I wonder who the ideal partner would be. Disney is such a valuable (and therefore fragile) brand, that partnering has always been a risk for them. Would partnering with Facebook, for instance, be too risky given their issues with user privacy and data collection practices? How would you weigh this risk with the money required to go it alone?
On your last point, I think that is a very good argument for partnering given that this would be a very new ground for Disney. They do have some digital immersion experience at the parks, but I am not sure this would translate into the at-home AR/VR experience. A question though, given Disney is such a precious brand, is who to partner with? Can Disney, for instance, afford to partner with Facebook given all the heat that comes with Facebook and privacy.
Thanks! Great point on the cannibalization. This is probably one of the main issues that would give me reservations about doubling down on digital. Someone else brought up a really good point about perhaps coupling the two experiences together – Disney+ earning points to get a more high-quality experience at the physical park – an interesting idea to perhaps prevent the cannibalization.
Thanks Marius! I would love to be a fly on the wall during a board meeting. I wonder much time the combination of debt access and cost-cutting could buy them before they have to start considering drastic pivots such as the one mentioned.
Definitely, fingers crossed! You mentioned that the digital experience could take a cycle that is 5-20 years and make it something that is accessible every day (i.e. continuous). A thought I hadn’t brought up was the risk that doubling down on digital could cannibalize the theme park experience, should it end up recovering after COVID. Perhaps a good reason to wait and see how it pans out before making the switch.
I think Disney’s content is a huge advantage internationally provided they can keep trademarks as they have done in the US. I know there was a huge amount of controversy behind Disney extending their trademarks in the US by influencing lawmakers. I believe the one on Mickey Mouse was supposed to have already expired (or expire soon). A big question, therefore, is whether they can protect their IP abroad too and maintain this advantage with the digital pivot.
Yes, the fully digital experience is a possible option for them in the very long term future. The part I left out is what they would with their huge amount of fixed assets left on their balance sheet. Is there a way to still monetize them in any sufficient way?
Great point – I will have to go back to the Netflix case to analyze their P&L to see how streaming looks as a business. I know that it is incredibly expensive to create your own content vs. license. My sense is that the top players will to some degree price fix (in a legal way) to prevent a price war that ruins everyone. I am honestly surprised that there is a price differential currently between streaming companies – the threat of a price war would have me match my competitors.
Interesting. This would be a great side by side comparison case to see how a large, asset-heavy business should handle demand shocks. I am very curious to see the outcome with Disney vs. Universal. I must say that doubling down on CAPEX when revenues have come to a screeching halt is very risky.
Great idea about cross-selling to link the digital and physical experiences together. So if I understand you correctly, digital subscribers could get some discounts when it comes to theme park tickets. What might be even more interesting is some sort of points scheme (like credit cards) to encourage users to make more in-app purchases to earn points for discounts. Netflix and Amazon could never replicate this feature.
Do you think size will help Disney? This would be a great discussion in class about asset-heavy businesses in a crisis like this. I wish I would have added this to the article, but a company that has a lot of fixed assets on its balance sheet must mean their operating leverage is huge. So their size could be what actually ruins them if they can’t pay off the fixed costs.
Great point. I actually got Disney+ for that exact reason – to rewatch my old shows with the kids. I definitely think Disney+ is a huge asset for them, and it was the right move. But given that it is such a small portion of their revenue streams, it might be too little too late. If the world does change permanently, and they do go fully digital, I wonder how they might optimize the huge amount of fixed assets they have on the balance sheet.
Interesting! I had not thought about the advantages of animated and CGI-enabled entertainment. I wonder how easy it would be to develop content remotely. One of the other articles I read was an AR/VR company that is trying to layer graphics on Zoom chats to give users a way to exchange ideas and imagery over chat. This might be a perfect fit to help production studios work on CGI and animation from home.
This is a fantastic example of scrappy innovation. The movie theatre industry has taken the brunt of COVID, and there really are not any other revenue options to fall back on for them. I wonder if Evo was able to rely on relaxed laws in Texas to make this happen (i.e. converting a parking lot, allowing food and alcohol to be served to vehicles etc.) My sense is that a lot of states would not allow this flexibility even in light of the Covid crisis.
This is unlikely to be a long term, digital solution for the company, but more of a digital bandaid to be removed when things (hopefully) turn back to normal. I would also be really interested in seeing what their P&L looks like before and during this fix. At this point, any revenue is good revenue given this asset-heavy, fixed-cost industry, so this might be just enough to get through this troubling time.
When I started initially reading this, I had my doubts. Houseparty seems like just a casual version of zoom but limited to 8 guests. Judging by its performance before COVID, it did not seem promising at all. COVID, ironically, threw it a lifeline, but it seems very temporary and just a fad. I think it was very interesting how you analyzed Houseparty in Italy. This appears to be glaring evidence of the temporary nature of this product. The open invite piece (the main differentiator from other apps) is interesting. I like the fact that you can just meet up spontaneously without needing to invite or dial-in. This could be a terrifying concept if you left an ex on your call list. Hopefully, there are ways to customize who this open invite extends to. I also agree with your conclusion – they have to think quickly about layering onto the value proposition with other experiences like in-app games. Anything to make it sticky. I just fear nothing can be done that Facebook cannot replicate rapidly. Great piece!
I think this pivot is interesting, to say the least. In scaling tech ventures, we map out pivot risks by seeing whether the company is trying to move to a new customer segment or move to a different product. In this case, they are doing both – new products and new customers. This represents a maximum risk because they are essentially trying to rediscover a new product-market fit entirely. It is a bet the company move, however, COVID-19 has caused a lot of that lately. My concern though is the product-market fit they envision – is an avatar for a conference call creating value? Or is this just a gimmicky fad? I would definitely be in the latter camp. Finding ways to enhance communication (i.e. a 3D components, designs, visual assistance etc.) is much more compelling as it provides real value to the customer. I would also hold out a bit longer (depending on their cash runway) to see if amusement parks are really upended permanently before making such a drastic pivot.
