Disney, Plus

Transcript from https://podmenti.com/t/8c5981195df9f3e3

Disney makes it very approachable, but I've just like read all their IR stuff and like it's not
It's not hard. Like it's it's really cogent.
I mean it's quite refreshing moving from
analyzing loss making, fast growing tech companies to a company like Disney that just makes it plain, makes it clear, it makes a lot of sense. Yeah. Isn't trying to hide the ball.
Yeah.
Alright.
Let's do it. Let's do it.
Welcome to Season 5, Episode 7 of Acquired, the podcast about great technology companies and the stories behind them.
I'm Ben Gilbert, and I'm the co-founder of Pioneer Square Labs, a startup studio and early stage venture fund in Seattle. And I'm David Rosenthal, and I am a general partner at Wave Capital, an early stage venture firm focused on marketplaces based in San Francisco. And we are your hosts.
This time it's different.
These are four very dangerous words that should set off an alarm every time you hear them.
Bob Iker, the CEO of Disney, is trying to achieve the pipe dream of what has failed so many times before in the media industry.
combining content and distribution under one roof.
It has been tragic before, famously with AOL Time Warner and recently being tried with Comcast NBC Universal and ATT Time Warner.
But Disney has to compete against digital disruptors like Netflix, who have successfully built their own distribution and content in house.
So here we are.
One week after the ambitious launch of Disney Plus.
where Disney will try to attempt the multi year mission to do just that.
Transform their business not
Just to make great content and capitalize on the intellectual property through parks, licensing, and merchandise, but
But to be the distribution of that content as well.
directly to consumers.
Or another way to frame it.
Bob Iger just kicked off one of the most ambitious attempts to buck the innovators' dilemma of all time, compromising hundreds of millions of dollars in guaranteed revenue from keeping their content on Netflix and others in hopes of capturing the long-term asset of a direct connection with their fans.
It is no understatement to tell you that David and I are absolutely giddy to dive into this episode and are hot off of reading uh Iger's fantastic book, The Ride of a Lifetime. Are we ever. I have one question for you though, Ben.
Have you watched The Mandalorian yet?
I have. What are your thoughts?
Well, no spoilers. And I do No spoilers.
Uh I'm a huge fan. I think uh John Favreau is so far proving to be an amazing steward of that franchise.
Yeah, yeah. I haven't I haven't watched episode two yet. I've only watched episode one, but I was a big fan I've been doing so much research for this episode. Well that's research. That is uh it's true. That is research.
All right listeners.
Now is a great time to talk about a new partner of ours here on Acquired, Lagora.
The agentic operating system that is redefining how the world's best legal teams work.
Yep. It's sort of obvious that AI is gonna completely change the legal industry. I bet most of you listening have dropped a contract into some sort of AI chatbot out there. Ligora took that insight and asked the question, what if you really built something with that power from the ground up for the legal industry?
So the founders did exactly what great founders do.
operate with obsessive customer focus.
They embedded inside a massive law firm.
For months.
They sat with the lawyers just watching how the work really gets done.
And that's how you get features that customers love, like tabular review, where you drop in a folder of hundreds of contracts and it pulls every key term into a grid a lawyer can actually work with. Lagora's Bet Here is interesting. Since it lets each lawyer handle more complexity, any given person can increase the quality of their work.
and do higher value work. And this means that the pie can grow even as each individual task takes less time.
And they recently launched Lagora Agent, offering greater intelligence and performance. The agent lets lawyers set an objective. Then it can handle the planning and the execution and deliver of the final product. Legal teams get to maintain full control and transparency since they're still involved where judgment is required.
And Lagora works where you already work. You can use it within Microsoft Word while redlining or drafting. The early Lagora numbers essentially
speak for themselves. When they have a head to head pilot with their top competitor, they win seventy percent of the time. Lagora now has over a hundred thousand lawyers on the platform from twelve hundred legal teams in fifty countries.
And crazily they went from one million
to a hundred million in ARR.
In about.
Eighteen months.

truly insane numbers. And that is the real test.
Plenty of things demo well, but the question is whether a busy associate actually reach for it during crunch time, or whether a partner trusts it before going into a conversation with a major client.
If your legal team wants to check it out, whether you're a law firm or you're in-house at a company, you can learn more at Lagora.com/slash acquired.
And just tell'em that Ben and David sent you.
And now
On to Disney Plus.
All right, before we get into history and facts, I just want to set the stage
for everyone so that listeners are all on the same page of all of the deals and acquisitions over the last
really going back to Capital Cities, ABC, E SPN in ninety five, uh that have set the stage for for this
Momentous launch of Disney Plus.
We've covered most of these on their own episodes on Acquired, which we will link to in the show notes. But uh just as a quick recap, first Disney acquired capital cities, which included ABC and ESPN, most importantly, in nineteen ninety five for nineteen billion dollars. Then in two thousand six they acquired Pixar for seven point four billion dollars.
Two thousand nine, Marvel for four billion dollars, which is
Oh man, going back and re listening to that, doing research for this, we didn't grade that highly enough. That was one of the
best acquisitions of all time in any industry. We also didn't know Infinity War was gonna do what it did at the box office. I mean incredible and everything before that in the franchise. Highest grossing movie of all time. Okay. Then also in 2009, Disney invested in Hulu for a thirty percent stake. We don't know how much they paid for that.
Two thousand twelve they acquired Lucasfilm for four billion dollars.
In twenty sixteen, as we'll talk about later in this episode, this was rumored, but then Bob admitted in in Right of the Lifetime in his book, they nearly acquired Twitter in twenty sixteen and walked away.
The day before, right? It was like a Sunday when they called it off and on the Monday they were gonna announce it. And Jack Dorsey was on the Disney board. So
Awkward, awkward turtle. We'll get into that.
In
twenty sixteen though they did we did our episode on Bam Tech, which
has aged really well. Really encourage the listeners to go back and listen to our Bam Tech episode. They acquired first a minority stake for a billion dollars, and then they acquired a majority stake in twenty seventeen. In total they spent two point six billion dollars on Bam Tech, and then the big one
Fox.
Twenty first century facts.
Deal closed in March of this year, twenty nineteen. Seventy one point three
billion dollars.
And then the final piece of the puzzle is they have agreed, Disney has agreed to acquire from Comcast the remaining thirty three percent of Hulu that it does not own.
They will spend at least
six billion dollars on that and that will close within the next five years. Disney and their
legendary strat planning MA team is uh the masters at setting these like uh
deals of investments with options to acquire and over time and they've done really well. So okay, that's to set the stage. Keep all that in mind. Thinking of of Bob Iger and Strat planning, uh I think of sort of like Thanos, like where he like after using the infinity stones, like goes off to the other planet to rest for a while. Like you just look at this list, it's
Unbelievable. Oh my God. That's the best analogy ever. Also because like Bob Iger and Thanos.
Could not be
More polar opposite.
Well, that is the perfect tea up.
To the history of facts.
We couldn't have timed.
This better.
Even though Bob didn't intend it this way.
His book that just came out, Ride of a Lifetime.
Is so good.
Everybody should go buy it, read it, listen to it, whatever you need to do. This is one of the best business books. It's right up there with Shoe Dog that have come out in the last ten years.
Completely agree. When you say he didn't intend it this way, are you referring to like timing it with the Disney Plus line? He intended to time this with his retirement from Disney, but um obviously as we will see, things did not go quite according to plan. But the story that we're gonna tell here
is Bob Iger's story because the story of
All of these deals.
the culmination of it all in in Disney Plus and going direct to consumer
This is Bob's vision. It is very directly Bob's vision. And the story of how it came to be is is an incredible one that and one that is just unparalleled in in today's business world.
So
This is a man.
Bob Eger.
Who
Has worked.
For every year of his life except one, his very first year out of college, he was a weather man.
in Ithaca, New York, for a local T V station. Except for that one year
He has worked for the Walt Disney Company in one form or another, for the same company. Forty five years.
the last thirteen of which have been uh or fourteen of which have been a CEO
of the company. Um, he literally
Started at the bottom.
Let's rewind all the way back. Who
is Bob Iger.
So he was born in nineteen fifty one.
It's all when you look at him, he looks like uh he looks like a fifty year old. I mean to me he's a he's six seventy year old. He's yeah.
He's sixty eight. He is in cr incredible shape.
He was born in nineteen fifty one to a Jewish family in Brooklyn, but he spent, I believe when he was five, they moved to a working class town on Long Island called Oceanside.
And Bob's
father was a World War Two veteran. He had been in the Navy in World War Two.
Um, and he was a mid level ad man in New York City. Like he was
He was madman. He was Don Draper. The parallels are are so apt. He Bob talks about this in the book. His father suffered from depression, which was
Hugely stigmatized back then from
A lot of reasons, I imagine.
no small part having been a sailor in the Navy, you know, during a war. And he even underwent electroshock therapy to treat it.
All that said, he he did instill in Bob.
a a love of both music and literature.
And a very, very strong work ethic.
Bob was not a great student in high school, but he was a hard worker and he went to Ithaca College for college and he worked his way through school working at the local pizza hut. Uh and to this day, famously, Bob does not eat any carbohydrates except for pizza. Loves pizza. Um
But it was his dream in high school to become a network news anchorman. He wanted to be uh, you know, like uh Dan Rather or Peter Jennings or the like. And so when he graduated in nineteen seventy three, uh from Ithaca with a degree in television and radio, he, as we mentioned, worked briefly as a weatherman for the local cable TV station there.
He was not particularly talented on that side of the camera, unfortunately. Um but uh strengths and weaknesses. We all have strengths and weaknesses. Fortunately, though, does not take Bob long to figure this out. In nineteen seventy four, the next year after he graduates, he gives up on the dream of being in front of the camera, moves behind the camera,
And he also moves back closer to home.
to New York City where he joins
A B C
which then was a independent company, just ABC.
At the bottom. So he was a basically a gopher.
On
television sets for like soap operas and game shows, like he was like cleaning the sets, fixing them up, getting there at four in the morning, getting ready for recording, all this stuff, um, for a hundred and fifty dollars a week.
And literally when you say go for like he was the guy that when they would say, like, Yeah, yeah, we need two hours to do this thing, like go hang out with the talent so that we can tell you to tell him to come back when
You know, when one right like that was his job.
His big break comes when he works on a television special the with Frank Sinatra and it's like Frank needs mouthwash.
Bob, go run to the pharmacy. Go get a mouthwash. You know, that kind of stuff. In a great New York Times interview that we'll link to in our sources with Maureen Dowd.
Bob says you know a quote here, he says, I never viewed myself as exceptional. So whenever I got a job, I was relying on hard work more than anything and a level of enthusiasm and optimism. And Bob is nothing if not an optimism. He says when I went to ABC, everybody there went to Stanford or Dartmouth or Columbia. I went to Ithaca College, okay? I didn't have an inferiority complex, but I knew I wasn't one.
of them. I didn't wear Gucci shoes. I didn't wear Brooks Brothers clothes. I couldn't afford any of that stuff. But I knew I had a work ethic that was prodigious. And what happened early on is people started relying on me because they knew if they asked me to get something done.
I would get it done.
And that is
What Bob does.
So
As we alluded to.
Shortly after he gets there to A B C he gets his big break where uh they're televising a big special from Madison Square Garden called the main event.
Hosted by the chairman.
Frank Sinatra. I think it's like a boxing themed musical number. I mean television was different back in those days. Um he uh he meets Frank, he meets the chairman by getting him mouthwash. Uh Frank says, Hey, what's your name, kid? And he says
Bob and uh Frank's like a great job and he gives him a hundred dollar bill. I did not know that he was the chairman. Like I didn't know that was a a nickname and I'm reading the the the book and I was like the like the chairman of ABC like who's this chairman that he's meeting? I'm like I'm an idiot. The legend. Blue eyes, the chairman. Yep
This uh special, the main event, quote unquote, was produced by
Two legends at A B C Jerry Weintraub and
Most importantly, rune arled.
I think Rune was involved, maybe because it was like a boxing themed thing. I d I I don't know. But Rune was legendary. So he was the head of ABC sports. Uh now Bob was working in ABC
what would become entertainment, like the you know television shows, soap operas, game shows that way. He wasn't working in sports. Sports was where the cool guys were at ABC. Right after this special
Bob uh gets into a big fight with his boss in entertainment because it turns out his boss was like embezzling from the company. It was not good. And and Bob realizes he's about to get fired. So he calls up one of the sports guys that he worked with on this event and says, Hey, do you have any openings over there? Can I transfer over there? They're in a completely different building in New York. He transfers over there and he starts working.
Again from the bottom within ABC sports.
What was sports? I mean, they had Monday Night Football at the time. They had the wide world of sports, which I remember was still a thing like when I was growing up. Uh spanning the globe, like bringing all of this, you know, great content, all these stories from around the world.
And most importantly
A B C at the time had the Olympics. So they showed
the Olympics in the US every year.
And what Rune had realized and kind of built
within
A B C that would then get taken over to ESPN shortly and and be a big part of
Their success was that they weren't selling
Showing sports. Like just televising
A football game or the Olympics or some you know random event that they did on the wide world of sports without a story was was flat. It was boring. They were selling storytelling, they were selling entertainment. What were the narratives? Who were these people? Where did they come from? What adversity had they faced? What was the storyline of the game? Um
And so all of that, that was really pioneered.
by ABC sports and by
Byron.
David, we probably could have saved ourselves a lot of time if we had done this episode.
like three and a half years ago because I feel like it took us like three years to figure out oh the the reason people like acquired is not
let's do an audio discounted cash flow and figure out if that acquisition makes sense financially five years from now. It's it's the stories behind the deals. And I think Rune hit this thing
That
It's only recently occurred to me that everything is storytelling. You know, I'd obviously work on a lot of pitch decks and um
Yeah.

human beings absorb information best through story.
You know, it's it's a multi billion dollar realization that Rune had that would that would sort of play out over the the next several years that this is the way to build enduring fanhood.
Yeah. And what's what's super cool about this th I I feel like this is one of the like
Key meta themes for acquired that run across
Everything we look at on the show and acquired itself.
