Disney's Bob Iger: tech is the key to streaming profitability

While speaking at a conference, CEO Bob Iger on Wednesday identified investing in technology as a measure that will help the Walt Disney Company make streaming a money-maker.

CEO Bob Iger on Wednesday identified investing in technology as a measure that will help the Walt Disney Company make streaming a money-maker. 

"Now what we really need to do is invest in technology to serve the user because it’s very, very clear that in order for us to turn streaming into a profitable business, it has to have a user first mentality," he said at the MoffettNathanson Media and Communications Summit.

Disney’s combined streaming business of Disney+, Hulu and ESPN+ came close to making money in the second quarter with an operating loss of just $18 million. Hulu and Disney+, which make up its entertainment streaming business, notched $47 million in operating income.

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Iger, speaking at the conference, said Disney’s marketing expenses for its streaming business were "too high" because the entertainment giant "didn’t build in technology to have not only the algorithms but the ability to send very, very highly customized messages to our subscribers where we believe they’re potentially at risk" of canceling their membership.

One of Disney’s biggest streaming rival – Netflix – is "brilliant at this," according to Iger. He has previously described Netflix as representing the "gold standard" and said Disney needed to make its streaming service technological capabilities comparable with those of its competitor.

Making investments in technology will help cut down how much Disney spends on marketing, per Iger.

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The entertainment giant must invest in technology "to basically create much more to serve the user, to serve the customers, really, and it’s something that is really subtle, but really important, which is that first screen experience needs to be really customizable and dynamic and constantly changing" each time subscribers use the Disney+ platform, the Disney CEO also said.

Artificial intelligence, Iger said, will play a significant role in that.

Other factors the Disney CEO highlighted as "critical" moves the company was working on to bring its streaming business to profitability included engagement and curbing password-sharing among users. 

The entertainment giant recently incorporated Hulu into Disney+ for certain users and, later in the year, aims to start similarly putting ESPN+ in the platform. It is targeting more engagement with both moves. 

Meanwhile, Disney+ users in some markets will see the company’s password crackdown start in June. Its planned tactics have drawn comparisons to Netflix, which pioneered curbing password-sharing with its own initiative last year. 

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Engagement helps address churn, an issue Disney and other streamers contend with. 

Disney has said it foresees profitability for its combined streaming business in the fourth quarter and eventually turning double-digit profit margins in the long term.

Its platforms collectively had 228.6 million subscribers at the end of the second quarter.