Richard Plepler
Appearances
Decoder with Nilay Patel
Disney Is a Tech Company?
And Netflix wasn't just using Disney's movies to grow. There were those ABC shows like Lost and Grey's Anatomy that Disney had licensed to Netflix. And Disney even began making original Marvel shows for the streamer.
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Disney Is a Tech Company?
This was Disney feeding its very own DNA directly into the Netflix machine, giving over its precious IP to engineer specific shows designed to convince consumers to sign up for Netflix.
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Disney Is a Tech Company?
By supplying great content to Netflix, Disney was getting paid. But it was also building Netflix's business, helping it become a primary pick for home entertainment. Disney thought its identity as an entertainment company would keep it relevant over a tech company. But as more and more people turned to Netflix for entertainment, it all got a little confusing for Disney.
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Disney Is a Tech Company?
But the lines were beginning to blur. Was Disney's partner actually the competition? Disney thought it had some time to figure things out. Here's Matthew Ball, an author and independent analyst today. Ball has been watching the streaming war since he was the head of strategy for Amazon Studios.
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Disney Is a Tech Company?
But between 2012, when Disney made its movie deal with Netflix, and 2015, when Bob Iger called HBO's Richard Plepler, viewing habits rapidly changed. Internet speeds in the US more than doubled within the space of a few years, making streaming feasible for more people.
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Disney Is a Tech Company?
And devices from companies like Roku and Apple took off, making it easier than ever to watch streaming services like Netflix directly on your TV set instead of on a computer or iPad. And within that same period, Netflix started to stand out as a destination for original, top-of-the-line shows. It outbid traditional studios to make House of Cards with top-tier talent.
Decoder with Nilay Patel
Disney Is a Tech Company?
created a viral sensation with Orange is the New Black. And yes, it began production on a series of Disney Marvel originals, Daredevil, Jessica Jones, Luke Cage, and more. With Disney's help, Netflix had torn down the wall between content companies and tech companies.
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Disney Is a Tech Company?
Which, in retrospect, might look like an absolutely bonkers business strategy on the part of Disney. But John Skipper says it's more complicated than that. The Wall Street beast needed to be fed.
Decoder with Nilay Patel
Disney Is a Tech Company?
And just because you know something's out there doesn't mean you can avoid crashing into it, even if you're the CEO.
Decoder with Nilay Patel
Disney Is a Tech Company?
By 2015, Iger had caught on. He was watching Game of Thrones on HBO's shiny new streaming platform. And ESPN's cable subscribers had started to make a big enough dip for him to feel like he had to tell investors about it.
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Disney Is a Tech Company?
Meanwhile, Netflix wasn't the only tech company that had made the leap into entertainment. Amazon was starting to produce zeitgeist shows like Transparent. And studios that made premium content were sprouting up in previously unlikely places. So now it was time for Disney to make a pivot, for the entertainment company to act like a tech company, for Disney to become a streamer itself.
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Disney Is a Tech Company?
Step one, it made its first big investment in BAM tech in 2016, and eventually bought the whole company for more than $3.5 billion.
Decoder with Nilay Patel
Disney Is a Tech Company?
But Skipper, along with Kevin Mayer, who would go on to lead Disney's streaming reconfiguration, didn't think there was too high a price for this technology. BamTech was the best in class, and Disney needed a quick way to speed to the top.
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Disney Is a Tech Company?
In other words, Wile E. Coyote could see the cliff. And so if Disney had arrived at the edge of the chasm, it had no other choice but to dive in. By August 2017, Iger was ready to go public with a plan.
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Disney Is a Tech Company?
Netflix would no longer be Disney's partner, Disney's buyer, Disney's source for easy money. It would be Disney's direct competitor. There was just one problem.
Decoder with Nilay Patel
Disney Is a Tech Company?
So instead of having something of a streaming battle, Disney duking it out with Netflix, Disney Plus dropped into more of a streaming war.
Decoder with Nilay Patel
Disney Is a Tech Company?
