To take on Netflix, Disney faces a challenge in embracing technology

Disney is known for its success on the big and small screens, but rivals from the technology world are forcing the company to confront a difficult question: can it transfer that dominance to a Netflix-style streaming business?

This is the question hanging over CEO Robert Iger, already credited with leading Disney to new heights. Under his leadership, Disney has managed to do what was previously thought impossible — release a stream of billion-dollar blockbuster movies including “Star Wars: The Last Jedi,” “Black Panther” and “Avengers: Infinity War.”

But the days when Disney could concentrate on churning out movies and TV shows are coming to an end. Now, the Disney chief has to push his company in a new direction — how to develop the technology and infrastructure to create a new online, direct-to-consumer entertainment service.

“The real challenge for Disney is that most of the times Disney has touched technology, it’s blown up,” said Rich Greenfield, an analyst at financial analysis firm BTIG research and an outspoken an influential analyst at BTIG and a regular critic of Disney. “It’s been the polar opposite of every time they touch content.”

Disney is already playing catch-up to Netflix when it comes to distribution technology, and Netflix has been ramping up its own content production. In May, Netflix briefly overtook Disney’s market value despite making far less money, signalling that investors see a brighter future in Netflix’s direct-to-consumer model.

Anticipation is building for “Disneyflix,” the industry nickname for the company’s forthcoming Netflix competitor.

“Investors underestimate how difficult direct-to-consumer is,” Greenfield added. “Success is not going to be measured in millions. It’s ‘Can DisneyFlix be in 100 million to 200 million homes worldwide?’”

A better mousetrap

Disney recently locked into place the first big piece of its strategy. At the end of July, Fox shareholders voted to approve Disney’s $71.3 billion acquisition, a move that will transfer the ownership of TV shows such as “The Simpsons” and Fox movie franchises like “X-Men” into the Disney fold. Disney’s bid won out over a rival bid made by Comcast, owner of NBCUniversal, the parent company of NBC News.

Disney has a long track record of acquiring content — including major entertainment brands Pixar, Marvel and Lucasfilm — and turning those into highly lucrative operations. But building a global technology service will challenge even Iger’s lengthy experience in the business.

Luis Cabral, a professor of media economics at New York University, said companies like Netflix that first focused on distribution have shown a knack for learning to make content. Content companies like Disney, however, haven’t fared as well in learning digital distribution.

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