Disney Takes on Big Tech: A Quest for Fairer App Store Deals

When Disney CEO Bob Iger speaks, the tech world listens, especially when he’s addressing a subject as pivotal as the distribution of streaming services. At an investor conference this week, Iger made it clear that he wants a better deal from tech titans like Apple and Google, who currently distribute Disney’s streaming services, including Hulu and Disney+. The crux of his message: Disney is surrendering too much money to Big Tech app stores, and he’s not thrilled about it.

Disney’s distribution model, unlike Netflix’s, relies heavily on third-party app stores. While this approach has its perks, such as broad accessibility, it also comes with significant financial drawbacks. For instance, Disney must share a chunk of its revenue with these platforms. The specifics of these deals vary. Apple, for example, charges video companies like Disney 15% of revenue for signups made within Apple-distributed apps. Meanwhile, Roku, a connected TV company, not only imposes fees for customer signups on its devices but may also demand a portion of these services’ ad inventory. These charges chip away at Disney’s profits, which explains Iger’s eagerness to renegotiate terms.

The comparison to Netflix is particularly illuminating. Netflix managed to grow its subscriber base without the heavy reliance on third-party app stores that Disney has. This strategy has obvious benefits for Netflix’s margins, allowing the company to retain a more substantial portion of its revenue. In contrast, Disney’s dependence on platforms like Apple and Roku means accepting less favorable financial terms. However, Iger’s comments suggest that Disney is actively exploring ways to balance accessibility and profitability.

It’s essential to understand that app stores and app distribution are significant revenue streams for many tech companies. Apple, for instance, can take up to 30% of revenue generated by in-app purchases and signups. For Apple, the growth in its Services segment, which includes the App Store, is a critical component of its future business plans. This is why Disney’s potential pullback from third-party app stores is more than just a company-specific issue; it could have broader ramifications for tech companies heavily invested in app distribution as a revenue source.

Interestingly, Iger might not need to resort to drastic measures like pulling Disney’s apps from third-party stores to achieve better financial terms. Regulatory scrutiny is mounting on tech giants like Apple regarding their App Store policies. Around the globe, regulatory bodies are pressuring Apple to modify its terms, and Apple is grudgingly making some changes. These adjustments could potentially benefit major content providers like Disney, possibly leading to lower revenue-sharing percentages without the need for direct confrontation.

While Iger’s comments spotlight a significant issue within the streaming and tech industries, they also hint at a shifting landscape. As regulatory bodies continue to scrutinize and potentially alter the policies governing app stores, companies like Disney might find themselves in a stronger negotiating position. Whether through direct negotiations or regulatory changes, the days of tech giants claiming large slices of streaming revenue might be numbered. And for companies like Disney, that could mean a more favorable financial future on the horizon.