About five years ago I bumped into Greg Hywood at the airport. Greg was then the CEO of Fairfax Media (which is now called Nine Entertainment), one of the biggest media companies in Australia: newspapers, magazines, radio stations, websites, streaming services, etc. Greg was coming off a transformational year: newspaper ad rates were dropping, paywalls were going up, digital subscriptions and streaming were just starting to take off.
When we got to talking about whats next for Fairfax now that they were well down the path of their digital journey, he told me something that Ill never forget. He said: I need to reorganize the company. Right now Ive got all of these properties, each with their own sales and distribution arms, and theres a lot of redundancy, and were often working at cross-purposes. I need to re-organize and rethink my entire business in terms of just two things: products and customer segments.
I was reminded of that conversation this week when Disney announced a strategic reorganization of its media and entertainment businesses. According to the Financial Times:
Disney said it would separate content production from distribution, with an eye towards making television shows and movies to feed into its streaming services.
In the old model, all the various product groups at Disney were also responsible for their own distribution. Those two functions were joined at the hip across all their business units: the movie studio made and distributed movies, the streaming service made and distributed shows, etc.
But now, Disney is creating a single distribution arm, to be led by Kareem Daniel, that will decide where to put these shows and movies, with the primary focus being [Disneys] streaming services.
In other words, theyre consolidating everything into two buckets: products and customer segments. Kareem Daniels new job is to obsess about Disney customers and where they like to hang out: social media, streaming services, theme parks, movie theaters (one day theyll be back!), wherever.
Managing content creation distinct from distribution will allow us to be more effective and nimble in making the content consumers want most, delivered in the way they prefer to consume it, Disney CEO Bob Chapek said in a statement announcing the reorganization.
Our creative teams will concentrate on what they do bestmaking world-class, franchise-based contentwhile our newly centralized global distribution team will focus on delivering and monetizing that content in the most optimal way across all platforms.
Lots of people are saying that this is a response to COVID. Lots of people are saying its a response to Netflix. Others call it a general streamlining of operations. Im sure some of those factors are at play, but I think the broader story is that the media industry is evolving.
Media companies are realizing that channels (games, movies, shows, etc.) are really just a matter of format. They shouldnt be organized and incentivized to compete with one another. You need to put your customer squarely in the center of your organization by surrounding her with great media experiences, in whatever channel she chooses.
Thats the only way to establish a viable direct-to-consumer relationship. Heres what Bob Iger said several years before Disney+ launched:
Its one thing to be as fortunate as we are to have Disney, ABC, ESPN, Pixar, Marvel, Star Wars, and Lucasfilm. But in todays world, its almost not enough to have all that stuff unless you have access to your consumer who, because of technology, is providing you with incredible data to provide the consumer with a more customized and personalized experience that can be monetized better.
Disney is trying to set up the same kind of direct relationship that you might have with Apple, or Amazon or Google. Not by throwing a bunch of disparate products into the market, but by creating a single unified media experience.
And the first step in establishing that kind of relationship is to eliminate siloed business units, each with their own content and distribution arms, each with their own incentives and priorities.
Remember, its called Direct To Consumer for a reason that relationship cant be scattered across a bunch of product fiefdoms that are fighting and not sharing information. Instead, focus on making a great product, and then delivering that product to your customer through whatever channels make sense.
Lets say you have a family whose kids are obsessed with Marvel movies, but they still have a soft spot for Pixar. Maybe they thought the last Star Wars movie was kind of underwhelming, but now theyre all in on Baby Yoda. Maybe they cant wait to go visit Disneyland once things get back to normal. Shouldnt Disney know all that stuff, so they can curate content and offers that make sense for your family?
Theres a lesson here for all media companies: stop setting up your business units to fight one another. Have one team that is exclusively dedicated to making a great product. Have another team that is exclusively dedicated to figuring out who your customers are. Use both teams to surround your customers with great experiences.
Instead of you coming to Disney, Disney is now coming to you.