I mean, I'm thinking about Sequoia and Don Valentine.
hopefully many of you have gone and watched on YouTube the talk he gave at Stanford he says in there
The most important thing is storytelling. Money flows as a result of the stories. If you can't tell a story, you're not gonna raise money. I love the way you phrase that. Like listeners, David gave us homework, so I hope we went and watched our YouTube videos. Only because it's done, Valentine. Uh
Anyway, okay. So to pick the story back up. The other thing that Rune
really embraced within ABC sports and pioneered was technology. So this is back in the seventies. So technology within media, you know, is not
Disney plus. We're a long way from that. But I think this is really where the seeds of all of this get.
So Rune embraced, you know, new camera technology
uh graphics overlays, graphic overlays on on live content, new camera angles, satellite feeds to be able to take content from the wide world of sports in the Olympics from all over the world, get it instantaneously broadcast back to the US and retransmitted. And he had kind of a mantra around this
which he called innovate or die. And unless you were pushing the envelope and using technology and using new techniques to in the service of telling better, more engaging stories, you were just gonna fall behind and someone was going to surpass you. And so both of those things, both the
Storytelling.
And the innervator die.
Mindset of Rune really, really rub off on Bob in the early days.
You know, Bob gives all the credit to Rune for teaching him this innovator die.
lesson, but if you look at the parallel story that was happening
you know, maybe a dozen years earlier with Walt Disney himself.
You know, the the start of Disney of Disney animation was incredible innovation, figuring out how to make these animated motion pictures, inventing new machines to do it. You look at the the start of totally. The start of Disneyland, the whole imagineering department, uh creating animatronics, like
Disney too was built on this foundation of of innovator die and use technology to tell stories.
Yeah, I mean it's again such a thread unacquired. It's um you know, it's Steve Jobs who's gonna come in here in a minute. It's technology and the liberal arts, you know, that's where
Real magic happens when the two of those things come together. So
Bob.
rises through the ranks over the next ten years at uh at ABC Sports. He becomes a VP.
And then in nineteen eighty five, when he's just a little over ten years, uh probably ten years into his time at sports
Famously, as we covered in our ESPN episode, the minnow
Eats the whale. And
Capital cities this uh
Backwater.
Penny pinching, backwater, yeah. Broadcasting, you know, company.
in the Northeast acquires ABC. And and literally that was the headline in uh I think it was in the Wall Street Journal the day it was announced was Minno eats whale. At first there was, you know, and Bob talks about this in the book, there was quite a bit of culture clash between like you've got these scrappy penny pinching, you know, Tom Murphy and Dan Burke, uh, you know, Warren Buffett
I won't even say disciples of contemporaries, you know, uh sympatico kindred spirits.
And then you've got
Rune was many, many great things, but penny pinching was not one of them. And it certainly nor was um
the entertainment side of ABC, you know, it was Hollywood. So there's some initial culture clash.
But Bob and other folks at at A B C
really are part of kind of bridging this gap and they get to know Tom and Dan
And they actually realize they're cut from the same cloth. And Tom Murphy in particular comes to really trust
Bob, uh Bob Ager as as one of the key managers within the company that can kinda make
Instill.
this ethos of
the ultimate investor mindset and
really excellent management.
into the creative industry that is, you know, both sports and entertainment within ABC.
And uh someone said we'll get to into a minute that when Dan Burke so Tom was uh CEO of Capital Cities. Dan was COO, but they were they were a duo. When Dan retired, Tom
asked Bob to become his COO and replace Dan. Um, you know, that's how
That's how much he's like we said, cut from the cloth of this Tom Murphy, Dan Burke, Warren Buffett.
um you know, style of management.
So Bob keeps rising. First he gets promoted to run A B C Entertainment.
the where he first started out at ABC, sort of the the Hollywood side of the house. So he moves out to Hollywood
And entertainment had been struggling, unlike sports, which was an unquestioned leader at the time. And of course then with the capital cities
acquisition, uh ESPN came into the fold and ESPN is really taking off during this time.
Bob now.
gets tasked with
Make the entertainment side of the house great too.
And this was really key because he had to learn now how to
navigate Hollywood, which is you know, he's a he's a Jewish kid from Long Island. Like this is not what he's used to, despite rubbing shoulders with uh with Frank Sinatra. It's out there in his suit and you know, he's he's he's
He knows he can't quite do business the way that he's used to doing business in New York, but he also has no idea how you're supposed to do business in Hollywood. Yeah, totally, totally. So one of the things though that he
Realizes and I think leads to him
being able to succeed is
There is one commonality, which is it's all about the stories. You know, if you tell a great story
Y you're probably gonna succeed.
So Bob, uh, he really leans on
the people around him to help him learn the business and he has a very low ego about it, um, which is one of his hallmarks. But he he has a pretty good run. So he greenlights Doogie Hauser, uh, which is a massive success uh for the network. Twin Peaks, which ends up being quite controversial and and
Bob and the company probably make the wrong decision to cancel it, but a massive risk, you know, putting
A
Dark drama on network television.
He knows that he's put in there for a reason. He has to revamp this group a little bit. He knows that he's not a typical Hollywood guy, so he can't just go and pretend to be one. And so what he's trying to do is
basically a flank attack. Like ha I have to take a different approach to doing this. I have to zig when other people are zagging and and what do I do? Green light very non traditional content and sort of go with my gut and take some risks on stuff that other people probably wouldn't put on the air.
Yeah. Well I think it's it's a balance, right? He
It is that. It is that outsider perspective.
And the willingness to take risks.
They're gonna come up again and again and again in this episode. But
He also does his homework. Like he doesn't just ride in and be like, We're doing things my way. He really, really trusts the people around him and says, I'm not from this industry.
I respect you all as creators. I want to learn from you.
And let's think about like what are some like
just given norms in our industry that maybe aren't right that like we should we should consider challenging. So Twin Peaks is a great example of that.
NYPD Blue he launches. Uh Roseanne is another great example of that. Uh the Roseanne show becomes very successful.
There would be controversy with the reboot later, uh, more recently.
But that all goes really well. And in nineteen ninety two, Bob gets promoted by Tom and Dan uh to become president of all of ABC. So sports, news, entertainment.
All reporting up to Bob.
And the rest of capital cities they have their own managers for. And then, like we said, in nineteen ninety four, Dan Burke retires and Tom says
Bob Bob had just recently, two years before become president of ABC, Bob says I don't know that I'm ready to come in and and run Capital Cities with you and and Tom says, Nope, you don't have a choice. You gotta come in. You're my CEO. You're running all of Capital Cities with me. And ESPN at this point in time is, you know, again
Re like we covered in that episode.
it's clear that this is gonna be a
multi not just billion dollar business, but tens of billions of dollars business in the future.
So enter.
Disney right after
Bob becomes COO of Capital Cities. And take us through this is ninety five. We're at nineteen ninety five right now. It's ninety-four when Bob becomes COO.
At the Sun Valley Conference, the Allen Company, famous Sun Valley Conference in in Idaho.
Uh
Michael Eisner, the who we're gonna talk a lot about, the CEO of Disney, then CEO of Disney, gets together with Tom Murphy and Warren Buffett and
And they cook up a plan.
for Disney to acquire
capital cities and ABC and ESPN. This is
To
preview a little bit when we talk about Disney Plus and get into this.
This move Michael Eisner was an equally legendary CEO of Disney before Bob.
This was his capstone was unfortunately Eisner stuck around a little bit too long after the capstone, as we'll see. His first ten years were incredible. His first ten years were inc absolutely incredible.
And then this was the calfstone that ended up in
Really, you know, ABC of course is super, super important, but ESPN becoming part of Disney. And for many years, I mean again, I remember we talked about this on the episode when I was a media investment banker right out of college in New York, you know, covering Disney
People just like basically discounted.
everything else within Disney, the animation, the parks, the studios, everything to basically zero. And it was just like this company is ESPN. It is that powerful. It is the most
profitable by a million miles cable network and content provider in all of America.
Yeah, and to to contextualize that for for listeners.
Every single person who is paying for cable in the United States and is getting ESPN, ESPN two, and the the you know, the rest of the stuff that comes with it, the sports stuff, is paying about nine dollars directly to ESPN of whatever the bundle price is, forty, fifty bucks.
It's crazy. When you think about let's say it's fifty bucks, that's uh and let's say they're making a uh they're two Xing the COGs or their cost of goods sold of the the actual channels. So like nine of the twenty five dollars for all of those channels are just going to ESPN.
Yeah.
And
Contrast that with six ninety nine a month for Disney Plus. Right. So now
Disney's going direct to consumers.
Seven bucks a month for all of their content versus they're getting nine dollars from the cable bundle.
Just for ESPN.
Yeah.
Yeah. Wow. Okay. So
This deal happens, nineteen billion dollars. Disney acquires the company.
And actually a super key part of the deal, like a a sticking point for Disney and for Michael Eisner.
was he was not gonna go through with the deal
Unless Bob committed to
running ABC for at least five years.
after the acquisition. He was worried about
Bob leaving and it was like it was like a non negotiable point and actually held up the closing of the deal, which is kind of amazing. Eisner
To rewind back to him a little bit.
He's
Quite an interesting character. So he had actually started his career at ABC.
But he had become CO of Disney in nineteen eighty four.
And he had turned around Disney from
while Disney had died in nineteen sixty six, and for that almost twenty years before Eisner took over, Disney was completely floundering, producing
No notable IP
No new movies. I mean, they were producing new movies, but they weren't any good. They narrowly survived a series of takeover attempts
Um the parks were struggling, there was no vision. Uh you know, it was it was a really rough period. And you think about like what Disney animation was in those earlier days, it was Snow White, it was Sleeping Beauty, I mean it was these like classic enduring I mean, you you have Mickey Mouse being you know created and that that lasting the test of time.
But yeah, I mean before parks too, which are incredibly innovative.
Yeah, there th you think about everything you associate with Disney, th it's all sort of in this like
fifties and sixties era. And then there's like very little uh the the early eighties for Disney, I guess I think that's this, right, is is pretty akin to like the early eighties for music. Like it's kind of best forgotten.
Okay. But the Disney board
had recruited Eisner and his
partner really in turning around Disney Frank Wells, who was his COO.
And
They
uh did a couple really important things. Most importantly, they brought in Jeffrey Katzenberg to be head of Disney animation and head of the studio. And
Jeffrey
completely
turned things around. So you know, some movies
that you might be familiar with. You probably are no matter where you live in the world. The Little Mermaid, Beauty the Beast, Aladdin
The Lion King
These are all movies in these golden years of the
the late eighties through the mid nineties at Disney.
The other things that Eisner and Wells do to really turn around Disney.
Are
They get big time into the VHS, the home video business. VHS and then
DVDs and they're really smart about this. They do like limited edition, I remember this growing up, like windowed releases of limited time only. You can get, you know, Snow White. Pull it out of the Disney vault. Pull it out of the vault, you know?
I haven't done research to really know, but I I I think they they
Probably in Disney at this time, probably
are big innovators in this concept of windowing that became so prevalent in the media industry of really
Milking as much profits out of a set of IP and content as possible with you got the theatrical release, you've got the home video release, you've got the T V release, like and building excitement around all of it.
the concept of the Disney vault became so prevalent that S N L did a parody of like looking inside the Disney vault and it's all these characters like trapped in there. Being like Yes. It's definitely worth looking at
Oh man. Then like we said, the capstone of all this is the Capital City steal, where they bring ABC and ESPN into the company.
Very, very sadly, though, right before the Capital Cities deal
Frank Wells is killed in a helicopter crash in nineteen ninety four. So
You know, had this not happened, I think history would have been really different for Disney, for Eisner, and probably for Bob and Iger, too. And this really throws everything for a loop. So when the Capital City's deal happens,
Eisner is looking for a number two to be his partner to help run the company'cause man, this is a massive company. You know, no one person can uh even Bob Iger can
really run this by himself or herself at this point in time.
And so Eisner's looking for a number two.
And
when the deal happens, you know, Bob is so important and there's this clause in the
in the acquisition that he has to stay on for five years as head of head of ABC, you know, people start thinking, including Bob, that you know, maybe he's a good candidate eventually for this number two role at all of Disney.
Bob writes about in the book that Tom Murphy actually told him around this time, like, Hey, you know, look, you play your cards right.
You might be CEO of this company, this whole Disney company one day. And indeed that would be true. The path
Is not quite straight.
To get there though.
Michael Eisner was thinking about bringing on a number two, but it was not Bob. So
This is like a We Work type situation. This is the Wee Work of the mid nineties, Disney was. It honestly was. Not to just totally keep dunking on We Work here unacquire, but this was all over the news and all over America. What a disaster this was.
Eisner brings in
Super agent.
Michael Ovitz.
to become his number two.
A clear a clear COO candidate, you know, the clear choice. What do you what do you want in a really operationally strong person to help you run a large, recently combined business?
Someone who's basically never managed people.
Yeah. Never managed people is a founder too. Like Michael Ovitz is like was incredible. I mean, he started CAA, Creative Artist Agency. Greatest agent of all time.
Yeah.
And uh you know, if you've seen uh the movie Jerry McGuire, you know that's about sports agents, but like uh you know, that whole world
Is
Michael Lovets. Uh or uh Entourage the um
Oh shoot, the e didn't in our cash.
Yeah. Uh you know, that's Michael Lovitz. So he comes in into Disney
And it is just
Just a disaster. Uh incredible culture clash. Bob is now under
Michael Lovitz. Remember, Bob is like Warren Buffett, Tom Murphy, Dan Berg school of
Manager.
He's now reporting to Super Agent Michael Lovitz. Eisner really has a foot in both worlds here. Uh he's an incredible guy himself, but Disney is Disney. It is not.
An agency.
I mean when you say a foot in both worlds, I mean Eisner had that creative gift that that Walt had. I mean, Bob talks about how Eisner would go through parks and be able to spot issues with line of sight and things like that that are are taking away from the experience being magical. You could imagine that that also leads to micromanagement, which was true.
uh on the other hand, you know, isn't so far from the capital city's world of figure out what's core to a business, make it really lean, make it really operationally sound. You know, I think Iiger did a little bit more of that than than Eisner did, but Ovitz certainly had had no notion of of that.
