Nelson Peltz Says Disney Should Eliminate Hulu + Live TV Altogether
As part of the new 133-page presentation released by Trian Fund Management today, Nelson Peltz laid out his strategy for Disney’s streaming business going forward.
To see Disney’s direct-to-consumer units reach “Netflix-like” margins of 15-20% by 2027, Peltz believes that the company needs to make drastic changes.
As we previously discussed in more detail, Trian Fund Management is arguing that Disney needs “more shots on goal” in streaming to achieve better results.
Basing their strategy on Netflix’s success, Trian says that Disney should “explore allocating more budget dollars across lower-cost, easier-to-produce projects to further balance Disney’s higher-cost franchise content; prioritizing ‘retention’ content spend should diversify away the risk of expensive streaming flops.”
Trian’s ESPN Strategy
Perhaps the biggest question looming over Disney is how ESPN will transition to a streaming-first platform. In their white document, Trian argues that the “worldwide leader in sport’s standalone streaming service should be launched ideally with a ‘bundle’ partner like Netflix or Amazon.”
Joining forces with the likes of Netflix has been a constant refrain for Peltz. Why Disney would potentially cannibalize its own bundles to join forces with a third party, however, remains unclear.
If Disney does not choose to go the partner route, Peltz argues that ESPN should “harvest cash out of its linear business to selectively reinvest in ESPN+ and higher growth parts of Disney’s business (such as Disney+).”
Over the next few years, Disney will surely allocate more resources to streaming. Once again, however, Peltz does not detail what a gutting of linear ESPN would look like. The bulk of the network’s spending goes towards live sports rights, which would obviously also be the linchpin of any direct-to-consumer product.
Phase Out Hulu?
Perhaps most interesting is Petlz’s thoughts on Hulu.
In Trian’s new white paper, the activist investor suggests merging Disney+ and Hulu to cut costs. According to Peltz, this could save Disney nearly $1 billion.
Disney, of course, has already stated that it will be creating a “one-app” product that combines the libraries of Disney+ and Hulu. Peltz, however, believes they should take this strategy one step further and “phase out the Hulu tile.”
“We are skeptical that keeping Disney’s best general entertainment content behind a Hulu tile optimizes user engagement,” the white paper offers.
Disney Should Eliminate Hulu + Live TV?
Finally, Trian believes that Hulu + Live TV, which has proven to be incredibly lucrative for Disney, “is a loss-leading product that has struggled to scale and adds limited strategic value.”
“In our view, Live is not competitively positioned compared to YouTube TV following its deal to secure NFL Sunday Ticket and is no longer positioned as a ‘low-cost alternative to cable.’”
While some of Trian’s ideas seem to lean into what Disney has already done, others would fundamentally change the company’s streaming strategy. While Trian’s new suggestions may not stand up to rigorous analysis, one thing is clear, Peltz is making his final push for a Disney board seat and is laying the gauntlet down.
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