Great article though – would be great to discuss in class!
Jack, a really well-written post! My 12 year old uses TikTok constantly and because of you, I know what he is doing for 23 hours of each day. The part that caught my interest is the algorithm hacking – humans learning about the algorithm’s decisions and monetizing on this advantage. I wonder if it is truly just about originality, creativity, and quality, or is there a way to manipulate it given that 0s and 1s eventually make the decision for what gets shown to viewers. I know that YouTube does have algorithm hackers, and when YouTube changes the algorithm, it sends shockwaves and protests from influencers that must re-learn how to manipulate the system. And would this honestly be in the interest of TikTok to avoid? Algorithm hackers effectively consolidate the content that entertains viewers and makes the platform efficient. In other words, do viewers want to see the content that predictably follows their preferences, or would they rather see raw diversity?
Thanks for the great article. I had no idea that AI could find a place in the world of coffee. Proof that AI will eventually become our digital overlords. AI is certainly a great application for new locations and operations, but I wonder what impact it will have on customer preferences. Is AI really solving a problem for a customer that consistently orders a Chai Latte, three dashes of cinnamon, 1% skimmed milk with foam not to exceed .35 inches? In all seriousness, I’d love to see whether catering to preferences that are already very habitual will offer any real value to the customer, or worse, will it turn them away because the experience seems too invasive? Personally, if a chain coffee company started to do this, I would make a concerted effort to find somewhere local. Giving up that sort of information for a cup of coffee is not worth it to me.
Great article, thanks for sharing. It’s a fascinating business and one that will become more relevant as cities gradually become smart. I think you were spot on with the challenge of disintermediation as companies consolidate in markets. One of the topics I am curious about when it comes to any AI/ML platform is – who owns the data? Given how valuable data is to large enterprises, data platforms wrestle with customer reluctance to turn over company data even if it does improve margins. I wonder if Zoba experiences this friction, and if so, could finding ways to properly solve for data ownership disincentivize companies from disintermediating?
Great article! Gofundme is a perfect example of a marketplace platform. On paper, it is an ideal way to match demand and supply efficiently regardless of geography. You brought up the issue with trust, which is always such a difficult piece to get right. But for a market place, it is crucial. If I were an early investor, this would have been my biggest concern – a handful of bad press could spell the end of a market place that deals with peoples’ money and charitable causes. However, they have smartly taken a hard line by fully reimbursing affected parties. I think another challenging issue is curating the use cases for Gofundme. I believe that recently they banned using the platform for raising legal defenses. I wonder if this could become a slippery slope that could get in the way of scale. Facebook has made a concerted effort to keep the boundaries as low as possible for this very reason – once you start building constraints, the complexities start to scale with the growth.
Thanks for making me second guess my entire article which used several Wikipedia references! The Wikipedia model is fascinating to me. If there were gross inaccuracies or bias in the articles, I am quite sure I would have picked on them at least once or twice. However, I can’t remember the last time I encountered this issue with Wikipedia. The content seems very informative, unbiased and accurate. I point this out because this could very well be the result of an interesting positive feedback loop with crowdsourcing. With more eyes on the articles, there is more chance that content will be flushed for accuracy, which in turn makes Wikipedia a more trusted source and therefore encouraging more users. This sounds great in principle, but I would have never predicted it to work just given human nature. It appears it does though. I’d be interested to know if they have any other tools that help curate the content outside of direct human interaction.
Great article – you articulated many of the concerns perfectly. As an idea, this sounds really incredible, however, the economics and incentives do seem to have issues when it comes to scale. The curation cost appears to be high and might prevent the sort of scale that one likes to envision with a platform. As many of the comments have suggested, finding ways to keep therapists on the platform with other value propositions will help boost lifetime value and help offset the acquisition costs. I also see adverse incentives as perhaps a roadblock to scaling. If a patient finds a good therapist on the platform, ideally you would have some organic growth from referrals. However, patients can be rather territorial with therapists, meaning they have the incentive of hiding the good ones to keep their scedules more available and open.
Thanks for sharing. I did a similar piece on the construction market. Obviously improving the supply chain process is something that affects everyone in the chain. In other words, everyone gets a little bit of value out of a more efficient system. This might sound great in theory, but I wonder who Flexport must focus on as a paying customer to capture the value it creates. I just did a case on a company that provides really good location services for smart devices, something that is extremely valuable to all end customers, but even with this great amount of value created, they had a really difficult time figuring out how to capture it. Who in the manufacturing stack do they charge and how? For Flexport, who in the complex supply chain do they charge – the end customer, warehouses, shippers, brokers etc.
Drones have always been an interesting market to me. It appears DJI initially was more focused on high end drones that appeal to a very particular, tech savvy segment. I bet if the professor asked how many people in class owned a drone above $100, very few would raise their hands. My hunch is that the push toward simpler, modular drones that can integrate with social networking is a strategic play to open up the general consumer market. This is basically a high end selfie stick. I’d be very interested if this strategic approach makes them a winner in the consumer space. I also am curious how easy it is to get patent protection in this field given the competition.
Very interesting post, thanks for sharing. I wanted to read this because I am fascinated by digital innovation for warehouse inventory solutions. Although this particular business is very interesting, I also know this space is getting very crowded. Amazon is of course front and center when it comes to distribution center efficiency, and robotics are the next big thing in this space. I wonder if AutoStore really has first mover advantage or just a different spin on a common solution, and if the latter, how long can this edge last? I also wonder about the scaling ability given how asset heavy this product is. This would make for a great case discussion.