Yeah. Well and to the foot in both words. You know, I Eisner
To maybe
try and put ourselves in his mindset at this time a little bit. Jeffrey Katzenberg
very much, you know, extremely, extremely talented, but more of the Michael Ovitz, you know, type of personality and creative, you know, genius.
Than the you know Warren Buffett operational style.
Uh Eisner's gift was he recognized that talent out there and he recognized it in Katzenburg and it led to
this great, great flourishing within the company.
You know, and I think he probably hoped that Ovitz would be able to
Bring that.
back, uh bring that spirit back to Disney.
It didn't work out though. So Ovitz only lasts fourteen months at the company.
And leaves after fourteen months.
This is in the late nineties, mid to late nineties, leaves with a hundred and forty million dollar golden parachute. This is the one point seven billion dollar Adam Newman payout of its day and leaves the company kinda in shambles behind him. Uh and Eisner's reputation having gone from turned around this
Iconic American company.
and produced, you know, with with Katzenberg, The Lion King, Aladdin, you know, all these great movies to this Disney is the laughing stock of, you know, the business world at this point in time.
Heisner goes back after this, you know, he's wounded in uh in more ways than one. And he goes back to running the company solo and consolidating
All authority and responsibility.
with himself. He assigns Bob. This actually becomes really pressured. He assigns Bob
to what seems like a um uh a I was gonna use a Siberian outpost actually is a Siberian outpost uh to uh go run international for the company. And Disney was not huge internationally at this time. And Bob actually learns a lot by going
and operating Disney's business. This is when um you know Euro Disney was getting set up on the theme park side, which was a disaster at first, famously until they figured out that uh
European parents want wine at lunch to deal with their toddlers running around. Uh, and I think that uh that turned it around.
Different countries are different. Uh I think American parents probably also want wine at lunch to be able to deal with their kids. One of the reasons that that I've been so keyed into Disney recently is I went to Disneyland for the first time three months ago and yes, did see Galaxy's Edge and yes, it was awesome.
And there's a bar in the there is, and it is the only place but you have to get these reservations. It's almost impossible to get in. You have to like very pre plan it. But it's the only place in the entire park to get
alcohol. And at least in Disneyland. I think California Adventure you can. I think in Disneyland you used to be able to, and they took a hard pivot and got rid of it all. So it's interesting. I think they have a little bit of a um
Some experience with that going poorly at in Disneyland.
Interesting. Interesting. Um
But importantly, running international here.
was the very beginning of Shanghai Disney.
Yeah.
Which would become a
one of Bob's we're not gonna talk about as much on this episode, but another Marquee
Project for him over his
whole career of the company and his tenure as CEO was opening up
China to
Disney from you know, content obviously but also theme parks.
Right. And the crazy thing is thinking about the timeline of that. So that started when Bob went to run international here in this time frame. We're talking about late nineties. It opened in the last few years.
Yeah.
Was it twenty
eighteen twenty seventeen. Twenty seventeen to twenty eighteen when Disneyland Shang I opened. An incredibly long project.
So Bob does very well running international and in addition he's still running ABC as well. And so finally in January of two thousand
Eisner does promote Bob to
COO he kinda
has to at this point in time. Uh is sort of like keeping him at arm's length. You're sort of my number two, but you're not actually my number two. And the board is really starting to get really upset with Michael at this point in time after all the time. Especially around succession planning. Like what's the plan, dude? Like you're not doing that great and even if you were, it would be nice to know where we're
Yeah, like you've been here a long time.
Anyway, so
Bob finally does become COO but
Still all is.
Really
really not well. And the the biggest problem that's going on at Disney at this point in time, despite all this drama and personnel stuff.
is animation. You know, and there's a saying within Disney that we're gonna talk about
a number of times over this next bit here, which I think goes all the way back to to Walt of as animation goes.
So goes.
the company. Animation and what animation really means, you know, gotta remember at this point in time, Disney doesn't have Star Wars. It doesn't have Marvel. It they has you know some live action. One of the other really smart things touchstone pictures. Well right, one of the other really smart things that Eiser and Wells did was they acquired Mirmax. That gave Disney
An adult.
film not not an adult film, a film studio uh capability targeted at grown ups, not just kids. I mean although
Disney movies are for grown ups too, which is the beauty of them. But anyway
animation was the core of the IP generation that flowed through Walt Disney's
beautiful flywheel that we've talked about on a few episodes here. We'll link to
Again in the show notes, you know, back in the early days of
the Walt Disney company, Walt illustrated this flywheel. You know, it's like an Amazon flywheel. It's the original one of how
Disney's business model works, and at the core of it all.
is animation. And animation means the generation of intellectual property and content and characters. And that flows into
movies, television, uh publications, theme parks, characters, visits, consumer products, all of this and but without the life cycle of constantly
Inventing new and refreshing old IP is
that all starts to break down. David and I have revered the Disney flywheel diagram and talked about it, I think, at length on many episodes and
I actually looked at it the other day to to prep for this and and started thinking about it more. And one thing that I thought about was sure uh the film IP powers the parks and the parks make people want to buy merch and owning the merch makes you want to watch the movies again and g go see the sequels, but like how does it actually shake out financially? And looking at
the income statement for Disney that that uh if you think about the year that ended this last September
This is pretty counterintuitive. So Studio Entertainment did about eleven billion dollars in revenue.
But
parks experiences, products, licensing, that sort of thing, did over twenty six billion. And and that's pretty similar to what the media networks division did, that's l largely ESPN. And so when you think about it,
Like
uh sure, the movies are a a big great business on their own. And of course this includes Lucasfilm and Star Wars and all that at eleven billion dollars, but more than twice as big is how they sort of monetize in a downfunnel way of that that seed that they've planted with the audience of, hey, you should
You should engage with us in these other ways.
That is what really makes Disney special.
And is Disney's moat, and is w the reason why we talk about it so much on this show.
There are lots of other media companies out there. There's twenty first century Fox, which we'll talk about. There's Time Warner. There's, you know, plenty of others.
But nobody else has this
ability to take eleven billion dollars in film revenue and add an additional twenty six billion dollars
In
Flywheel revenue around it.
To give you a sense of how bad things were. Oh man, I remember this. This was dark.
Here's a sampling of Disney animation movies that come out during this time.
You ready for this, Ben? Yeah, I'm glad you're sitting down.
Tarzan?
Dinosaur.
Atlantis.
Treasure Planet. Remember Treasure Planet? Oh yeah.
N no. Yeah. I mean I remember hearing of treasure plant. Like that these were yeah.
Brother Bear. Is this the the Emperor's new groove?
Yeah, the Emperor's New Groove. That was probably one of the more successful ones during this time. Things are dark. So
the the flywheel really starts breaking down. Like parks are down, like everything's bad. There's one saving grace, though, during this time period
And it's a big one.
Which is that Disney
has
A very close collaboration with a little company
Up here in the Bay Area.
Called Pixar.
And
Picks are

uh public company. We've talked about sadly was our first episode. Our history and facts on Pixar. We're gonna talk about it a little more here. It's about a sentence. Uh and we really need to revisit the whole episode. But Pixar had done to
Yeah.
Uh distribution.
and then additional revenue. They've done a big deal with Disney where Disney distributed the Pixar films.
And
co-licensed with them all the characters for theme parks and merch and you know ran the Pixar characters through the Disney flywheel.
And
The
movies and the content that picks our
you know, has always produced but was producing during this time was you know, Toy Story. The very first one was Toy Story. The very first one was Toy Story. Toy Story, Toy Story Two, a Bugslave, Monsters Inc. The Incredibles. Compare that to Tarzan.
And so this was this was really keeping the Disney flywheel afloat was the second party um IP that was flowing through it from from Pixar. Even finding Nemo was pre acquisition.
I don't rem I don't recall if it was or wasn't.
Yeah, okay, okay, yeah, then it definitely was pre acquisition. Yeah. Um the acquisition was two thousand six. So
Unfortunately, and this was the last draw for Eisner.
Eisner.
and Steve Jobs get into a very
Public.
Clash.
And the deal goes sour.
And Pixar and Steve. Steve owns forty nine percent of Pixar.
at this point and uh Pixar is a public company. Pixar announces that they're gonna walk from the Disney deal at the end of their original three movie contract. Steve Jobs publicly he's already come back to Apple at this point. He started his reascancy, you know, the iPad, the iMac, the iPod have happened, he is uh incredibly well respected
business person. And remember the narrative around Disney has been
This is
This is we work, and he calls Disney completely mismanaged and like, you know, basically a dead company. Uh the really interesting thing here, though, to come back to technology and this all you know to bring it back to Disney Plus.
Disney.
The content and the creative side of the house was a mess.
But also the technology side of the house was a mess. You know, again, like it was always
new technology that was driving Disney animation
And they had just completely stagnated and Pixar was the one that had taken
The lead here.
Yeah. And I mean what they were doing was
Uh and still is so cutting edge. I mean i if you look back at
Toy story and think about the year that that was produced. What was it, ninety five five. I mean it by no means the photorealistic stuff that it is today, or the water or the sky, or the s you know, but it is
absolutely pioneering and and so unlike anything that anybody else in the industry was doing. Yeah. I mean think about like
I'm trying to even remember what kind of computer I had in nineteen ninety five. If I even had a computer. I mean I think my family had a computer but I did not have my own computer. My family had a Power Mac eighty five hundred.
the Motorola the like Motorola chip that uh that uh Max ran on for a while. Like it I
I don't I don't know how to like compare that in megahertz or anything, but yeah. It was and here's Pixar making Toy Story, you know?
So incredible with the render farm and
as Nolan Bushnell told us, he he figured out how to do render farms with with gigantic cellar of of parallel computing. Yeah.
Yeah.

So
The Disney board once the Pixar deal falls apart.
They've had enough.
So in Lee
two thousand three.
Roy Disney, who is the nephew of Walt and the sort of storage of the Disney family's involvement on the board and with the company.
and longtime Disney family lawyer Stanley Gold, who's also on the board. They resigned from the board.
And they launch
Save Disney. The Save Disney campaign.
It's so bad. So here you have Disney family members.
Former board members campaigning and the the
the goal of the Save Disney campaign is oust Michael Eisner as CEO. Uh it's not mint words about what Save Disney means. Yeah. Save Disney means get rid of Eisner. And so they decide that how they're going to run this campaign is they're going to wage a proxy battle.
for the March two thousand four shareholder meeting of Disney, where they're going to encourage all the shareholders. You know, the proxy vote is at the annual shareholder meeting of every public company. There's a uh vote like the all the shareholders vote according to their voting rights.
on the board of directors and the management of the company.
And they are encouraging
shareholders to vote.
Eisner.
out of the company and off the board.
No vota, no confidence. Very interestingly, right at this time, and I remember this happening.
Comcast.
Which at this point in time, you know, Comcast is just a cable company. Like they have they are literally just a cable distribution company. I think they own the seventy sixers and the Philadelphia Flyers at this point in time. They're based in Philadelphia. And they're nowhere nearer hated as badly as they are today. The internet hasn't launched, so you can't see any tweets. Yeah. Totally.
I mean they're still hated. It's just everybody thinks they're the only person who hates them.
They launch a hostile takeover bid for Disney. They offer sixty four billion dollars in Comcast stock.
to take over the company because they see like, hey, this is damaged goods. We wanna make this play. We wanna get into content and distribution. We're gonna build an empire here. And it's kind of a miracle it doesn't work. Like it almost works. You know, here we are 15 years later, Comcast is a two hundred billion dollar
Company.
Um, they've acquired MBC Universal, so they have gotten their
Yeah.
But Disney is a two hundred and fifty billion dollar standalone public company that once was almost acquired by Comcast. For fifty or for sixty four billion. Yeah, pretty good that didn't happen. In a sneaky move, too, like right, you know, that night before the earnings call.
Yeah, yeah. Well and while this save Disney proxy war was going on. So interestingly, the media world is a small world too, just as is the technology world as we talk about on this show.
Uh Comcast
number two, I don't know if his title was COO or president or just what, um the CO is Brian Roberts.
The number two person is Steve Burke, son of Dan Burke, who had worked for Bob briefly at ABC.
Before the
Capital Cities merger. So there's a lot of personal history uh here.
fortunately for Disney, at least,
Comcast bid eventually collapses because Disney stock runs up in price on the announcement of this takeover bid and Comcast just can't afford it, even with a even with a share deal. And what was it that made the stock pop there? I think it was like
There was a couple of movies that did well and there was like one data point in earnings that got everyone excited. It was like a a small sort of like glimmer of hope in this otherwise pretty
Yeah.
That made the stock pop and and made this bid impossible to go through.
Yeah, I mean it really was uh haven't this in a while.
It was history turning on a knife point. The bid collapses, but
The shareholder meeting still has to happen in
March.
And
An astounding forty three percent.
of Disney shareholders vote no confidence in Eisner uh at the shareholder meeting. Like that's insane. That never
Never happens. Yeah. Whenever I get those things in the mail, I'm always like ha ha ha, like I could have anything to do with this decision. Yeah. So
In the immediate aftermath, literally that night.
The Disney board meets.
And they strip Eisner of his chairman title, so he was
Chairman and CEO. So he's no longer chairman of the board.
And he announces that he's going to step down from the company at the end of his contract, uh, which expires in
Two thousand six.
He would end up
Leaving earlier.
But it's really a sad kinda
ignomaniaus um
You know, end for it's an example of somebody staying too long. Again, his first ten years within the company were amazing, but the second ten were were terrible. So the board runs a search for a new CEO, and Bob Iger is the only internal candidate, but it's a super uphill battle. Like he's
The COO to Michael Eisner through all of these disasters. So nobody believes he's actually gonna get the job. They're looking at all sorts of external candidates. Interestingly, the frontrunner external candidate is Meg Whitman, who started her career within Disney.
