The Economist - USA (2020-11-13)

The EconomistNovember 14th 2020 Business 55

1

D

isney promised investors in spring

2019 that a new video-streaming ser-

vice would win between 60m and 90m sub-

scribers by 2024. Disney+ has outper-

formed that forecast spectacularly, hitting

its five-year subscriber target in just eight

months. In doing so it is fulfilling the digi-

tal-transformation plan set in motion

three years ago by Bob Iger, Disney’s long-

time boss, now its executive chairman.

Marketing muscle, crucial to success,

has been backed up by “The Mandalorian”,

a space western inspired by “Star Wars”.

Such is its popularity that Disney was late

meeting demand for a plush-toy of its baby

Yoda character. The pandemic added a tur-

bocharge, dashing fears that Disney+ and

other new streaming services, like hbo

Max and Apple tv+, might struggle to at-

tract time-starved consumers. Lockdowns

mean extra hours to while away, notes Tim

Mulligan of midiaResearch.

Amid school closures Disney+ has been

as trusty a baby-sitter as baby Yoda’s nurse

droid. Of all the new streaming services

Disney+, which launched in western Eu-

rope in March, just as lockdowns began, is

the clear winner. Even so it has not touched

the leader, Netflix, which has 195m sub-

scribers worldwide and over 70m in Ameri-

ca alone (see chart).

Disney’s other businesses have suffered

because of the pandemic. Shuttered theme

parks, closed cinemas and cancelled sport-

ing events have taken their toll. In August

Disney said covid-19 wiped out $3.5bn of

operating profits at its parks, experiences

and products division in three months.

The company is expected to report another

quarterly loss on November 12th, after The

Economistwent to press. Yet the streaming

service’s subscriber gains have helped

shield the firm’s share price. It has fallen

but by far less than its peers.

Disney+’s rapid success also underlines

a doubt about the firm—whether Mr Iger’s

choice of successor was correct. The fa-

vourite for the top job was Kevin Mayer,

who designed and launched Disney+. Mr

Iger chose Bob Chapek, a talented operat-

ing executive who had been running theme

parks. “Given the runaway success of Dis-

ney+ it is even harder to understand how

the theme park and home-entertainment

executive got the top job,” says Rich Green-

field of LightShed Partners, a research firm.

Mr Mayer left Disney this summer.

Will Mr Chapek now bet heavily on Dis-

ney+? The firm as a whole lavishes nearly

$30bn a year on original and acquired con-

tent but this year set aside only $1bn for

Disney+. Netflix spends $15bn a year. The

Disney service’s rich library is enough to

keep under-tens engaged but it may lose

subscribers unless it regularly offers origi-

nal grown-up fare. Third Point, an activist

investor, wants Disney to stop its dividend

and spend the $3bn a year on Disney+.

Disney could do more than that if it

went “all-in” on streaming, dropping its

current system in which, for example, big-

budget films go exclusively to cinemas,

and putting everything it makes onto Dis-

ney+ at once. The service could then spend

as much as Netflix and raise its price from

$6.99 per month to over $10.

This would make for a huge global busi-

ness but there is a danger that it would

swiftly cannibalise the existing parts of

Disney’s empire. A more likely course is

that Disney will move new content more

rapidly onto Disney+. It could also com-

bine Disney+ with Hulu, a separate and

successful video-streaming service the

firm took control of last year.

Disney is expected to announce in

December that it will spend a lot more on

content for the service. All eyes will be on

whether Mr Chapek seems as tuned-in to

streaming’s bright future as Mr Iger was. 7

Disney bet on the right new product.

But has it bet on the right new boss?

Disney

The streaming

kingdom

Screen capture

United States, streaming subscribers*

Q32020,m

Sources:UBS;Netflix;

pressreports

*Selectedservices

†Includesnon-streamingservices

ESPN+

CBS All Access

Showtime OTT

Peacock

Disney+

HBO Now/Max

Hulu

Netflix

Amazon Prime†

1209060300

From “Star Wars” to streaming wars

S

upermarket shelves stripped bare by

stockpilers were familiar scenes as anx-

ious shoppers loaded up with toilet rolls

and pasta when lockdowns were first im-

posed. The taste for long-lasting dried food

has been a boon for Italy, a country in deep

recession. Although Italians remain the

biggest eaters of pasta worldwide, munch-

ing through 23kg per head annually, the

country’s pasta-makers export 60% of their

production, mostly to Europe and Ameri-

ca. While stuck at home far more cooks

made plates of spaghetti, fettuccine and

farfalle. According to istat, the Italian sta-

tistics agency, exports of pasta increased by

30% in the first six months of the year com-

pared with the same period in 2019.

Barilla, the world’s biggest pasta-maker

with sales of €3.6bn ($4.2bn) last year,

must keep up with increased demand for

its core product. The 143-year-old family

firm also owns Wasa, the world’s biggest

maker of Swedish crisp bread, as well as a

host of smaller snack brands. The com-

pany’s high-tech headquarters in Parma

operated at close to capacity, producing

1,000 tonnes a day, throughout Italy’s

harsh lockdown in spring. Some other Ba-

rilla factories produced more pasta than

ever, says Bastian Diegel of Barilla in Ger-

BERLIN

Germany’s insatiable appetite for

Italian pasta is keeping one firm busy

Pasta

On board the

spaghetti express