Disney is a case in point of a company that is almost 100 years old but is now a pioneer in artificial intelligence (AI) in all its business lines. AI gives it a competitive edge in content creation, but also in its direct-to-consumer business (where it competes with Netflix). AI is also at the heart of Disney theme parks’ cost-optimisation model. Disney has thus broken with the stereotype that artificial intelligence is the province of tech companies and start-ups alone.
Artificial intelligence at the service of content creation, then storytelling
Disney’s history has featured a number of blockbusters (Aladdin and Toy Story, among many others). These successes have rested on ingenious content, as well as storytelling. This is where Disney uses artificial intelligence in several ways. How? By training algorithms that learn from previous successes. It happens that neural networks are more effective in assessing a content’s emotional effectiveness or popularity than a team of human experts.
Disney recently decided to go further in enhancing its content and storytelling by using the technology of factorised variational autoencoders to monitor spectators’ reactions to the first few minutes of a film, in order to anticipate their following reactions and create content and storytelling that is most likely to optimise the spectators’ positive emotional response. This technology was used in particular in creating the latest Star Wars film.
As a pioneer in artificial intelligence, Disney is likely to go even further by gathering the top artificial intelligence experts and capitalising on its colossal IT investments and datasets to create content likely to maximise spectator satisfaction. This would be a competitive edge that no one else could match. It is already possible to envision the day when AI writes better and faster than an entire team of creators.
Wristbands and big data at Disney’s theme parks
Since 2013, Disney has put big data and the Internet of things to mind-boggling use in another of its flagship businesses, its theme parks. When visitors enter the park they are given a wristband, called the “MagicBand”, which unlocks their hotel rooms, pays for rides and restaurants, lets them skip lines for their favourite rides, and gives them a personalised itinerary and a digital wallet on their smartphone or smartwatch. MagicBands come with GPS, an RFID chip and a transmitter.
Disney uses the MagicBand to retrieve valuable datasets on its customers in areas as varied as the number and type of attractions they go to, how long they stay in their hotel rooms, what they order at restaurants, and when they enter and leave the park. The data is then used to maximise the customer experience and, of course, to optimise Disney’s profits. This is a dream come true for so many companies – knowing their customer paths and exploiting those paths in its profit centres!
Disney Parks has achieved a clear return on its heavy investments in big data. It has: 1) achieved labour savings of about 20% at its parks by better matching its resources with its visitors’ actual consumption; 2) shortened its visitors’ waiting times in queues, which frees them up to spend more money.
Algorithms, the cornerstone of personalising Disney Plus (a Netflix competitor)
In late 2019, Disney launched its direct-to-consumer (DTC) business, called Disney Plus (and its sports corollary, ESPN Plus), which is now Netflix’s most serious rival. Like its famous competitor, Disney Plus makes an algorithm available to its subscribers that guesses what we will want in the future, based on what we have watched in the past (and not just what we watch, but also what we don’t watch) and what a cohort of other subscribers with identical viewing habits have watched in the past. The algorithm analyses the type of series and films viewed, how long they last, and the time of day or evening we watch them, and draws the right aspirational conclusions about us.
In DTC, Disney goes even further in using natural language processing (NLP) to better understand the content it broadcasts and, above all, the relevance of that content’s emotional impact on its audience. Disney Plus also analyses demographic datasets in its base of subscribers to match its offering of content with their demand for services, using homogenous subscriber cohorts.
ODDO BHF Artificial Intelligence is a global equity fund that uses artificial intelligence and quantitative analysis to invest in listed equities with exposure to the theme of artificial intelligence, through a selection of associated sub-themes. It seeks to be permanently invested in equities in order to generate long-term capital growth. In the first instance, a big data algorithm is used to define the main sub-themes of artificial intelligence and to select the most relevant global equities. The internal quantitative Algo 4 model is then applied to this limited investment universe to identify between 30 and 60 companies with the most attractive financial and risk characteristics. The management team may then adjust the weightings on a discretionary basis. The portfolio is subject to ongoing monitoring by the management team.