Which is the craziest thing I learned in this research. Of course we know Meg Whitman as Meg Whitman for America or Meg Whitman of eBay. What's she CEO of now? HP, right? Uh she was CO of HP. Now she's C CEO of uh
Quibi. Bring it all in full circle. Yeah.
But she started her freaking career in Disney strategic planning.
Yep, yep. As did so many people. Uh Jeff Jordan, who went on to become CO of um Open Table and now is uh
Well was general partner for many years and uh now it's just promoted to co managing partner of Andrews and Horowitz.
uh board member at many great companies including Airbnb
Michael Deering, great seed stage investor that we look up to a lot here at Wave. Um, many, many great folks have come out of Disney's trap planning.
Crazy. All right, so you got Iger here, this guy that let all the bad things happen as COO. Come on, this was on your watch. Like why why are you CO this? Why are why should you be CO material.
And this is where
Bob.
comes up with
the plan. So we're now in two thousand four, two thousand five.
Bob comes up with the plan that that ends in Disney Plus.
And he says he realizes that
Both
To get the job as CEO.
he has to distance himself from Michael
And he has to do that by making his plan about the future of Disney. Like forget the past. Like the past is done. We have to look to the future. And it's also the right thing for Disney. Like Disney, uh, you know, it's innovative or die. Like they have not innovated in a long time and they are dying. Like they need
to
Change
their approach to consumers, to the market, to technology, to everything that's happening around them. So he comes up with
Three.
Key pillars of what he thinks is going to transform
Disney and save it.
One.
Make high quality content.
And importantly, that's content of all types, not just animation, but
It has to be extremely high quality. And we're gonna quote from him in the book on on his three points here, because I think they're just super cogently and eloquently laid out.
And again, remember, this is fifteen years ago he laid these out. And importantly, branded content. Content that we own that can be enduring franchises that that that will enable the rest of the Disney flywheel to spin.
Yeah. So he says we needed to devote most of our time and capital to the creation of high quality branded content, as he said. In an age where more and more quote unquote content was being created and distributed, we needed to bet on the fact that quality will matter more and more. It wasn't enough to create lots of content.
There are lots of people creating lots of content, including like YouTube and UGC, just creating like tons and tons of content, some of which is great. Uh it wasn't even enough to create lots of good content. With an explosion of choice, consumers needed an ability to make decisions about how to spend their time and money, great brands would become even more powerful tools.
For guiding consumer behavior, they believed. And that was just like so spot on and not obvious at the time. Like YouTube is about to get started here. You know, uh web two.
It's not obvious that the future is actually doubling down on
Professional, super high quality content. It's very interesting. And I think we see this trend in a lot of ways where you sort of are as the long tail starts to exist, and actually I think this is right around that time that the long tail book came out, there's two different strategies and two different playbooks to run. One is enable the the long tail, which means that you
create these smaller affinity groups around really niche things that go super deep, like the acquireds of the world and the 700,000 podcasts that are out there. And then at the head of the curve
If you're gonna be one of the few that wins there, you need to run a very different strategy to say, Hey, this is the pillars, like these are the things that America is gonna galvanize around.
Yeah, not just America, but the world, which we'll get into in a second, it's Avengers Endgame. I think Bob and Disney
I think they appreciate U D C and they appreciate
All the
technology companies and innovation and everything that's happened.
Over the ensuing fifteen years. But it's an and, you know? It's like there's YouTube
And there's Netflix. Right, but they're they're inherently not that. Like Disney, it's partially why the Twitter deal fell apart. I mean, I think when they really looked at it, they were like, Boy, all this like user create stuff. Granted there's all these risks and stuff involved in it because people are tweeting all the stuff that they're tweeting, but like it's just not it's not actually what we do. We create content.
Yeah, yeah.
All right, listeners, now is a great time to tell you about a longtime friend of the show, Vanta.
AI has scrambled the whole security picture.
It used to be that you proved that you were secure once a year on audit or a static PDF, then everyone would nod and you're done.
But in an AI first world, that doesn't hold up anymore.
Yep, your risk surface changes every week now.
A vendor turns on an AI feature or someone writes in a new model without telling IT.
And your posture is different than it was last week, let alone at your last audit.
Banta's own research found that around seventy percent of companies have this quote unquote shadow AI running with no security review at all.
Right.
And that's where Vanta comes in.
They're the leading agentic trust platform, meaning they've built the thing that closes the gap.
And the way that they close that gap is Vanta Agent.
Think of it as a GRSC engineer, that's governance, risk, and compliance, except that it's software and it doesn't sleep.
It finds the issues, drafts the fixes, and cuts the time that you'd spend on vendor assessments in half.
In half.
Which is exactly why more than sixteen thousand companies today run on Vanta. Companies like Ramp, Cursor, and Snowflake.
All stay audit ready and catch the risks that crop up between audits across every vendor.
Every AI tool.
The whole environment.
And that's the real value. Trust has to be continuous now, which is why Vanta automates your security, your compliance, and the work to earn and prove trust.
We're huge fans of Vanta over here, and literally hundreds of acquired listeners have become Vanta customers at their companies over the years.
So you can get$1,000 off Vanta at vanta.com slash acquired. That's V-A-N-T-A.com slash acquired for a thousand dollars off.
And just tell them.
That Ben and David sent you.
Okay, so number two.
This is
uh number two eventually becomes, I think, the most important of these three points.
is invest in technology. Rewind back to this
point in time, and I remember it being an a media investment banker at this time. Media companies were hating on technology companies. Like we'd just come out of the Napster era, and now all the movie studios are worried about like the same thing's gonna happen with video that happened to music and YouTube's gonna kill us and like there's all this pirate content and like
It's all just crap and we hate these people.
Bob instead says we needed to embrace technology to the fullest extent.
First by using it to enable the creation of higher quality products like Pixar.
And then to reach more consumers in more modern, more relevant ways. From the earliest Disney years under Walt, technology was always viewed as a powerful storytelling tool. Now it was time to double down on our commitment to doing the same thing. It was also becoming clear that while we were still
And would remain primarily a content creator.
The day would come.
When modern distribution would be an essential means of maintaining brand relevance. Disney Plus. Unless consumers had the ability to consume our content in more user friendly, more mobile, more digital ways, our relevance would be challenged. You know, again, this is such a change. Like, remember the Disney vault? Like Eisner era Disney was all about
Protecting the content, limiting consumers access, only, you know, opening the vault uh at very, you know, specific moments of time.
And then ESPN back to you know getting nine dollars a month from the cable providers.
This is like super revolutionary here that Bob is
Is espousing. He's saying like
Nope.
We're eventually gonna get rid of all that.

Yeah, and he didn't say it in so many words until like August of twenty seventeen. Um, you know, there there there was definitely this working to use technology both for
creating better content and but you know enabling better distribution. But I think the whole industry for a while thought that meant things like
when things like Netflix emerge, we will be okay putting our stuff there. I don't think anyone thought that it meant uh what uh
What ultimately happened with Disney Plus.
I I think publicly, yeah, I think that's true. But I I
think i it's a little unclear from the book, but I I I think this was part of this original
presentation to the board was he knew that like the day was coming
When
Just like giving the you know, Netflix didn't even exist yet, but giving the equivalent of Netflix the right like where they had to own it themselves. And so the mindset of starting to build towards that.
Yeah, started with Bob becoming CEO.
And then the third point was grow
Globally.
You know, and it's hard to like
Remember now. I mean f actually for our international audience, it's probably easy to remember.
uh Disney for all the IP of Disney and especially now Marvel and Star Wars have universal worldwide appeal.
In every country and culture.
Disney wasn't that back then. It was an American company, you know? Um like they had Euro Disney, but you know and made no more more obvious than by when you go to Disneyland and you walk around and you're like, Oh my god, I'm in like this the epicenter of Americana. Like this is like the most glorified county fair I've ever been to.
It sort of exudes nineteen fifties American. Main Street USA and all that. Yeah um so
This was the third pillar of Bob's strategy was and he'd you know seen this, I think, from his time running international, like
Hey, guess what? There are a lot more people out there who don't live in America than do. And
Oh, and by the way, that it's an emerging middle class in huge countries elsewhere.
Yeah, yeah.
So
He presents this vision to the board.
Really compelling.
Yeah, it's a brutal process. But through this vision he's able to overcome
Honestly, there was no way he was gonna get this job without
without something really compelling. And in in fact, he tells talks about in the book, he had breakfast with Jeffrey Katzenberg during this process.
And
Katzebrick told him he was like, Dude, your career is done. He basically tells him to write up a resume.
Yeah, he tells him to start doing community service to rehabilitate his image. Um not that even
Just do community service. That's good. But like you know It's so bad. Bob has a uh he has an anxiety attack during he takes his son to a Clippers game. He thinks he's having a heart attack and he's about to die. It's just a brutal
Brutal process. There's one management lesson in here. I know we're we're talking about the book a lot, but it obviously informs so much of this and is really tremendous. At the end of the book, um he compiles a bunch of his leadership lessons learned. The one that's happening sort of in this moment is
is he keeps redirecting
all the criticism that he's getting
And all the questions from the board around like
Well, it was a pretty big screw up the last five to ten years, and you were a pretty big part of that, so why should we pick you? He keeps redirecting that as hey
The past is the past.
We can't change the past. Here is my plan. Here's why I think it's right. Here's why I'm the person to execute that plan.
Let's talk about the future. And yeah, I understand where we are. And like I'm I'm neither going to blame that on someone else nor say that was all my fault.
We're going to talk about the future.
It's a pretty powerful insight on a way to sort of redirect the the conversation.
I think it's one of the reasons why, you know, there's been so much talk over the years about uh
Bob potentially running for president someday.
Gosh, like that's like that's the way to handle these things. He's a tremendous diplomat. Yeah. So um
By the way, I did I did look up the the reason why the Comcast bid failed and Disney stock price spiked. Uh
was the tremendous success right in a row of Finding Nemo and Pirates of the Caribbean, which came out in the same quarter. So revenue spiked nineteen percent and caused the uh the stock to change.
Mm.
Tiny Nemo.

Pirates the first pirates of the Caribbean was so good. So good. Just went so far downhill. Oh, yeah.
It's kinda like Star Wars, like I don't remember there being other uh prequels.
Uh anyway, okay. So
The board makes its decision. Bob is CEO.
Oh he does a few things.
When he gets the news. He calls his parents.
He calls his family, he calls his mentors, he tells them he thinks he calls Tom Murphy, I believe.
But that night he calls Steve Jobs.
This is like such an amazing olive branch. And I think also just talks to like Bob as diplomat, like Eisner and Jobs were like not on speaking terms.
And on the very day that Bob gets the most momentous news of his entire career
He calls Steve Jobs.
And he says
I just wanna let you know I wanna come see you. I wanna come talk to you. Me.
person, in person, face to face, and find a way to make this work. And Steve is like super skeptical. But fly, I guess. Sure, I guess.
Um
So
That is exactly what
He does. He goes up to see Steve and we'll take a minute and tell
a little bit more of the history of the Pixar deal here, because I think it's important and we we didn't do it on our episode. Uh and it so it sets the stage so much for w ha w why the position why Disney's in the position they are today. Yeah. This is really this is the first step to
You know, first reconciliation with with such an important partner and piece of the business and then acquisition, you know, and then and then rebirth of of Disney. Bob
does go up to C Steve, but he doesn't start with talking about
Pixar.
He says
Hey, um
I have an idea.
Unrelated.
To Pixar.
You know, we own
A B C we have all this content, and we have our movies and we have our television shows here. Um at Disney
And
You know, you guys, Apple, you make such incredible technology. And like the this is the heyday of the iPod. Uh, and he's like, I have my iPod, I love my iPod, and I love, you know, what this has done for me as a consumer with my ability to consume music whenever I want.
Do you think there's any way that we could do the same thing for our
video content that we have, you know, within Disney and ABC. And again, remember like all the media company executives at this point in time are like, tech is evil. They're gonna pirate all our stuff. And uh Bob is like extending this huge olive branch to Steve and Steve's like
I have something I want to show you. And he does not show him the iPhone, which is of course already in the works at this point in time, but he shows him the
video iPod. I remember when the video iPod was announced and came out and it was like it was not that long before the iPhone. Um but it was a it was a huge deal.
kind of a strange product. Like I remember being very excited for it. I had the ad pinned up on my wall of um it's like the there was the first black iPod I think and it was shiny and you could use uh there was a um the ad was Bono singing on it with sort of this like blue.
I was excited for it, but it was a strange product once I got it,'cause it was like really, I'm gonna watch movies on this
Yeah.
Like I get it, digital distribution of content and that's cool. I can do it anywhere, but this is like not
This is subpar.
This is a halfway experience.
Yeah. But
It becomes such an important
Door opening to
So much to come for for Apple, Disney, Pixar, all of them.
Because
Bob sees it and he says immediately, he says, We're in.
Steve, you have my word.
You are going to get ABC and Disney content for your launch.
on this device. And that's just like unheard of. Like that uh like you think about like the media rates and like uh finance teams involved and our lawyers involved and and that's what that's what Steve was used to from Disney. He was like cool doing a deal with you guys is no promises and a year of dragging this out and every SWAT team of people being involved.
And then it's I'm signature that he knows that he needs to put on Disney to just come in guns blazing here.
So when
Uh Steve at the Apple Keynote that uh summer, I believe, of two thousand six, announces
The video iPod.
Bob Iger walks out on stage.
And says.
All our Disney and A B C content, you're gonna be able to purchase it, you're gonna be able to download it, you're gonna be able to watch it on the go.
On Apple products.
So this is the opening.
of the thawing of the relationships between Steve Jobs and
Disney.
It takes a little bit of time after the announcement for that Bob's gonna become CEO before
Uh Michael Leaves and he officially is installed as CO it's about six months in his first board meeting.
Immediately
After
Uh he's officially CEO.
Then TFO, Tom Stags.
And the head of Strat Planning, Kevin Mayer.
to put together an analysis of Disney animation versus Pixar to present to the board. And Bob has
an idea that he hasn't told anybody about.
And they put together this analysis and it's
I mean it's brutal, like as you would expect from what we've been talking about in the
Same period of time that Pixar has been operating and had their deal with Disney.
