A business run by visionaries like Netflix has followed a clear, linear trajectory, both evolving with and driving the evolution of the Internet towards video streaming.

Mayer was a fiduciary executive, and despite the extraordinary optics of Disney+’s rapid growth, just over 60 days after Disney shut down its production and theme parks businesses, Mayer told Disney and the marketplace that effectively there were no more wins at Disney for him.

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