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Disney to Put Emphasis on Asia Growth, Direct to Consumer

Kevin Mayer Disney chief strategy officer
Damian Dovarganes/AP/REX/Shutterstock

The newly expanded Walt Disney is to place particular emphasis on Asia as it rationalizes its recent acquisition of 21st Century Fox and as it prepares to expand its direct-to-consumer (D2C) businesses.

“Asia Pacific is one of the growth drivers [of the new Disney]. Asia is super important to us,” said Kevin Mayer, chairman of Disney’s direct-to-consumer and international business segment, at the APOS conference in Indonesia. “The [Fox] acquisition was driven by two things. One of them was growth in Asia, growth in India.”

Mayer said that the acquired businesses in Asia, such as pay-TV powerhouse Star, include trusted brands and consumer relationships that Disney will be seeking to build elsewhere through Disney Plus and a revamped Hulu. He said that one in four hours of television in India are watched on Star. And just four years after it was launched by Star, the Fox-owned Hotstar OTT streaming platform has amassed 300 million monthly active users. It also recently broke records for live streaming, with 12.7 million concurrent users watching IPL cricket.

Mayer said that Disney had been looking at pushing into D2C for several years. “The decision to change the business is not taken lightly….The one way to really get data on people’s affinities and usage patterns is to have a direct relation with them,” Mayer told the assembled executives at APOS. Direct-to-consumer is “part of the value chain that doesn’t require massive infrastructure any more. It requires the right brands, the right video technology.”

Mayer said that Disney is aiming at “60-90 million subscribers (from all D2C activities) in five years. Most of that will come from international markets.”

He said that Disney would have three clusters of D2C businesses. Disney, Pixar, Marvel, Star Wars, and the recently acquired National Geographic will make up a family-friendly group of core brands at the heart of Disney Plus, with some variation of windows, according to territory.

Hulu, which is majority-owned by Disney as a result of the Fox acquisition, will be the venue for wider, and more adult-skewing general entertainment. It will include ABC, FX, Freeform and most Fox Movies. In the U.S. there will additionally be sports OTT service ESPN Plus.

Disney’s operations in Asia have now been reorganized under a new management team headed by former Star chief Uday Shankar. With the possible exception Southeast Asia, where there is corporate overlap and where redundancies are most likely, further integration in Asia is expected to focus on complementarity rather than cutting headcount, a source familiar with the situation told Variety.

In India there is little overlap between Disney and the formerly Fox-owned Star business. Since 2016, Disney India has concentrated on distribution of the U.S. studio product and the distribution of children’s content. Star has no presence in kids’ entertainment.

Fox’s India businesses are expected to be at the forefront of another trend that Disney is now embracing: localization.

Both Disney and Fox (outside India) have previously applied a business model where most content was developed and produced centrally, and then distributed and monetized globally. Under the new paradigm, increasingly dominated by streaming, and where overall content consumption is growing, most growth is being driven by local content. The acquisition of Star via the merger with Fox, for example, reverses a strategic decision taken by Disney in 2016 to close down the Hindi-language film and TV production businesses that it previously acquired with UTV. Star is a content factory that produces 18,000 hours of drama every year, delivers 260 days of live sports broadcasts and invests in feature films in multiple local languages.

Disney Plus will be available in India, but there remains a question as to what form it will take, the source told Variety. It could be a standalone business or a tier within Hotstar. Decisions will be taken separately within each market wherever there are local product ambitions.

In China, Fox had a small presence focused on channels with limited “landing rights” and Hollywood content marketing. Disney, through its theme parks, consumer goods, and studio products, has a major footprint. With China poised to become the largest market in the world, as well as one with its own set of rules, Disney expects rationalization to be thoughtful and calibrated.

Another shift in Disney’s mindset is to stop looking at Asia as a single entity. Internal planning has dis-aggregated the continent, with each country now treated individually. That was the recipe for success at Star, which once operated across much of East Asia but was broken up into subregional clusters in 2009.

In recent years, Star has even ceased to treat India as a single country. It now operates separate approaches for Hindi-, Tamil-speaking and other local language segments.