Disney animation films have lost four hundred million dollars in aggregate. Meanwhile
Not only has Pixar had hit after hit after hit and had made immense profits on their films. Bob has has Kevin and Tom commission
Brand research.
To ask parents.
In the U.S.
what entertainment brands they think are best for their kids.
And
This is like Disney has always been the number one in this.
Disney has been unseated by Pixar.
More American parents.
at this point in time believe that Pixar is the best entertainment brand for their kids than Disney.
This is real bad. And so he presents this in his first board meeting and he reminds the board about, you know, the saying about as animation goes, so goes the company. And he proposes three options. One
We can keep the status quo. That's not a good option.
Two, we can go out and try and hire new talent to run our studios and revitalize Disney animation.
He's like
I've looked
That's gonna be hard.
It's gonna take a while and there's no promise of success.
He's like or three.
We can buy Pixar. And he writes about this in the book. The boardroom just like erupts in chaos. And like this is a you know, uh
crazy idea. Board members are shouting. Uh, you know, people are like the Disney family members are offended. Um, you know, this is crazy, but he
methodically makes his case and says, you know, look, I don't know if it can happen.
The relationship has been damaged. You know, Steve is Steve, but
I think we have to try.
And do this, I think this can save the company.
So the board does give him approval to explore it, finally.
Bob calls Steve the next day and he says, um

Hey, I have a crazy idea. Can I come see you about it?
I just love this. Yeah. He writes the book. He says I didn't yet fully appreciate just how much Steve liked radical ideas.
Tell me now, he said. So Bob's like he's driving in his car, he pulls over like into his driveway and he's like calms himself and he's like oh man, I wasn't really expecting to do this now. He's like well
Um
I've been thinking about, you know, our respective companies' futures and um
What do you think about uh Disney buying Pixar?
Steve uh is like silent for a moment and then he's like
You know?
That's not the craziest idea in the world. And thus begins
the negotiation, which actually goes very quickly and within a matter of months.
They've reached a deal for Disney to acquire Pixar for seven point four billion dollars, uh, which was a huge, huge price at the time.
And still unclear as we talked about on the episode, like financially did that deal make sense, you know, it's kind of been like okay.
But
That
deal saves Disney and that sets
Yeah.
to
Starting to revitalize the company, bring technology leadership back into the company, bring creative leadership back into the company. To the extent you believe that Frozen would not have happened without revitalizing Disney animation, and that wouldn't have happened without acquiring Pixar and bringing Lasnar and Catmole to run Disney animation.
Then yes, it's worth it.
But for the Pixar movies alone, it's sort of a an open question. It's interesting actually hearing the rationale for why it was 7.4 billion.
The thing that made it really unique was it came with this full studio that number one had films already in pre-production. So there was like a roadmap of five years of Pixar films that were already all in development, had teams, had directors.
So of course you can sort of value that asset. But then also it came with the it was a machine that knew how to do this and it had all the people and all the creative talent to repeatedly do it over and over again, which was a really interesting
thing that made it different than buying Lucasfilm. Cause Lucasfilm didn't have any Dreamworks animation if they consider that, or you're gonna bring Jeffrey Katzenberg back and all like Yeah, Pixar was a machine. They had their own process.
Process and and
big team of people that were actively doing doing stuff. So
I there's another excerpt from the book here. I just gotta say that it's amazing how much people anchor on price. So this seven billion dollar thing for Pixar, you know, when when they're negotiating with George Lucas and he says
I want the Pixar deal. Yeah. You have Iger having to come back to him and saying, Well, no, no, no. Here's actually how it's very different. Like, you made these great movies a long time ago that have a really enduring universe that we think we can do something with, but like
There's not any of the infrastructure or any of the current development that that's technology or
Well, there's I L M, which is pretty amazing, but yes, but not uh not uh anywhere near as valuable to Disney as as
Pixar's uh animation technology was Bob and and his team at Disney
make the case to
Steve and two Ed Catmole and John Lasseter about
Why this?
Makes
sense. He talks about this, go read the the book about it, but you know, Steve and he whiteboard out all the pros and cons of doing this deal. And Steve like you guys already like list like a hundred cons.
And then they move to the pros and there's just like just a few of them.
But they're like pretty big pros. And so the specific pros are like for Disney
Pixar and John and Ed can save Disney animation. They can bring the process, they can bring the talent, they can bring the technology. Keep Pixar separate, but revitalize Disney animation.
Two, Disney gets full access to
The IP of all the Pixar.
characters and the perpetuity of all the all the content in the pipeline.
And then for Pixar.
they remove this existential risk about distribution and marketing that they were always going to have as a small independent
studio, they couldn't just go off and be independent. Like they needed a distribution partner. It was gonna be Disney or it was gonna be somebody else, you know? Um
And anybody'd be happy to have'em, but
It would it would have been someone.
Yeah. And then and then I think this is really the
to the people aspect of this.
Probably the most compelling, especially to John and Ed. Bob tell says
You guys are gonna get a much larger canvas to paint on.
And like what better way to inspire you know people whose mission is, you know, bringing
creative endeavors to the world than to give them that larger canvas to paint on. And Bob talks about the lesson in his uh in his uh lessons at the end of the book of, you know, sometimes especially when you're talking about like big, bold, risky bets,
There are million reasons not to do something. But like
If you have a few really, really good reasons to do them, that can outweigh any number of cons.
It's interesting to zoom out a little bit and think about what the board was thinking and what some of the Disney old timers were thinking here.
Specifically, Roy Disney hated this idea of we're gonna go buy new IP and new franchises.
and and wanted to sort of stick to this strategy that has worked.
Well, worked and not worked over the entire life of Disney of it's very much not invented here syndrome. Whereas you look at sort of where Bob Iger

being a non Disney acquiree himself coming in through sort of a
a business that was not homespun in Disney, but was this enormous part of Disney's revenue now with with ESPN.
you can kinda see why he had the the conviction that hey, this could work and it's gonna change who we are as a company in some ways, but it could be really powerful for us.
Yeah, so
This becomes you know, the blueprint in so many ways for
the next series of acquisitions that we'll we've already covered on the show, we'll run through quickly
Here, paying a very large price.
for a very unique asset, whether that asset is
Content.
Or technology
Or both.
With the
belief.
Which is not just blind belief. You know, they do uh Bob and and Kevin and Tom
you know, with him and then the rest of the team over time, do a ton of work to plan out and model the vision for what is going to become Disney Plus. The belief that together all these assets can be worth a lot more
You know, they go out, they pay seven point four billion for
Pixar.
And then in two thousand nine, four billion from Marvel, which
Goodness, again, like forget Disney plus forget everything. That was like
the purchase of the century, given uh what would happen with the Marvel cinematic universe. It is funny on our episode, like w we didn't see it yet. We didn't we missed it. We missed it. Then they
They invest in Hulu, then in twenty twelve they buy Lucasfilm for four billion dollars. Which um the reason it was four was because the Marvel price was the floor.
that uh George Lucas was willing to accept. Yeah. But you know, the Marvel price too, you know, Bob talks about in the book
That was crazy at the time. Four billion dollars for Marvel. You know, the there was an interview I can't remember if it was either an interview with Brian Roberts at Comcast or
Bob talking directly to Brian.
Uh, and he was like, Four billion dollars for a comic book company? Like
Right. And the comic books were way past their heyday. They were doing some film licensing. The best characters had already been licensed out. You know, Spider Man was was elsewhere. Yep. As were X Men and
It's kinda crazy that like it in this world we're sort of like
Rich
potentially valuable IP had sort of laid fallow for for many years. We're now in this era where it's all about having the best IP in the world and being able to make huge investments in that and then get
huge profits out the other side. And I think it all goes back to this thing that we were talking about before, where you have to run one strategy or the other. You're in the business of the long tail or you're in the business of creating the iconic thing that the whole world cares about at once.
you know, it really manifested in in Bob's strategy here of what are the most unique and iconic
pieces of intellectual property and worlds and
you know, mythologies that that we can really amplify.
And the ability within Pixar
To create new.
Ones of those.
So after those big three
Pixar, Marvel, Lucasfilm, content.
acquisitions are done, the first piece of Bob's strategy.
Then they start to turn to the second piece, which is technology and specifically distribution. So
There's a fateful
earnings call in twenty fifteen, couple of years after the
after the Lucasfilm acquisition where
Bob and Team. They they're you know, they're thinking about technology, you know, all the way back to his initial
plan and they're thinking about the distribution piece of this, but
ESPN starts to really
show signs of weakness. They lose
quite a number of subscribers, cable subscribers. And this is like
the first in terms of, you know, actual numbers and chink in the armor.
of this colossus that is ESPN and really the entire previous way of
business for cable networks and
cutting of the cord for consumers. So in this
Late f twenty fifteen earnings call. They announced that yes, Pan subscribers are down.
And
Bob and the team talk pretty honestly about like the existential risk from disruption and cord cutting to
to their business.
This sort of cord cutting thing is.
People are seeing Netflix and Hulu and all these things where they're like, Cool, I can get access to TV shows. Is it really worth me paying fifty plus dollars a month for this cable bundle?
All I really care about there are is s live sports and freaking ESPN knows it by their carriage fees, as we we see in their economics. But people are like, uh, I don't watch that much sports. And so like, even though ESPN
would probably live sports in general would probably uh w keep people
Um, what is the strongest tie to keep people on on uh those cable networks for the people who were subscribing f for the non sports things that are, you know, mostly available on these streaming services now, they're the first to leave.
Yeah.
And and of course'cause the SPM was getting the money regardless. Uh
They're
They're losing those subscribers. So the stock gets hammered down ten percent the next day.
And they were like this is a
big wake up call to Bob and the team. They realize like
We've spent the last several years
Fixing, you know, the content side of the house.
uh getting part one of the strategy in place. We now need to like massively accelerate part two.
And
Prepare for a world where like pay TV and the cable bundle and everything that that means, not just for ESPN, but for all of our content and that piece of our flywheel is
Going away.
they start looking around for technology acquisitions that can make this happen. And as we said, you know, they
come close to a deal to acquire Twitter. And and interestingly, like this
This never made sense. The idea was they were gonna buy Twitter for the technology and the access to consumers and they were gonna use it as like the distribution head for what would become Disney Plus.
Doesn't make any sense. So um it's exactly how a media company would think about buying a technology company. First they're like, Well, who's got the best technology? And they're like Apple
And Google and No, they're too big. They're too big. Okay. Next rung down. Twitter. It's it's like a it's a very blunt way to look at we need technology.
Bob talks about the deal falling apart because of the UGC content issues and the free speech issues and the hate speech on Twitter and all that. And I'm sure that was part of it. But
But honestly, the deal just also didn't make any sense. Uh and so what they do instead, as we talked about in our Bam Tech episode, makes so much more sense is they invest it and then they acquire Bam Tech, which is just a technology provider and the best in the business other than Netflix of delivering streaming content both for live sports.
And for they're powering HBO now.
And for services like
Uh you know, entertainment.
content services like Netflix, like Disney Plus, like uh all these
Into the company.
Yeah, and in Twitter, I mean well, I think this is the my biggest thing that I want to talk about in playbook is is sort of the vertical versus horizontal conflict, where like if you're buying a business that already serves a bunch of other customers and has a bunch of other stuff that they do, buying them to just do your vertical thing
w would be tricky. Like on Twitter, what are they gonna stop it from being Twitter so that they could make it
Disney's Twitter and only distribute Disney content on this. It's just like this is massive vertical horizontal conflict. Whereas on in Bam Tech, like, sure, they get paid pr pretty good money to like power the tech for other people's platforms. That may or may not go away over time, but it it's even though they're doing a horizontal service to the industry there.
by Disney using them for this intensely focused verticalized capacity of distributing their content on their channel, um, with Disney Plus, with ESPN Plus, with now Hulu, like it's not creating conflict.
Yeah.
Totally. So
In twenty seventeen, they complete a majority purchase of Bam Tech.
Uh they own seventy five percent of Bam Tech. I believe the other twenty five percent is probably employee equity and major league baseball. And the NHL owns a bit. Oh yes, and the NHL because they did a uh streaming rights deal with the NHL.
And interestingly enough, this initial Bam Tech deal was done to power ESPN Plus. They they were like ESPN needs a streaming service and hadn't yet conceptualized of Disney Plus.
Well, they they were starting to conceptualize of it, but it was gonna take longer.'Cause they when they do this deal, they announce on their earnings call uh after it that they are launching ESP this is twenty seventeen, they're launching ESPN plus
with leveraging BAM technology.
The next year in twenty eighteen.
And they are going to launch a as yet unnamed
Disney content streaming service to compete with Netflix.
We're launching ESPN Plus and we're launching a Disney thing that's very similar, but we haven't named it. But but they're not that coyote. They also announce, like, hey, you want to know how serious we are about this?
We're taking our content off of Netflix. That's true.
As our content agreements with Netflix expire, we're taking it all off.
And this is all gonna only be on
Disney Plus. If you're bored or something like this, this is actually a we'll link to this in the show notes. The August twenty seventeen earnings call is crazy the amount of stuff that it has in it. It's hey, twenty five minutes ago, we just did this spam tech thing. We're doing it for ESPN. We're launching ESPN Plus. We're gonna do a Disney thing and we're gonna pull off of Netflix. It's like bam, bam, bam, bam.
Yeah, yeah. And it was I mean, this was huge. Bob writes about the book. This was like a major turning point for
the company and their mindset, like
They're like, No, we're we're all in on this.
The street loves it. The stock goes up significantly after the earnings call. Netflix stock drops.
Five percent.
And this was, you know, like Raw Raw greeting like, you know, we'll get into
Disney plus ESPN Plus and Disney Plus here in a sec, but but this was a hard decision, like you know, for a bunch of reasons because you know who hates this?
Disney's
pay T V partners, like, you know, uh the cable companies and the satellite companies that um Disney's basically saying like
Hey.
In the future.
We're gonna end around you guys. And like you all sort of like knew it was coming, but like, nope, it's happening, you know. Yeah, you're you're our most important partners now, but we did just announce that we have a twenty year vision to not be.