Coming up, Disney was now a streamer. and a major player in the streaming wars. To compete, it was going to have to double down on the idea that it was both a creative company and a tech company.
Decoder with Nilay Patel
Disney Is a Tech Company?
Ten years ago, HBO and its then-CEO Richard Plepler had one of those problems that most media execs would kill for.
Decoder with Nilay Patel
Disney Is a Tech Company?
In 2018, Alana Pena was just getting her start in TV.
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Disney Is a Tech Company?
She was working as a writer's assistant on a TV show called Crazy Ex-Girlfriend. And her new agent called her up and asked, got any show ideas? We want a comedy.
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Disney Is a Tech Company?
This is what it was like during the boom times of streaming.
Decoder with Nilay Patel
Disney Is a Tech Company?
And in 2018, these networks were starting new platforms, and so were thirsty for more content than ever before, because they were building up their arsenals for the streaming wars.
Decoder with Nilay Patel
Disney Is a Tech Company?
The exec did have good taste and invited Pena to come in and pitch her show, a story about a young teen.
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Disney Is a Tech Company?
The response to the pitch was extremely positive. Disney picked up the series the same day Pena pitched it. Gina Rodriguez was a producer, and it was called Diary of a Future President.
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Disney Is a Tech Company?
Disney Plus wanted to be well-stocked on content for all corners of the streaming battlefield. And so the company ordered every entertainment division to get working, creating fresh new shows like Diary and tons of shows based on existing Disney IP. And then there was all of Disney's back catalog, the movies and shows that families with kids would love to have at their fingertips.
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Disney Is a Tech Company?
Things had gotten wild in Westeros. The Starks were on the run and the Lannisters were hanging on to power, barely.
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Disney Is a Tech Company?
But the streaming wars were gearing up, battles forming on every front, tons of enemies, few allies, and Netflix leading the charge with a decade-long head start. Every strategic advantage needed to be seized and leveraged. Every opportunity needed to be considered.
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Disney Is a Tech Company?
Disney bought 21st Century Fox in 2019 for over $71 billion, giving it 30 seasons of The Simpsons and also Avatar, the Die Hard and Alien franchises, Titanic, and also a majority stake in Hulu. All of these assets helped Disney to expand far beyond its core family brand. Here's Ben Fritz, editor with The Wall Street Journal, who covered Disney at the time.
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Disney Is a Tech Company?
The thinking in large part was that, look, Disney has these great brands, but they don't have a huge content library. It was not nearly as big as what Netflix already had.
Decoder with Nilay Patel
Disney Is a Tech Company?
For over a decade, Bob Iger spent billions on acquisitions that helped expand Disney's creative reach. But that was a drop in the ocean compared to what they were now spending to beef up for the streaming wars.
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Disney Is a Tech Company?
In order to compete with the Apples and Amazons and Netflixes of the world, Disney needed to look, act, and spend like them. But it also needed something else, some slack from Wall Street. Disney was spending like money wasn't real in order to build a service people would want to sign up for, just like the tech companies were. And so Iger had a pitch for investors.
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Disney Is a Tech Company?
The significant thing to know, Joe, is that he was telling Wall Street that you should value us based on the success of our streaming service. Value us the way you value Netflix, based on how many subscribers we get in streaming. Subscribers first, profits later. And much to Wall Street's delight, Disney Plus delivered huge numbers as soon as it launched in November of 2019. Matthew Ball.
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Disney Is a Tech Company?
Disney aimed to get 60 million subscribers within four years of launching.
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Disney Is a Tech Company?
Within just one year, Disney had over 70 million. Its virtual overnight success surprised everyone. But in 2022, after a few years of slugging it out in an increasingly crowded field, another surprise was in store for all the players in the streaming wars. It was not a pleasant one.
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Disney Is a Tech Company?
Yep, this comes as the company is reporting a drop in subscribers for the first time in more than a decade. It was like a bomb went off throughout the industry. If growth wasn't guaranteed, Wall Street had a new demand, profits. Streamers had to show they could make money fast.
