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Disney upends activist investor Nelson Peltz. Now it’s real work time


Bob Iger, CEO, Disney at the Allen & Company Sun Valley Conference on July 11, 2023 in Sun Valley, Idaho

David A. Grogan | CNBC

Disney shareholders overwhelmingly voted to keep the company’s current board intact during Wednesday’s annual meeting, suggesting they believe current CEO Bob Iger has a plan to boost shares and install a strong successor.

Now, Iger will have to prove it, or he risks facing yet another activist campaign this time next year.

Iger can show progress in a number of areas over the next 12 months. That starts with turning his streaming services into a profitable unit, explaining ESPN’s digital strategy, scoring some box-office hits and picking a successor with a transition plan.

If Disney struggles to show investors the entertainment giant has a coherent strategy, or if Iger kicks the succession can down the road once more, activist investors may be knocking on the company’s door again during next year’s annual meeting to demand change.

“They still have the same problems they’ve had before, which are really industry problems,” said TD Cowen analyst Doug Creutz. “Direct-to-consumer streaming is just economically inferior to the old linear bundle model, which is going away. They have to try to manage through that.”

‘Turning Red’ … to black

Still from Pixar’s “Turning Red.”

Disney

Disney said earlier this year it plans to turn a profit in its streaming TV businesses in its fiscal fourth quarter this year.

That would mark a milestone for the company, which launched Disney+ on Nov. 12, 2019. It would be the first time Disney showed it can make money from Disney+, Hulu and ESPN+.

Disney will need to sustain and grow streaming profit to justify Iger’s five-year-old strategy to go “all in” on the segment.

Iger’s confidence that Disney will make streaming profitable by the end of the fiscal year stems from draconian cost-cutting on content, which includes new movies, sports rights spending and TV production. Disney said in November it was targeting an “annualized entertainment cash content spend reduction target” of $4.5 billion.

“What they have to do next is fix the streaming losses,” said Needham & Co. analyst Laura Martin. “They still need to cut costs on the streaming side to get to profitability.”

ESPN’s strategy

Disney has set up a two-pronged digital strategy for ESPN. For decades, Disney reaped billions by keeping ESPN exclusive to the cable bundle.

Those days are nearly over.

In the fall of 2024, Disney plans to launch a skinny sports bundle that includes ESPN’s linear network, along with sports channels from Warner Bros. Discovery and Fox. The yet-to-be-priced digital streaming service will likely cost about $45 or $50 per month, CNBC reported in February. Disney owns one-third of it.

ESPN will then debut its own flagship streaming service in the fall of 2025. It will include new personalized features that cater to sports bettors and fantasy sports players. The Athletic reported last month that service is likely to cost $25 or $30 per…



Read More: Disney upends activist investor Nelson Peltz. Now it’s real work time

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