Or a five year vision to not be. Yeah. Yeah. So that's number one.
Number
Two.
You know, Netflix, you know, again, Disney's a huge company, but
The
rights money that they're getting from Netflix of dollars. Hundreds millions of dollars a year. That is pure marginal profit to Disney. Like it doesn't cost them anything. They've already produced this content. They're just leveraging that content through an additional distribution channel. They're just getting pure cash flow margin from Netflix and they're cutting that off.
to instead go spend two and a half billion dollars to buy Bam Tech.
and invest many, many billions of dollars over the coming years to build up their own
Uh
Streaming service.
Yeah, it's interesting to think about one of the reasons why the innovator's dilemma is so
is typically so unavoidable.
Is because
y you can't, especially as a public company, get the leeway that you need from from your shareholders to do something
really risky, that's gonna take a really long time and it's gonna cost you a ton of profit in the near term. And so this really is like hundreds of millions of dollars of pure profit that they're just like foregoing for five years, for years to, you know, to come here.
And how are the next set of carriage agreements for ESPN gonna go with the pay T V providers when now they know that like they're gonna be like, Yeah, nine bucks? Yeah, I don't know about that, that I'm gonna pay you that anymore.
a lot of what it comes down to is do you actually have a leader who's gonna get that leeway and that really long term thinking from shareholders to be able to
To sort of act like a startup.
while you have this business that you're trying to preserve the glide path on.
Typically an executive wouldn't. I think it it takes someone who's earned the trust like Bob had.
Contrast this decision to the end of Eisner's time at at Disney. I mean again, Eisner did many, many great things, but
the Ovit's decision, the feuding with Steve Jobs, that you know, it was all about like
I'm so great.
And I've built this thing and it's gonna be the best forever, as it is. And this is is the opposite of that. It's saying like nope, this is precarious. Innovate or die, you know?
But there is one more thing. And that one more thing I think is actually, you know, both
a huge piece of this and opportunity, but also is pretty scary.
And that is Fox.
There's the one more acquisition.
Of which
Is by far
the price that they paid to buy Fox announced at the end of twenty seventeen and then closed in the beginning of twenty nineteen, seventy one point three billion dollars. Many, many times more than all of these other
Incredible acquisitions all combined. Like this is a
Literally betting the farm.
on bringing in Fox. Now, so what do they get for Fox?
None of the news assets, uh, so not Fox News, not the Wall Street Journal, none of the publications. It's all the entertainment pieces of Fox. So they get the movie studio, they get uh studios, uh, which have, you know, both
new slates of films coming out and the library, you know, Titanic, Avatar, all the
Great Fox films within the library are the rights to A New Hope to the first Star Wars movie, because remember, Lucas film uh had Fox was the distribution partner for the first uh trilogy. Star Wars Fact Time, the uh theme to Star Wars was actually composed in the key of B flat
I don't know if it's major or minor, but B flat because
The
Fox twentieth century Fox. The Fox opener was in that key and it was meant to be the sort of like a natural lead-in from
No way, I never realized that, but you're so right. It's the same key.
Yep, and actually then John Williams in uh Empire Strikes Back uh got to re record with his orchestra uh the um twentieth century Fox intro to lead right into it.
That's amazing. I wonder if now the
Fox intro is gonna come back to Star Wars'cause now it's part of Disney.
Uh probably not. I don't think so, but Probably. So the other things that they get
So we mentioned a little bit of Marvel.
Both the X-Men and Fantastic Four movie rates were owned by Fox. So and those are key Marvel franchises. So that's now back in the Marvel Cinematic Universe.
They get
A big part of the library for Fox is is television, not just film. So like the Simpsons specifically, all thirty seasons of thirty seasons of the unreal. Yeah, incredible.
And then to the third goal of international geographic.
National Geographic. Yep. Yep.
But to the third piece of Bob's plan, and this hasn't been talked about as much, Fox is a much more international company than any of the other US media companies were. Fox has huge content and distribution operations all over the world. Um obviously
Fox started in Australia with Rupert Murdoch, but especially in India, uh, where Fox owns
Hotstar, which is the largest streaming service in India. I believe both for entertainment content and for sports, they stream cricket, which is uh cricket in in India is like, you know, um
The NFL and the NBA combined in the US.
Which, by the way, total aside, Indian Premier League cricket is very compelling content. I would love watching it. Do you have a hot star subscription?
No, but maybe with Disney Plus I might now. They're getting a lot here, but seventy one point three billion dollars is a huge
Huge price tag and that's from like fifty, right? Fifty-two point four was the initial agreement. And then Comcast, the old uh
I feel like Comcast and Carl Icon need to like uh uh do something together. We do we need to have
Brian Robertson uh actually we should have Steve Burke on the show. That would be amazing. Steve, if you're listening, open invitation.
Both you and Carl. Well we'd love to have you at any point in time.
But yeah, it gets bit up to seventy one point three billion and um
You know, so the thing that I wonder with that
Is
I'm curious what you think, Ben, like
This actually is a
Keine.
Different thing than
The marquee acquisitions that have really made Bob's career.
Yeah, I don't look at this.
as an IP acquisition or a franchise acquisition in the way that those other
big three were. I mean this to me is
It's kinda more distribution than it is content.
Well I think there's so here's my my bull and bear case, uh just to pull it forward uh quickly.
The bull case is
The launching Disney Plus.
And Baptox, by the way, this is this is the stated strategy.
And they want Disney Plus.
And the whole, you know, ESP and plus and all that to be
In the future.
a viable competitor to Netflix and ultimately D3 Netflix. And so like Disney has all of this great content, but it's just Disney content. Like does Disney plus all of this Fox content
Is that enough now? And they make all of that exclusive to their streaming services and not on Netflix. Is that enough to really de-threaten Netflix? I I I think you're right, because one of the things I've been struggling with actually about Disney Plus is
On on december twenty seventh, the last episode of season one of the Mandalorian is gonna end.
Will people stay subscribed? Like are they gonna w what's next? And I think they've got plans to do ten movies over the next two years and all these different TV shows, but like
Uh people are hungry for lots of content. And does Disney actually have enough content and development to make this really compelling in the early days? Maybe Disney plus Fox, um, over the next two, three years can make it something that feels really full and rich.
That's the stated, you know, reason for doing this. I think the scary thing though is like
Is this
Barbon.
Disney, you know, falling victim to some of the things that
brought down Michael of Empire Building and um
The the overreach in the Greek transition. The overreach, yeah. Like you know, and just reflected in the
deal and the purchase price, right? Like
The initial negotiated deal for fifty two billion
Bidding that up to seventy one billion. Like and Bob talks about in the book. Like he felt like he needed to come in with a quote unquote knockout punch to get Comcast out and get the
Get Fox.
Is that really the right thing? Do they really pay the right price for this? Um you know, so
Or or could they have continued their march of acquiring different franchises for a billion here, a billion there, and and and come up with enough content to
And it's not just enough content, it has to be the best content in the world that is the most celebrated and uh
content that the world feels the most emotion around.
It has to be that content.
And the teams and talent
to continue to keep that content fresh. You know, they've already talked about that the
state of the studio and the slate of films, uh, for Fox that they acquired is not in as good a shape as they thought it was. So, you know, I think it's an open question. Um
My bet is it it will prove to be a generally good decision, although the seventy one billion will look like a too high of a price tag.
Yeah.
I mean I think that's probably fair to
Let's put a bow on Disney Plus, and then we can come back to analysis and creating. So one thing I wanted to point out here. So there's um
Well, first I wanna make this point. So Bob talks about how after the Fox deal got done, he stood in front of a whiteboard to sort of come up with a reorganization of the company. What does a modern media company look like?
From two thousand five to two thousand eighteen
He said this is the
only time I've stood at a whiteboard since two thousand five with Steve Jobs. I don't know if that's hyperbole in the book, or if I just fundamentally do not understand the job of a like
Global.
Fortune fifty CEO that like this is not i in their workflow at all. But I I was like, Whoa, that's a long time before.
Whiteboarding something out.
You know it's very different than my day to day.
And uh so he talks about how he's whiteboarding out sort of this this
organizational structure for the combined company where you have uh a separation from technology from content. And you sort of have this physical goods thing as well. But think about technology and content, where technology is in charge of distribution and monetization and content is just in charge of content. And it
I found myself sort of like laughing while reading this,'cause that is the traditional newspaper's organizational structure from way back when. Like keep the journalists doing their journalist thing, don't bother them with this business model thing that these ad sales guys have to do over here. That fell apart in the era of the internet. It's just so interesting to see like
call it bundling, unbundling, or push and pull, or tick tock, or what's old is new again. There's lots of aphorisms for it that all mean slightly different things, but in this case, it is mind blowing to me and I
Think it's gonna work that
this sort of traditional newspaper org structure of of separate content from the content delivery and business model around that content delivery in different
different organizations. That's how it's playing out.
Yeah.
It also highlights like they bought Twitter.
This would not have worked at all. Like that org structure and this whole plan only works if the technology is Bam Tech. Is a
uh distribution rails technology, not a
consumer facing like
content and technology married together.
Mm-hmm.
So Disney Plus.
April.
Twenty nineteen of this year.
they do a big investor day to announce Disney Plus. Kevin Mayer, the longtime head of Strap Planning.
is now put in charge operationally of running Disney Plus, running this new segment, uh that is the future of the company.
Important to know like has strap planning. So he was a deal guy. I mean he was an a an analysis guy, a hard charging leader and a deal guy. Not a creative, not from the creative side of the house.
Yeah, so this is his this is his big test. And a lot of people think this is his
test that if he passes it will be he will be Bob's successor when Bob has announced his retirement in twenty twenty one. They announce
Disney Plus.
All the content on it, the Mandalorian, uh all the Fox content that's coming under the Simpsons, Net uh National Geographic.
And then they announce.
The price.
And the crowd goes wild.
Six ninety nine a month compared to twelve ninety nine a month for the basic plan of
Netflix.
Now, of course, right now, even with all the Fox content
You know, Disney Plus is still quite behind uh Netflix in terms of the amount of content that they have on there. This is a really, really
bold price to go out to consumers with. And I'm sure they spent a lot of time thinking about this. But the aim is they they wanted to set a price that they felt like they could get sixty to ninety million subscribers within the first five years.
Wall Street loves it. The next day the stock is up eleven percent. By the end of the month, the stock is up thirty percent after this announcement. Then the service uh finally launches.
Last week, November twelfth.
Uh twenty nineteen. Maybe.
birthday. Uh it was a nice birthday present to watch in the Mandalorian. Happy birthday.
Watch the second episode.
Yeah. I do need to watch the second episode. Uh
And they get ten million subscribers in the first week. We'll talk about this in the analysis, but
So far, so good. First forty eight hours. First forty eight hours. Yeah. Yeah. Yeah. Let's save it for the analysis. So a very auspicious beginning that it is off to. Now lots of questions still remain in the future.
But
Here we are now at the end of twenty nineteen.
And
This company looks
So different. Than it did when
Bob took over as CEO. Yeah.
Back then it was as animation goes, so goes Disney. And
The lion's share of the revenue and profits came from
ESPN carriage and advertising affiliates, but uh uh deals which were
intermediated through pay TV providers.
Best I can tell right now, I think ESPN cable affiliate fees are responsible for somewhere around twenty five percent of Disney's revenue.
Yeah. So it's st still a material amount in the old world. Even as we talk about betting the farm and changing the business model, like this ESPN plus thing is not yet going well. Um they only have two million subscribers, we're over a year in.
It doesn't have the content. It's not like you stop subscribing to ESPN and start subscribing to ESPN plus. It's like sort of these. Seriously handicapped. So so ESPN, let's let's
be clear on this, the affiliate fees f to with cable companies currently are still a juggernaut, even though they're not the entire enterprise value the way they used to be.
Yeah, totally. But but yeah, you look at it today and you've got revitalized animation with Pixar and Disney animation, Frozen Two coming out uh in a matter of days here.
You've got
The Marvel Cinematic Universe, highest cursing films of all time. You've got Lucasfilm and Star Wars and all the revitalization there.
All that on the content side. Now you've got the addition of all the Fox content. And then on the distribution and technology side now, you've got
Not only Disney Plus, of course, but you got ESPN Plus.
Which we should talk about a little bit, you know, is handicapped they've
This is I think one where they've not played the innovator's dilemma. Uh I mean w they're really hamstrung here, but like the current ESPN plus offering is just not compelling. It contains no
major sports uh content. I think they're slow rolling that one more than they are with with Disney Plus. I bet it will continue to be hamstrung until that twenty five percent. And again, I'm I'm ballparking there. It's not an actual number.
Or it's my my best guess by by running some numbers. Um until that comes down to fifteen, ten percent, until like it it really wanes off, I don't think we're gonna see them throwing, you know, their you know, sports center football and NBA and NFL and sports center on there. Uh
True. But it is set up to do that once that threshold gets crossed. Uh they have the technology in place to do it. And then they have Hulu, which they now, you know, own two thirds of and are
uh obligated to by the other third. Um
I I that's the that's a little bit of the head scratcher here. I think that's the one where they're like this is part of the strategy because it's also streaming. Yeah. So I think it's like if we could all play it all back, I'm not sure that that they
they would get get to I I gotta imagine, you know, they've already introduced the Disney bundle of all three of those services for I think
eighteen or nineteen dollars a month.
It's not a large leap to imagine.
That becoming a real bundle and all you know.
Entertainment.
Sports.
And rates to non Disney properties all in one subscription.
That uh as consumers, you know, with that and like, wow, well Netflix has a lot of stuff, but they don't have sports. They have a dwindling amount of stuff. And honestly, if that's what, eighteen, nineteen bucks, that's not that much more than that where Netflix has raised their prices to for H D indefinitely when you compare it to their four K offering.
Yeah, exactly. So
You know.
It's promising, I think.
But as always.
There are a bunch of nuances to tease out here.
All right listeners.
Now is a great time to thank our longtime friend of the show, ServiceNow.
If you are running a large enterprise, AI agents are likely spread across every team, and deploying them is uh no longer the hard part.