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Disney Is a Tech Company?
That's Alana Pena again. In 2023, this incoming call, sort of a head-scratcher for Pena. After a two-season run, Diary of a Future President had already been canceled, a while ago. The exec got right to the point. She told Pena that Disney Plus was taking Diary off its platform, scrubbed, erased, not a trace of its 20 episodes to be found. Not because the show was bad.
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Disney Is a Tech Company?
A lot of people really loved it. But because its non-existence was worth something to the company. Removing shows allows platforms to write them off for tax breaks. Lots of streamers turned to this option during the Netflix correction, including Disney. The company purged dozens of original shows across Disney Plus and Hulu.
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Disney Is a Tech Company?
But this purge was buying Disney some time, allowing it to recoup a little money while it figured out how to shift strategy in this new era, where Wall Street was demanding real profits and growth. Here's Jessica Reif-Ehrlich, longtime analyst for B of A Securities.
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Disney Is a Tech Company?
In 2014, you could stream HBO's content online with HBO Go, but it wasn't the kind of streaming service we think of today. You actually had to have a cable subscription first or know somebody who did, which for some people started to feel like a secret code passed around through the Millennial Whisper Network.
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Disney Is a Tech Company?
Disney needed to be ruthless with controlling costs. And it didn't stop at erasing existing content. Disney cut way back on commissioning new shows. And yes, there were lots and lots of layoffs. Because despite trying to spend like a tech company, Disney just wasn't one of them.
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Disney Is a Tech Company?
Companies like Amazon and Apple could drop a bajillion dollars on original content because streaming was a side business.
Decoder with Nilay Patel
Disney Is a Tech Company?
For Netflix, streaming wasn't a side business. It was just business. But it also had the advantage of being first with the greatest brand recognition in the streaming space. Disney didn't have any of this. And yet, its strategy to compete with Netflix had been to try to become Netflix. the company needed a new strategy. It didn't need to stop acting like a tech company entirely.
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Disney Is a Tech Company?
Streaming was still core to its business. But maybe there was a more Disney way to go about things. A way to lean into 100 years of experience surprising and delighting audiences.
Decoder with Nilay Patel
Disney Is a Tech Company?
And perhaps no other choice had more brand awareness or affinity than the Walt Disney Company. Generational love, nostalgia, memory, and myth-making. That's all Disney.
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Disney Is a Tech Company?
It was time to look to the past and look within in order to define the future.
Decoder with Nilay Patel
Disney Is a Tech Company?
That means not trying to appeal to every possible subscriber. It means leaning into the content it already does well. Disney fairy tales, Pixar robots, the Avengers, Luke Skywalker may not be for everyone, but they're indispensable to a lot of people. So indispensable that people will keep paying, even after price hikes.
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Disney Is a Tech Company?
Today, if you want to subscribe to Disney Plus without ads, without bundling it with Hulu or ESPN, you have to pay $13.99. When it launched, it was $6.99 per month.
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Disney Is a Tech Company?
It seems the path forward for Disney is to be Disney. Sure, it can infuse its business with lessons from tech competitors, but it can also lean on its deep roots and delighting audiences, and even its experience with the cable bundle. Disney recently decided to strike a wartime alliance with Warner Brothers Discovery to create a sort of unified offering.
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Disney Is a Tech Company?
You can now get access to Disney+, Hulu, and Max at a discount. This is Tech Meets The Bundle. And it's an example of Disney getting out of Netflix's shadow to fight the streaming wars on its own terms. Netflix is still winning those wars despite the dip in subscribers back in 2022. It has more members than any other service. But Disney is number two, and it leads in another distinctly Disney way.
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Disney Is a Tech Company?
Nielsen reports that Americans spend more time watching Disney platforms, streaming shows, cable channels, ABC, than any other company's platforms. And in terms of profitability, Disney streaming platforms are, for the first time, generating some cash. It's still modest, but a lot better than where they were last year, which was losing hundreds of millions of dollars.
