Walt Disney Co (NYSE: DIS) CEO Bob Iger has voiced his concerns about the revenue share with major tech companies, including Apple Inc. (NASDAQ: AAPL) and Alphabet Inc. (NASDAQ: GOOG) (NASDAQ: GOOGL).
What Happened: Iger expressed his dissatisfaction with the current revenue-sharing model at the MoffettNathanson-hosted conference. He pointed out that Disney is losing a significant portion of its earnings to the Big Tech app stores that distribute its streaming services, such as Disney+ and Hulu, reported Business Insider.
"We have to look at the way we're distributing," Iger told analyst Michael Nathanson at a MoffettNathanson-hosted conference. "Unlike Netflix, we distribute largely through third-party app stores. There's obviously an advantage to that to some extent, but there's a cost to that, too. And we're looking at that."
He mentioned that Disney's distribution model is different from that of Netflix, which used to allow customers to sign up for its service via third-party distributors like Apple. However, Netflix stopped this practice in 2018, a move that did not seem to affect its growth and had clear benefits for the company's margins.
Iger's comments suggest that Disney might be considering a similar move, which could have significant implications for Apple and Google. The revenue-sharing deals between Disney and these tech giants vary. For example, Apple charges video companies like Disney 15% of the revenue for signups made within Apple-distributed apps.
Why It Matters: Iger's demand for better app store deals comes in the wake of Disney's recent strategic moves in the streaming industry. The company has been expanding its streaming offerings and is now set to launch a new streaming bundle with Warner Bros. Discovery that includes Disney+, Hulu, and Max.
Disney's streaming business, including Disney+ and Hulu, has been a key focus for the company. However, Iger has previously admitted that Disney lags behind Netflix in terms of technology, leading to higher marketing expenses and customer acquisition and retention costs.
Amid these challenges, Disney has been working to enhance its streaming services and content strategy, with Iger expressing confidence in securing long-term NBA rights. However, the current app store revenue-sharing model could be a significant hurdle for Disney's streaming ambitions.