Yeah. The hard part is knowing what permissions they have, what employees are using them for, or what decisions AI is making.
AI security for an enterprise at scale is not a small concern. Like the risk
Are real.
Exactly. And the challenge with AI is governing it, securing it, measuring it, and making sure that it actually delivers value. That is why Service Now built the AI control tower.
Yep, AI control tower gives enterprises a single place to see, manage, govern, and optimize AI across the entire business. And it works with
Any AI, not just theirs.
Every device on your network, every permission across every system.
Every AI agent visible and secure in one place.
And ServiceNow can do this because they've spent more than twenty years building the operational backbone of the enterprise, the workflows, governance, approvals, security controls, and institutional knowledge that power how work actually gets done across IT, HR, customer service, finance, and security. ServiceNow
already runs more than a hundred billion workflows annually and trillions of transactions for more than eighty five percent of the Fortune five hundred. So when companies need a place to govern AI at enterprise scale, they're building on a platform at the center of how their business already operates.
And in a future, that isn't going to be one AI, it's going to be thousands of AI agents working across every function of the company. But the question is
Who's managing them all? So if you're trying to turn AI ambition into real business outcomes and make it work safely, securely, at scale.
Go check out service now dot com slash acquired and tell em that Ben and David sent you.
So let's see, where should we where should we start? I I why don't we go with we've I think rather than acquisition category,'cause there's so many of them, what if we do bull and bear narratives here?
Um yeah, that sounds great.
So
The
Ball narrative is
The image that I always picture in this sort of scenario is like the hero running out of the building that ex exploding behind them.
and and managing to like just barely make it out alive.
What do you always say uh pull the e break, you know, spin around as you're about to drive off the cliff. Exactly, exactly. So i in the beginning of this episode, I proposed that combining content and distribution is a
You know.
has failed before and and may fail again.
This has typically been for two reasons. One is both content and distribution businesses uh typically intend to keep horizontally operating, but realize some sort of synergies by working together, distributing the content that they own or on the pipes that they own. Um you can sort of see the problems that arise here.
you know, do you prioritize doing deals with yourself or not?
Uh the second one being that the clash of cultures, there's a clash of cultures and a misperception of value. And the that last part we definitely saw with the AOL time warner where you know creative houses are very different than these sort of low margin predictable distribution businesses.
I think Disney actually has the chance to do this right. They aren't buying some other distribution company. I mean they did buy Bam Tech, but they bought
that for exactly the right reason they do nothing more than the scope of the pure distribution technology. Which AOL was it wasn't distribution. You're right, it's distribution technology. It's not like BamTe already has all these relationships with consumers that Disney's just gonna flow through to
Yeah. I mean Disney Twitter, I think there's a really good chance that could have been AOL time warner. Totally.
Totally.
And they also don't have a vertical horizontal conflict here. The the only shows that are on Disney Plus are Disney.
Um, I think this time really may be different.
So that's
That's my bull case. That's the bull case. Well, and I think the as we were just talking about at the end of um history and facts there, like
Okay, roll the clock forward a little bit.
And
It's twenty let's say twenty twenty four. That's the time frame that Disney is talking about in terms of their
Mm.
And say they put real ESPN into ESPN plus so the price is up and it's been in place and whatnot.
Twenty nine bucks a month, Ben.
Uh I'm offering you
All Disney content.
All Fox content.
All ESPN sports content.
And
Access to everything on Hulu.
uh which they have locked up access to at least I believe at least MBC content.
on Hulu uh as well as all the other you know small media companies that are that are on there as well. Thirty bucks a month for that versus to get a similar
suite of offerings at that point in time, you're probably looking at uh
Probably close to twenty bucks for Netflix. Uh plus, you know, you're doing either U Two T V or something to get sports. Like
You may not even be able to get a lot of sports any other way. Um, is that compelling to you?
Hm.
Probably.
Yeah.
I mean just think about like really at that point what they're offering
is a true viable alternative to
An old cable subscription or a satellite subscription. Which was a hundred bucks a month. And so now you're getting it on any device, anywhere, wherever you are, for thirty bucks a month. So the fascinating thing is, yeah, that Disney may be able to rebundle and actually own all the content. Like that is the that is the mega, mega bull cases. Like imagine if you're
Comcast, but you actually own all the content that's flowing across all the channels as well. So you don't have to pay out that COGS.
Or at least the margin associated with the cogs. Now I'll take it one step further.
Remember, Disney was primarily an American company before.
They're doing you know d in the pay TV bundle world.
They were doing great, but they're going and doing all these carriage agreements with
All these pay T V providers, primarily in the US
Now with direct.
They're in every country in the world. They're in India. They're in China. They're True access to global markets. True access to global markets. And so like, yeah, maybe they're only making thirty bucks a month.
Which is a lot less than
Pay T V was making with a hundred bucks a month, but their addressable market went from three hundred million to, you know, three billion.
The thing that I I I've been thinking a lot about is it's it's
really the true brilliance of the Disney flywheel in action. Like if we were just thinking about this as a revenue transfer where we were trying to take that money that we would make by distributing that content on someone else's platform and then figure out
Are we going to make that money back by distributing it on our own and, you know, just charging people effectively what our margin would have been or what, you know, those distributors would have paid us? That's the wrong way to think about it.
That's not the right way to sort of value this this streaming offering. It's really about the direct relationship and turning Disney's hundreds of millions of sort of loosely connected
Call them fans.
into real and actual customers with an actual defined digital relationship with an email address, with data analytics, with a way for Disney to reach out and actually communicate with those customers whenever they want, however they want.
And and not just hope that that they've sort of planted some seed in their head that you you love Mickey Mouse.
And now take it one step even farther of
you know, you are a Disney plus subscriber or whatever this bundle is called, and um, you know, you want to take your family to your local
Disney.
Park.
Whether that's in Shanghai or Europe or uh India, I'm sure they're working on something.
Or the US.
And you show up and they're like
Mr. Gilbert, so wonderful to see you. Thank you for being a Disney Plus subscriber for you know, here are all the benefits, you know, like you can start to see this like really starting to make sense.
Yep.
Okay, so that's the bull. What's the bear?
Well, this quarter the direct to consumer plus international segment that is uh under two years old, uh lost seven hundred and forty million dollars. It is the only unprofitable part of Disney, which
Uh if we look back
Everything is crazy. It's not their operating profit margin something like twenty-five to thirty percent in most businesses, but media networks made seven and a half billion, parks made seven billion, studio made three billion, and here you're sitting here with nothing but losses in in this thing right now. This comes from a great Bloomberg piece, but there's a an analyst at Moffat Nathanson
that expects the the three streaming services to lose a combined eleven billion over the next four years and and finally turn it to profit in twenty twenty four. So a lot can change in five years, both internally Disney and externally in global markets. Like let's hope they keep the the leeway that they need to make this happen.
I mean Bob's leaving in twenty twenty one, so it's not like it's all gonna be profitable and and and a clear, good decision.
before he leaves, which I think is scary.
this is probably a good time to touch on uh I don't necessarily think this this means that um it isn't going well, but when Disney said we have ten million activations in the first forty eight hours, there are what, seventeen million households
that use Verizon that got a first year free offer. And so however many of them converted, you know, I think in there there's been major discounts given or or or free trials given to people who are are part of the d Disney existing Disney fan club. So this 10 million number is a little bit of a silly number to base anything off of, but it definitely uh
makes everyone feel like it's going really well here in this first week. Yeah. No, and I think this is super interesting. Like so
Jenny and I are Verizon wireless customers on an unlimited plan. And so we got a year of free Disney Plus. So yeah, for sure I signed up for that. Would I otherwise have paid to sign up for Disney Plus? I don't think so. Now the really interesting thing though is am I gonna keep it when the year
ends, I think there's actually a really good chance that I might. Uh so I think this is actually probably a really
It's uh bold, but I think it's a really good marketing move by Disney. But yeah, the ten million had some help along the way. One reason to doubt it, too, is
I think Disney may be underestimating just how much content people need to stay satiated, n and new content. It's a a beautiful and amazing thing to have access to all these
this entire back catalog of of all these really storied franchises.
But
Am I gonna
Pay seven dollars a month to keep an option available to go and watch those things? No. Like that's uh if I ever want to re watch a Star Wars movie, I'll just, you know, reactivate my subscription at any given time. So
they're they really do need to aggressively turn on a fire hose of content here.
I mean I'm I'm thinking about canceling my Netflix subscription. Right now I use it to watch the office reruns and like even that's gonna go away. And so, you know, I I think we live in this world where um people are gonna get more and more ruthless about am I really willing to give you money on an ongoing basis and are you really providing new value to me every single month to be able to do that.
Yeah.
Well, and that's where for well over a decade
Two decades.
ESPN was the heart of Disney.
And I think that actually is that is the biggest chip that
Disney has that nobody else has out there, which is ESPN and sports.
Not everybody cares about sports for sure, but for people who do
That is
truly unique content that like you cannot get
Except
the places that have the rights to show the sports.
And that is not Netflix, and that is not YouTube.
Well put.
Do you want to go into uh into what would have happened otherwise?
I feel like we covered a lot of stuff along the way with Twitter and whatnot. Let's uh I have one posit on that. So
The other course of action here would be for if Disney doesn't do a direct consumer streaming thing. And I touched on this a little bit, but I I wanna like
explore it a little more'cause I think it's important.
if they had said yes to everyone who wanted to distribute their content. So it starts with Netflix and who knows sort of where it goes after that. And Disney truly becomes content and and really lets everyone else do distribution.
Disney's business relies on the flywheel and always has. And in a pre-streaming, pre-digital world,
they could have the flywheel going
By
going through distributors like cable channels and movie theaters. But now in this era of email address logins, on demand, using data to profile customers,
Disney was for the first time facing true disintermediation if they didn't digitally own that relationship with their customers. And if you watch a Disney movie on Netflix, you'd probably be less inclined to buy that toy or go to that theme park. So in short, I guess what I'm saying is
Disney's customers by becoming more explicitly the distributors' customers, if they had gone that sort of Netflix route, could effectively leak out of the flywheel in a way that Disney didn't
didn't have to be worried about before.
That's sort of the additional
bull case, but I do think that what would have happened otherwise is
Forming digital relationships.
could allow for Disney to basically lose the power of their business model.
Yeah.
Yeah.
Totally agree. I mean I think that's why they
Bay.
Had to do this.
Yeah.
And it and it really comes down to that, like that thing that honestly I did not realize until starting to do this acquisition, but that parks, resorts, licensing and products uh makes makes twice as much money for them as as actual studio revenue.
Yeah, yeah.
That's their moat. That that is. Is they can have
Adventures Endgame.
highest grossing movie of all time, but it doesn't end there. Like they get at least another trip around the bases with all the
Flywheel associated revenue from
From those properties.
Yeah.
All right, what do you got for playbook?
I play I mean, number one for me is the
Yeah, innovate or die.
philosophy, you know, from rune arge.
Three S P N
Through
Disney and
You know, really has been
Bob's story here.
We'll see how this goes. But I'm I'm quite I'm you know, I'm well we'll get to grading at the end. Uh
I'm optimistic.
It takes like courage back to what was the Apple uh what was the Phil Schiller courage about the headphone jack. Dongle. Yeah. Yeah. Courage to remove the headphone jack, which is laughable. But like this takes real courage, like for sure. You're telling your most important partners
We're gonna leave you, you know, within not tomorrow, but within twenty years. You're giving up hundreds of millions of hundred percent margin cash flow. This is like a
Big risk, but but
Very well thought out and I think the right one. So uh so I think that's a that's my biggest theme.

One that we didn't talk that much about on this episode that I've been noodling on is is this idea of like uh who's running the show and is it creatives and visionaries?
and and people who are
thinking about innovation.
Or is it people who are thinking about protecting what you have? And I think for
ninety seven to two thousand three or so, Disney was really in this sort of like protection mode. It's like when you're playing poker and and you're up.
And you start playing
Some people play more loose when they've got a big chip stack, other people go into if it's a cash game rather than a tournament, go into value protection mode and and figure out how to not leave the the table with much less money than they currently have now.
And I think it was just this big
mindset shift where they said, No, we we actually need to empower the creatives
to do what they do best. And and a big part of this, and that's something we didn't talk about the narrative, but uh under Eisner, there was this big strat planning group that I decimated when he came in and changed what they do and and and said, look, you don't you don't have all the power anymore to decide what do what we do and what we don't do at Disney.
that's gonna get deputized to to people who are who are running these businesses.
Yeah, I mean this was you know, Kevin Mayer is such a
important executive uh and has been under Iger.
uh you know, and is in many ways the you know seemingly air apparent to him. But his strap planning group under Iger became the deal group of making all this happen. Under Eisner
It was the Strap Planning Group was running the actual businesses and that was that was not good.
Yeah.
Yeah, they went from like the if you think about it in like a if you're getting acquired, they went from both the deal sponsor and corp dev to kinda just being corp dev.
Yeah.
Yeah.
Another one that I wanted to touch on here, this is a great quote.
I think from Kevin Mayer in that same Bloomberg article that I referenced.
uh where he says, if you want to understand everything in future Marvel movies, you'll probably need a Disney Plus subscription because events from the new shows will factor into forthcoming films such as Doc Strange in the multiverse of madness. And
I think this is so I really like the Doctor Strange movie, by the way. I think it's so.
M C U uh entry.
I think so too.
I I think this idea and like
Obviously.
David and I believe it too because we created the L P show.
this notion that you can create
on offering for people who want to go deeper and make that a subscription thing and make it so you can participate more in a franchise that you care about.
Disney's taking it even to the next level where they're saying, look, if if you really want to understand like everything about this movie, like you actually do need to be a Disney Plus subscriber,'cause the movie's not going to explain it all, and and Disney Plus will need so it's like
They're not putting
too big of teeth into it where it's like uh the movie trails off before the climactic event and says, catch the rest on Disney Plus. Like they're not doing that, but they are m giving it a little bit of a bite where they're saying, look like
If th there you got a great film that's gonna make you really entertained and you're gonna walk out excited. If you care about knowing the
the intimate full story, uh y you you really do actually need to be a Disney Plus subscriber. Yeah. I mean how many times I do this all the time. You walk out of a Marvel uh movie or a Star Wars movie, you immediately go to Wikipedia and you're like, I want to know everything behind it. And now Disney's saying like Okay, you're still gonna do that, but you wanna like actually see it and experience that? Like come to Disney Plus.
