Big Tech’s New Challenger: Disney Demands Fairer App Store Deals

Bob Iger, the dynamic CEO of Disney, has thrown down the gauntlet to tech giants like Apple and Google, and the message is loud and clear: Disney wants a better deal. Addressing investors at a recent conference, Iger voiced concerns that Disney is surrendering too much revenue to Big Tech app stores that distribute its streaming services, such as Hulu and Disney+. Unlike Netflix, Disney heavily relies on third-party app stores for distribution, which comes with its own set of costs and benefits.

For Apple, their fee structure for video companies like Disney involves taking 15% of the revenue generated from signups within Apple-distributed apps. Roku, another significant player in the connected TV space, not only charges fees for customer signups on its devices but also demands a share of the services’ advertising inventory. This arrangement benefits platform providers like Apple, which has been telling investors that the growth of its “Services” sector, including the App Store, is critical to its future. Apple’s cut can reach up to 30% of revenue from in-app purchases and signups, making it a lucrative part of their business model.

The implications for Disney are substantial. While such partnerships facilitate widespread distribution, they also chip away at Disney’s margins. Iger’s comments suggest a reevaluation of these deals might be on the horizon. The landscape is starkly different for Netflix, which has largely sidestepped third-party app stores and reaped the benefits in terms of profit margins. This move has not hindered Netflix’s growth, highlighting a path Disney might consider to enhance its financial performance.

But Iger might not have to resort to drastic measures like pulling Disney’s apps from third-party stores to achieve better terms. Regulatory pressures on app store policies are mounting globally, particularly on Apple. Various regulators are scrutinizing Apple’s practices, forcing the company to make reluctant changes. It’s conceivable that these regulatory shifts could lead to more favorable terms for Disney and other major video service providers. A small adjustment in the revenue share could translate into substantial savings for Disney, given its enormous subscriber base.

Interestingly, the broader media landscape is also witnessing legal battles that could set precedents affecting Disney and its negotiations. For instance, Axel Springer, the parent company of Business Insider, along with 31 other media groups, has filed a massive $2.3 billion lawsuit against Google. The suit alleges significant losses stemming from Google’s advertising practices, underscoring the ongoing tensions between content creators and tech platforms.

Disney, under Iger’s leadership, is poised to push for better terms that could significantly impact its bottom line. As the streaming wars intensify and regulatory environments evolve, the outcome of these negotiations will be crucial. Whether Disney can carve out a more favorable slice of the pie without exiting third-party app stores remains to be seen, but one thing is certain: the conversation around revenue sharing is far from over.