Disney has a wholesome, family-friendly image. Will pivoting to gambling hurt its brand?

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There aren't many better times to launch a family-friendly streaming service than 4 months before everyone gets locked inside — and it showed for Disney.

After launching in November 2019, Disney+ went on to hit 100 million subscribers in record time. People were watching more content than ever, and Disney felt confident it could raise its targets. It settled on a goal of between 230 million and 260 million subscribers by the end of 2024.

After such a fast start, many thought that would be easy for Disney but when it reported its latest earnings Disney said things were slowing down and reported that it added just 2 million new paid customers in its latest quarter. Investors responded by sending Disney's shares down more than 7%. Investors didn't care that Parks swung back into profit or that Disney believes it is still on track to hit 230M to 260M subs by 2025. Many investors worry growth for Disney+ is tapping out.

With streaming growth stalling, what can save the day for Disney? 

Its CEO thinks it's betting. Chapek said "sports betting is a very significant opportunity" for Disney, and the company is pursuing it "aggressively" through its ESPN brand. ESPN has suffered as millennials continue cord-cutting, and streamer ESPN+, like Disney+, is still losing money. Gambling could be a lucrative way for Disney to attract young sports fans.

ESPN has reportedly had talks with sportsbooks, including DraftKingsand Caesars Entertainment, to license its famous name for a whopping $3B. ESPN already has sports-betting content on its platforms through marketing deals, but licensing could create an ESPN-branded betting platform.

The house of mouse has always had a wholesome, family-friendly image so will pivoting to gambling hurt its brand? 

According to Disney's research, gambling won't hurt Disney's brand but will strengthen ESPN's. Chapek said gambling doesn't have the same rep it did a decade ago. Thirty-two US states have legalized sports betting, and this week New York approved online-betting licenses for nine operators.

Disney and Chapek are betting that some vices such as gambling might be losing taboo status... Yet shares of sports-gambling companies tell a different tale: DraftKings, Penn National Gaming, and FanDuel owner Flutter are all down this year. Bottom line, I don't like this pivot from Belle to betting and I predict it is going to change Disney's core culture — the ‘Walt’ culture. Disney’s squeaky-clean image will end up getting tarnished.


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