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Disney Is a Tech Company?
In other ways, though, Disney Plus still has a long way to go. The interface is clunky, and its algorithm doesn't hold a candle to Netflix's. Churn, people canceling their subscriptions, is a major problem. But all of these issues wouldn't even exist if not for the fact that Disney is now a company that is much more expansive and innovative in the digital space than it was even a decade ago.
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Disney Is a Tech Company?
Over the course of our season, we've looked at how Disney has been able and sometimes struggled to push itself forward into the future while preserving the company that Walt Disney and his brother Roy founded at the beginning of the 20th century. Streaming might just be the hardest leap that Disney has had to pull off, but Ball also sees it as the most promising.
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Disney Is a Tech Company?
This new generation was not getting coaxial cords drilled into their homes and paying large bills every month for the cable bundle plus premium channels. But they did want to watch HBO shows.
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Disney Is a Tech Company?
It's not yet clear how tech will augment the ways in which people, children and families included, experience Disney, other than just a tool Disney uses to squeeze out more money from its park-goers or gather data to inform its algorithm. What is clear is that Disney is a company that grows in order to stay relevant.
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Disney Is a Tech Company?
It bought Capital City's ABC just in time to ride the cable wave, acquired Pixar, Marvel Entertainment, and Lucasfilm to expand its IP universe and its audience, and dotted the globe with its theme parks. Integrating streaming is the latest version of this strategy, growing, evolving Walt's Flywheel, and still remaining Disney. That's it for our season.
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Disney Is a Tech Company?
Land of the Giants, The Disney Dilemma is produced by Vulture and the Vox Media Podcast Network. Special thanks to Brandon Santos, Darian Mucha, Brian LaBombard, Jillian Robbins, and Liam Brooks. And of course, thanks to my colleagues at Vulture, Rebecca Alter, Bilga Abiri, and Chris Lee for joining me as hosts this season.
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Disney Is a Tech Company?
This episode included clips from HBO, Disney, the podcast Sway, Warner Brothers Discovery, CNBC, and CBS Evening News. Charlotte Silver is our lead producer. Joe Lee Myers is our editor. Claire Cronin is our fact checker. Brandon McFarlane composed the theme and mixed and scored this episode. Neil Janowitz is the editor-in-chief of Vulture. Art Chung is our showrunner.
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Disney Is a Tech Company?
Nishat Kurwa is our executive producer. And I'm Joe Adalian. Thanks for listening to our season. If you liked it, tell a friend.
Decoder with Nilay Patel
Disney Is a Tech Company?
So HBO needed to create a streaming-only platform, something that could handle tons more traffic than HBO Go, something people could access without a cable sub. And the company wanted to do it all very quickly.
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Disney Is a Tech Company?
But HBO was not a tech company, so it needed to hire one to help, a company that knew how to take content and create a smooth, usable interface around it.
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Disney Is a Tech Company?
BAMTEC, which was just called BAM at the time, was known for streaming Major League Baseball. It knew how to handle big event television. It came with stellar recommendations. It was perfect. So Plepler hired the company to build what became HBO Now.
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Disney Is a Tech Company?
And then the day arrived, the season five premiere of Game of Thrones.
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Disney Is a Tech Company?
HBO was not the first TV company to build a streaming platform, but it was the first that mattered. And it was the first major media company, a company that had planted its flag on the back of cable, to say we're taking our content directly to the consumer. No more cable subscriptions and bundles and extra costs. You want to watch reruns of Sex and the City, the newest Game of Thrones?
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Disney Is a Tech Company?
Give us $14.95 a month and you got it. This was such a big deal that it really did feel like a moon landing. And not just to Plepler. HBO Now got the entire industry's attention. Because if HBO was feeling the squeeze from changing viewing habits, so was everyone else.
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Disney Is a Tech Company?
