During their recent annual gathering, Disney shareholders consented to maintain the company’s existing board, expressing confidence that current CEO Bob Iger can stimulate share growth and transition to an effective successor. However, Iger must now prove himself capable of doing so, or he risks inciting further activist campaigns.
There are numerous areas where Iger can demonstrate improvement within the next 12 months. These include transforming the company’s streaming services into a successful division, revealing ESPN’s digital agenda, achieving box-office successes, and announcing a successor followed by an orderly transition blueprint.
Nonetheless, if Disney fails to convince investors of an intelligible strategy, or if Iger delays the succession process, activist investors could again demand alterations during next year’s annual assembly. Such claims are backed by Doug Creutz, a TD Cowen analyst, who highlighted the entertainment titan’s struggles with the industry’s shift from the traditional linear bundle model to direct-to-consumer streaming.
When questioned about this, Peltz affirmed that he wouldn’t initiate another proxy battle if Iger can make visible progress on his core objectives.
In response to those challenges, Disney earlier this year announced an ambitious plan to make profits from its streaming television enterprises in the fiscal fourth quarter this year. This would be a significant landmark for the company, which unveiled Disney+ on November 12, 2019. It’s the first time Disney has proposed the strategy of leveraging Disney+, Hulu, and ESPN+ to establish profitability.
The belief that Disney’s streaming will become profitable by year-end, as promised by Iger, is founded on the company’s aggressive cost-cutting measures. These cuts encompass new films, rights to sports broadcasts, and TV production costs.
Disney’s ESPN presents a dual-pronged digital initiative. For many years, exclusive rights to ESPN brought Disney billions of dollars. However, these times are coming to an end. Disney plans to launch a slim sports bundle that will include ESPN’s linear network, as well as channels from Warner Bros, Discovery, and Fox, in the fall of 2024. This digital streaming service is predicted to cost around $45 or $50 per month, with Disney owning one-third of it.
By 2025, ESPN plans to introduce a personalized flagship streaming service appealing to sports bettors and fantasy sports enthusiasts. Disney must ensure it avoids consumer confusion with its multiple packages and offer clear messaging for its new products’ introductions.
In recent years, Disney has suffered a stagnation in box-office numbers, resulting in a string of live-action failures and Pixar disappointments. However, there is hope for a turnaround, with a new president, David Greenbaum, taking over Walt Disney Motion Picture Studios. Greenbaum’s appointment comes with the task of reviving the movie studio’s fortunes.
Another critical issue faced by Disney is the question of Iger’s successor. Iger has postponed his retirement five times and even returned in late 2022 as CEO when his successor, Bob Chapek, was fired by the board. Iger’s goal is to appoint a successor around early 2025 and coach this person for the job.
Replacing Iger won’t be an easy task, as Doug Creutz highlights. The options are risky, whether it’s a questionable outside hire or an internal candidate who may not be able to fill Iger’s shoes. However, the board has now been given the go-ahead to commence its search process, which, as the shareholders’ vote suggests, is a triumphant moment for both Iger and them.