I have like a whole f the whole routine. I go to IMDb, I read all the trivia, I read the whole Wikipedia page, I if there's a uh fandom thing, I'll like you know the Star Wars won't, like, Wikipedia or any of those, and you start di like there's a whole it's interesting actually that there's these whole content universes that exist outside of the
creators of the IP that now serve some of this need.
Yeah.
Totally.
The last one that I wanted to bring up is um
Why does scale matter so much and why are we in this era of scale and consolidation? Because the the comment that Ruper Murdoch made to Iger when they started the discussion was
Just alluding to the idea that hey
You have the scale to succeed and thrive
In a world where
You need that, and we at Fox don't. We're not set up
to do that in the way that you at Disney are. And that's sort of the way that they said, Hey, we we we want to sell to you guys. So
Why do you think that's so important right now?
Well, I have a bold and bear case here. So the bold case is the same reason that is the stated rationale for buying Fox, which is that like
The scale is if you believe there are only gonna be a couple streaming services that survive in the long run, you need to have enough critical mass of content that somebody's gonna be willing to pay you, you know, right now Netflix is
You know, the only one that really has this that stand alone is people are willing to pay for it. Like, all right, there's enough content on here.
I paid thirteen bucks a month. Disney alone probably with even with all the great
franchises they have wasn't gonna have that. So I think that's the and and Ruby's saying, like I mean Fox like
We wouldn't like Avatar, who's gonna pay thirteen bucks a month for Avatar, you know?
My bare case here though is like I mean I used to work for Rupert and Radak, like
He's he's crafty. He's wily like a fox.
Especially given the bidding war and how much Disney ended up paying here, like, was he really just trying to play into
Bob's vision for the future and just like offload Fox for a
boatload of money. I think both things actually may be true here. Like it may be the right thing. It may be a good strategic decision for Disney.
And reper
you know, value maximized here. Especially given and we haven't talked about
the whole family business drama and dynamic around Fox. Um
But yeah, that's my take.
I like it.
The only thing I'll add to that is uh
that we've again moving to my bifurcated long tail and and head of the curve thing, we've moved into an era where the head of the curve
Productions are so expensive and they're
like darn near sure things. Like when you go and produce Infinity War, like
you know that that is going to be in the billions of dollars grossing
And so you can spend two hundred plus million dollars producing it. And that's what these sorts of film this that's what this category is now. And a lot of innovation and creativity and trying new stuff has moved down to TV and these these OTT services. It's like you need scale.
of distribution

Ameritize.
the cost of creating this content across so many people. And this is the classic sort of Ben Thomson comment about the why Netflix wins versus anybody that's trying to be like Netflix. Obviously Disney Plus is a different strategy'cause they they are coming from a very different place, but in order to finance the
types of shows that Netflix is financing or to pay to acquire the rights of any given show. It's a pretty simple model of like
Well, how many paying customers can we amortize it across? Amortize over, yeah. And and that that plays a big role in this too. Yeah. It is it's
An amazing example of scale economies apply to technology as well, in the in the right cases.
Okay, I got one one more real quick, which is gonna double as my carve out, is uh Everybody go read the book. Go go read Right of a Lifetime. It's it's so good. And we haven't talked as much on this episode because this episode's about strategy and about Disney Plus. But
Bob is you know, we've alluded to him being a diplomat, like the way he manages, the way he leads is so
Inspiring. And um
Yeah, I text it a little bit with the
uh one of my good friends, uh Ryan and and friend of the show, who who worked in Disney strap planning for Kevin Mayer for a number of years, and I asked him, I was like, What was Bob like really? you know, and he was like
I would be in meetings with him and he would listen to me as intently
As a twenty four year old kid, as he did to Kevin.
And he truly has like no you know, very low ego, very low pride. He wants the best decisions and he respects everybody. And so such an inspiring way to go about things.
It's awesome.

I had a different one, but I'm gonna follow your lead and do a theme appropriate carve out. So I've watched uh the first couple episodes of the Imagineering Story on Disney Plus. It is the sort of documentary behind the scenes of creating first Disneyland, then Disney World, and basically like
showing a lot of behind the scenes stuff in areas that have uh previously never been filmed, uh or at least never had the film released,'cause a lot of it's from sort of the fifties and sixties of um
what it is to be a Disney Imagineer and how they built
All the amazing things they did.
decades before other people sort of played with that type of animatronics technology or or um
Yeah, it's it's it's really it's really cool. If you're into this episode and you read that book, like it's the next logical thing to go and do.
Disney's got me. I'm I'm gonna pay at the end of trial with We gotta grade it though before we before we go.
We do. So
This is definitely one where we can't actually issue a grade now, we can only issue
Here's what we think an A plus would be and and how that could happen and why that would happen and you know, here's what an F would look like.
we basically painted both pictures in the bull case and the bear case
To me, the way this truly becomes an A plus is
If
uh and I hadn't realized it until you said it, David, was but if Disney Plus and ESPN Plus and Hulu replaces the full gamut.
of the cable bundle, which is a seventy fifty to seventy dollar a month thing.
Plus
replacing some of the old sort of like going and buying VHS movies plus some of going to movie theater revenue because you know now with a great four K T V at home, if they're gonna, you know, drop the next I they probably wouldn't do this for Star Wars, but you could imagine some world where they like drop a Star Wars movie and you just watch it at home.
Well they put the live action lady in the tramp, uh on the Yeah.
So you know, you think about it, you got call it sixty bucks from the effective replacement of the cable bundle. You've got replacing an Obama DVD a month, so it's another fifteen bucks, plus going to see a movie. You're you're in this above a hundred dollar a month category that you're paying, and Disney owns all the margin there.
because they're the content producer and the distributor.
the bull case is that they actually pull that off.
And don't have to go to other people for the content or the distribution.
Yeah.
The only thing add is my
Take this to an A plus. I think that's a that's like a
Okay.
Take this to an A plus is is is international too. Like uh that that is not only you just like Netflix, that becomes not only true in the US, but they go to every country in the world too. And massively
Uh increase their TAM for this.
W one bear case I have, and this isn't quite
related to Disney Plus, it's more related to ESPN pluses. In the same way that Apple will probably never release a product that is more widely purchased and with an a higher profit margin than the iPhone.
Disney may never stumble onto a business as good as the
carriage fees for ESPN to cable companies.
Ever again. Like that that may have just been a complete and total anomaly.
Yeah. George Bodenheimer.
Yeah.
And so, I mean i in in some ways it's like how can we
preserve what we have with the SPN in the now that all the cards are changing around on the t it's like we may not be able to like that.
But that's not exactly grading Disney Plus, and that's not exactly grading all these acquisitions, including Fox, to get us there.
What's the bear case for
For doing
Disney plus I think the F is that uh
Fox becomes an albatross.
starts losing a ton of money. Uh the studios don't pan out, can't
maintain and produce new IP.
As a result.
Uh, Disney Plus doesn't have enough compelling p content to be a compelling alternative to Netflix.
Yeah.
The other thing that somehow could fail
I don't know how this would fail, but if they somehow
by doing this actually decrease people's fandom to go to parks and buy
goods and buy license. But I I don't think that's so far. Yeah.
Can't wait to go to Star Wars Land.
We're planning a trip for next year. Oh nice. Yeah, yeah.
The m my next step is I've been at Disney World since I was six, and so at some point they're gonna open a uh Star Wars themed hotel.
outside of Galaxy's Edge and Disney World. So that'll probably be the the time to go.
All right.
Well
Listeners.
If you want to hear more required.
you should go and check out the four individual episodes on Pixar, Lucasfilm, Marvel, and Bam Tech.
And thank you so much for any SPN.
And E S P N, that's right.
And thank you for being with us on this uh
This journey.
to a galaxy far, far away.
If you want to go behind the scenes on company building, you should consider becoming an acquired limited partner.
Recent episodes have included Chaythan Pudigunta, uh general partner at Benchmark, and Tracy Lawrence, the founder and CEO of Choose. So Tracy uh uh took us into the mindset of a founder growing a three hundred person company in the food industry and everything that it is to
found and and grow a company and and frankly deal with that as a human. Uh so to listen, uh you can click the link in the show notes or go to glow.fm slash acquired and all new listeners get a seven day
free trial. And if you stick around after this, we're gonna play a little excerpt from that episode here.
With that.
We will see you next time.
Talk to you next time.
All right listeners.
Now is a great time to talk about one of our
Favorite companies, Statsig. Yes, there is a reason why the best product teams rely on Statsig, whether they are iterating on their core product features or shipping AI powered experiences at scale.
Yeah.
In the
crazy speed of today's AI world. Shipping fast is just table stakes now.
It's basically trivial to build and deploy your app constantly.
The real advantage is how quickly you learn what changes actually created value for customers and how fast you can use that signal to guide what you ship next. This is where StatsIG comes in. It brings experimentation, feature flags, and product analytics into one unified system so teams can ship safely, test rigorously, and directly link what they changed.
to how users actually behaved.
So if you want to make learning your competitive advantage, whether you're building new AI experiences or just evolving your existing core product, go to statsig.com slash acquired to get started.
You know, our main show with Acquired is about these big splashy exits that you've you've heard of.
Um Slack, Shopify ESPN, and a lot of our LP episodes, which covers the nitty-gritty of the journey along the way.
have have been about one of these companies too, like our Product Ops episode at Uber or Growth at Airbnb. Um and today we wanted to do an episode with a founder that is running a company that is much more emblematic of how most growth companies go most of the time.
uh, you know, getting a medium amount of press coverage, keeping extremely focused and diligent, um, putting in the hard work over a a long period of time to build a a sustainable and and durable business. And so our guest today is Tracy Lawrence.
Tracy is the founder and CEO of Choose, a 280-person company based in San Francisco that delivers family style office meals.
from the best local restaurants to six cities in the US.
Uh, Tracy started shoes right out of college eight years ago in twenty eleven. She's been named USC's entrepreneur of the year and raised
Over thirty million dollars for choose from venture firms like Foundry Group, which is how Tracy and I originally met at the Foundry CEO summit a few years ago.
Um, she has a really unique way that she runs and describes her company, a love company, that I'm really excited to dive into this episode. So thank you so much for for joining us, Tracy.
For sure. Yeah, let's talk about love. Yeah. This is gonna be a first for acquired, I think. Yeah, this is great. So I just threw out some numbers, uh and and sort of like eight years ago, twenty eleven, raised over thirty million. So h how do you describe choose and can you tell us about the business today?
Our mission is really to drive authentic connection. And in the workplace, I think that's the place where people are spending the most time and where it's lacking.
Especially when you look at sort of
People
forty years ago that were starting families with you know in the early twenties and now you're starting families much later. We kind of have this gap of time where it's like we leave home
You know, we leave home for work opportunities and then we're in our twenties and we don't start families till our thirties.
And work takes the brunt of it. Yeah. Especially here in San Francisco. Yeah. I think San Francisco is certainly in the US, maybe in the world, the city with the
oldest average age of mothers when they give birth. Uh
I think it it's San Francisco as well as DC.
Well makes sense. Yeah, and New York, right? So a lot of the the big urban centers. So
You know, our goal is is really to get people eating together. And uh and so we're partnering with over three hundred restaurants, um, and they're all local quality restaurants. My aunt, my grandmother, and my mom were all in the restaurant industry.
And when I started the company, it was because I was an event planner, but I saw that office managers wanted access to great local food and they were sick of Subway. So we work with offices in over five hundred companies across the US that are want to order great local food.
And we actually partner with the office managers at those offices and we build out sort of a calendar of meal programs.
And so instead of them having to order for themselves and kind of pick off of a menu or call up a restaurant, like ninety percent of the industry is still calling up restaurants directly, we have technology that actually builds out the menus on behalf of our customers.
So
Tracy
you started a love company. W what does that mean? Like you started a a food delivery catering company, but you also started a love company. So where do where do those things meet?
Yeah.
Oh, well love and food. Um
I think when people say that like they started the company and they knew exactly what they wanted to start, it's
Ninety five percent of the time it's bull.
So
When I started
I you know, as I shared, you know, I was an event planner and I saw this big opportunity and
And I was like, Cool, there's a market opportunity, there's a need.
I think there were two underlying factors I wasn't really being conscious of, but w they drive me to this day. One was a deep love for my city.
I still feel a strong affinity to downtown LA and and all of the food entrepreneurs in that city.
And that scales to every market that we're in.
I adore the food entrepreneurs there.
Um
The second thing I actually discovered three years into it.
So
Oddly enough, and Ben, I don't know if you know this story, but
I ended up through a series of introductions
Meeting Jerry Colonna of Reboot.
And um I got a sponsorship to go to his boot camp.
Uh it's a CEO boot camp. It's like three or four days out in the mountains of Colorado. It's beautiful.
And fifteen CEOs from pre fundraising to exit and earn out.
And not one of them was happy.
And uh you know, I'm like twenty four or something and I'm like, What? You're not happy? And they're like, Yeah you know, like and it's like okay, wow. Um
It's not really outcome based.
And so we started to talk pretty deeply about our childhoods, our paths, our motivations. And the thing that came up
for me was being bullied.
I was sharing the story when I was ten years old, I used to be bullied so badly, I would eat lunch in the bathroom stall.
And at that point and I'm I was feeling very emotional. St I still get a little emotional talking about it.
And Jerry walks over to me and he looks at me and he just says
What does your company do again?
And I said.
We make sure nobody eats lunch alone.
And
In that moment.
It felt like
thirty thousand volts of electricity went through my body.
I was like, Oh my God. Like I never put the past together
With the present.
I realized that I started shoes from a place of like deep love for that younger version of myself and a deep desire for people to connect together.
All right, listeners.
With that.
Thanks again, and we will see you next time.