Bob Iger told Klepler that he was considering making an investment too, a big one, an investment in Disney's future. Iger and Disney wouldn't just go out and hire BamTech like HBO did. They'd eventually buy the whole company. Because Disney was not just going to create a streaming option. Streaming was about to redefine its whole business.
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Disney Is a Tech Company?
This is Land of the Giants, and I'm your host, Joe Adalia. On our final Disney episode, how does a 100-year-old media entertainment company compete with tech giants on their own turf? Who tries to become one of them, to beat them at their own game?
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Disney Is a Tech Company?
He spent the bulk of his career at the Walt Disney Company, first in the publishing division in the early 90s, and eventually as president of ESPN. Over the course of his own career's ascent, he saw Disney's cable business grow to unprecedented heights of profitability. But in 2012, when Skipper became president and ESPN's performance was so wildly spectacular, something else happened.
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Disney Is a Tech Company?
The numbers were still enormous, but for the first time, they weren't growing. And Skipper, in his new position, now got to hear how the leaders of the company thought about this loss.
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Disney Is a Tech Company?
Danger from a completely new way of watching TV and movies that could peel away cable subscribers, undermining Disney's most lucrative division at the time. So why not meet the consumer where they were? Why not make a Disney streaming service to capture the millennial flight from cable? A win was a win, right? Not exactly. Richard Plepler from HBO again.
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Disney Is a Tech Company?
Internal resources were finite, so dumping a bunch of money into streaming while cable was still so profitable just did not make sense.
Decoder with Nilay Patel
Disney Is a Tech Company?
And it wasn't like cable was just making more than streaming at this point. Streaming companies weren't really making any money at all. Sure, Netflix technically had modest profits on paper, but it was racking up billions of dollars in debt. But it didn't have to make money.
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Disney Is a Tech Company?
Wall Street valued Netflix as a tech company and had its blessing to spend, spend, spend because all it cared about was the company's stratospheric growth in subscribers. Netflix could worry about turning a real profit later. Disney was a media company, an old one, a company that had been making profits for decades, paying regular dividends to its shareholders.
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Disney Is a Tech Company?
It wasn't supposed to spend billions of dollars on unproven projects. It didn't have that kind of leeway. And so Disney waited, and it leaned into what was still working, the cable bundle.
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Disney Is a Tech Company?
What Skipper is saying here is that Disney and ESPN made the content. ESPN, for instance, racked up sports rights, cultivated on-air talent, and expanded into narrative documentaries. But it never once had to send a bill to a customer. So maybe there was something more holding Disney back from making a switch to streaming. Something more than pie charts and future modeling.
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Disney Is a Tech Company?
Maybe it was Disney's own understanding of its place in the world order. Disney wasn't a tech company like Netflix, nor was it a distributor also like Netflix. Early on, Disney did partner with other big media companies to build a Hulu, but it mostly existed to make next-day reruns of broadcast shows available online. You originally didn't even need a paid subscription to watch.
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Disney Is a Tech Company?
But fully owning and operating a Disney-branded streaming platform just did not feel like the company's lane, and it didn't feel like a good investment either. So why not dip a toe in and let another company handle the hard stuff? A company that could eat the cost of maintaining the platform. Someone to deal with the people.
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Disney Is a Tech Company?
A partner who would pay Disney a lot of money for the privilege of streaming its movies for them. Disney turned to the incumbent.
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Disney Is a Tech Company?
Disney had already worked out a fairly lucrative deal in 2010 for Netflix to stream some ABC shows. But now, in 2012, Disney was about to make an even bigger deal. Netflix would pay Disney about $300 million a year for the rights to stream the latest Disney movies. Some stuff from the vault, too.
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Disney Is a Tech Company?
For Disney, this was sort of like free money from Netflix, and the company got to be where consumers were. This partnership would allow Disney to stay in its lane. But the deal had some unintended consequences.
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Disney Is a Tech Company?
Here's Bob Iger talking to Kara Swisher in 2022 during a brief window of time when he was not Disney CEO.