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AcctTwo Blog

How Disney Pivoted to a Subscription Revenue Model to Weather 2020

Subscription Revenue ModelIt has been an unprecedented year filled with highs and undeniable lows. We not only survived – we thrived. We learned what it means to truly pivot and overcome great challenges. At the same time, we celebrated every success in lockdown and learned what we are truly capable of.

Business & Technology Continue to Accelerate

Over the last ten years technology has been disrupting all aspects of business. The finance and accounting function is our particular area of expertise. We’ve seen enterprise software move from industry-focused on-premises suites for large organizations to horizontal cloud suites for both large and midsized companies to best-in-breed solutions with open APIs for companies and organizations of all sizes. 

These integrated cloud solutions provide the anywhere/anytime access that companies need to keep up with the increasing speed of business. They allow for configuration rather than customization, which lets organizations tailor these solutions to their needs relatively quickly, making them more agile.

They also break down technology silos between functions and departments so that data can be shared and reported on in real-time, allowing for quick decisions to be made based on what’s happening right now and what is likely to happen soon, instead of basing their reactions on what happened in the past. This trend has accelerated as the COVID-19 pandemic has made digital transformation for businesses go from optional to urgent.  

New Innovations Enable Agility & Resilience

strategic CFODespite the global pandemic, many organizations have managed tosurvive and even thrive during 2020. They were able to quickly pivot to a new operating model precisely because they had already made digital transformation progress.

Companies that saw the smallest impact from the pandemic had previously invested in automating business processes and eliminating manual, paper-based, location-dependent activities, so they could get anywhere/anytime access to their data and gain key insights, which enabled them to be resilient even as the pandemic unfolded and the timeline became longer and less clear when it would all end. 

Pivoting Your Business Model the Disney Way

recent article in the Wall Street Journal chronicles how Disney has managed to turn a profit, albeit a substantially reduced one, in spite of the fact that the company’s chief business lines have been decimated by the pandemic. The company has stayed profitable by making a massive shift towards a subscription revenue model with its streaming and subscription businesses at a time when theaters are mostly closed, and theme park attendance is down by more than 60%.

According to the article, “The company's flagship streaming service, Disney+, added more than 21 million new subscribers in the first quarter to hit 94.9 million subscribers as of Jan. 2, compared with 73.7 million subscribers at the end of the fourth quarter. The service launched in November 2019. 

Meanwhile, “Wall Street seems to have its eye on one figure: Disney+ subscribers. In December, Disney revised subscriber projections to reach as many as 260 million by 2024, a benchmark that sent its stock price soaring.” The company managed to beat analysts’ revenue estimates by about $350M.

How to Be Agile and Ready for Anything

Smaller companies and nonprofits might be dealing with (much) lower profit and revenue numbers, but they can still take a page from Disney’s book here. As we mentioned in our recent eBook, “Post-COVID-19 Business Model: How We Can Emerge Stronger and More Resilient,” beyond the basic blocking and tackling of disaster and continuity planning, digital transformation, and building out your planning and forecasting capabilities, companies of all sizes should look at re-examining their business models and supply chains to create multiple, redundant channels to deliver their products and services.

And just as Disney has with its streaming services, you can also look to create recurring revenue wherever you can. Many businesses that are not software-as-a-service, or SaaS, companies have found ways to convert their revenue to a subscription-based model. They have enjoyed more stable revenue streams during the crisis than businesses with a more transactional model.  With an array of new technologies available to companies and nonprofits of all sizes, we can now emulate companies like Disney in ways that were once out of reach. The options can be overwhelming, but we’re here to help. 

Contact us to learn more about how we can help your organization on its digital transformation journey. 

Topics: Subscription Billing business continuity General