That’s All Folks! Warner Brothers and Disney Leave Their Competitors in the Dust

Industry leaders never stand still. Two of them, Disney and Warner Brothers, are moving faster than The Flash and Kid Quick. Both companies recently announced transformations to their businesses that shocked the entertainment world. In fact, Disney and Warner Brothers are positioning themselves to flourish by embracing digital-first experiences. 

Two Big Moves That Shake up the Entertainment World

The pandemic rocked both Disney and Warner Brothers to the core in 2020 as movie theaters and theme parks either shut down completely or suffered dramatic drops in attendance. Disney Studios and Warner Brothers were left holding expensive movie titles such as Disney’s Mulan and Warner Brothers’s Wonder Woman 1984 (WW84). Disney’s parks and resorts business was crushed, resulting in 28,000 job cuts

But Disney had an ace in the hole: streaming content. In 2019, Disney took on ownership of Hulu and launched Disney+, which accumulated 72,000 subscribers in just one year (and now 86,000 as of this writing). And boy, did Disney play that ace card in 2020:

  • In September, Disney released its feature film Mulan on Disney+ (while distributing the movie in theaters internationally). The action triggered blowback among theater chains who were accustomed to enjoying traditional 90-day theatrical window before studios distribute movies direct to consumers. But 2020 is not normal times. The streaming approach probably salvaged Mulan’s financial returns, which was not lost on other studios. Disney will now release its latest Pixar film, Soul, on Disney+ December 25. But Mulan was just a warm-up for Disney’s December 10 investor day, when Disney announcing that 10 Star Wars series are coming to Disney+, among many other announcements that made Disney’s stock price soar
  • Disney also reorganized its media and entertainment divisions around its streaming content business – a huge move that underlined just how important digital experiences are to Disney’s future. Disney noted that the company’s creative resources, including Pixar and Lucasfilm, will focus on creating content for streaming first, and Disney will aggressively monetize streaming even more than it does – essentially making Disney+ the company’s engine growth. 

Warner Brothers had bombshells of its own to announce. First, Warner Brothers announced that its $200 million production of WW84 was going to be distributed Christmas Day on HBO Max, the streaming service owned by Warner Brothers parent WarnerMedia. Then Warner Brothers upped the ante by announcing that its entire slate of films for 2021 would also be distributed on HBO Max along with movie theaters. Critics such as director Christopher Nolan complained that Warner Brothers had chosen “the worst streaming service” and that the move makes no economic sense. Theater owners were angry. The Directors Guild of America demanded a meeting to discuss the studio’s plan. But analyst Bob Lefsetz said that the critics reminded him of the music industry clinging to compact discs in the early 2000s – a wrongheaded mentality that ignores how times are changing.  

With major movie theaters facing a downward spiral in box office sales, Warner Brothers and Disney, like every entertainment brand, have faced hard choices. Should they wait for people to return to movie theaters, and, if so, when would that time come? Should they sell their movies to streaming services?  But unlike the others, Disney and Warner Brothers are making moves to protect their assets and push themselves into the future. Here’s what we can learn from them:

Lessons Learned

  • In the face of uncertainty, be bold, but not reckless. Both Disney and Warner Brothers made their moves after first seeing how direct-to-streaming experiments were working out in 2020 – notably Mulan and the less heralded but successful (relatively speaking) direct-to-consumer launch of Trolls Worldwide by Universal.
  • Expect blowback. As noted, both Disney and Warner Brothers faced some harsh criticism for bypassing movie theaters. And, of course they did. They are challenging the status quo, as innovators such as Airbnb and Uber have done in their industries. 
  • Double down on your competitive advantage. Disney and Warner Brothers have access to their own streaming platforms, which creates a competitive moat that other studios lack.

Differentiation through Digital Experiences

Now comes the big question: as streaming services become increasingly saturated, how will Disney and Warner Brothers build loyalty and create differentiation with digital content?

One way, of course, is to keep cranking out culturally relevant content that fans love (just check out the buzz that The Mandalorian has generated). But increasingly, streaming platforms will need to borrow a page from Netflix by differentiating through the customer experience. Consider how Netflix created binge watching by releasing entire seasons of content at once – a dramatic shift in the user experience. In addition, Netflix has introduced innovations such as the “choose-your-own adventure” interactive content in which audience members can customize content plot lines. Netflix has also examined getting into interactive gaming and user-generated content.

The opportunity for Disney and Warner Brothers is to harness the value of customer data to anticipate and respond to audience preferences – going beyond what shows they want to watch and considering what kind of experience will surprise and delight them. 

Contact Isobar

It’s all about the experience. Always. Contact Asher Wren to learn more about how we can help your brand build digital experiences.

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