Bob Iger is returning to Disney as CEO, taking back the reins of a company that is very different from the one he led when he stepped down as CEO in February 2020.
With streaming losses of $1.5 billion in the last quarter alone, Park fans unhappy, cable networks inundated like ESPN dealing with cord-cutting, and stock prices plummeting, Iger has his work cut out for him. .
Disney’s problems are vast, and solving them all may not be possible, especially in the two years that Iger said he will dedicate to the company in returning to the C-suite.
But if anyone is going to bring the magic back to The Walt Disney Company, the company believes Bob Iger may be uniquely qualified to do it.
First priority: streaming business.
Disney’s streaming service — which includes ESPN+, Hulu and, most importantly, Disney+ — has been a vital part of the company’s sprawling media empire. It served as a lifeline for Disney in the early days of the pandemic — one of the most tumultuous periods in the company’s history — and grew to 100 million subscribers in just 16 months. Now, this business has turned into an anchor that weighs it down.
The company reported earlier this month that Disney+ exceeded Wall Street’s expectations for subscriber growth. But it came at a huge cost to the company: Disney said its streaming business lost $1.5 billion in the quarter, news that sent Disney stock tumbling.
The “growth at all costs” days are over for Wall Street, and now Iger and the rest of Disney’s leadership must prove to investors that its streaming business can turn a profit while continuing to grow.
That, more than anything else, is what’s moving the needle on Disney stock, which is down nearly 40% for the year.
“He needs to shift streaming as well as other parts of the company back to Disney’s core consumer,” Tripp Miller, a Disney investor and managing partner at hedge fund Glenn Capital Partners, told CNN Business. “That consumer is family-friendly, international and multi-generational. That’s the beauty of Disney, right? It’s not just kids, it’s not just adults. When it works, it can be anyone.”
This refocusing effort is easier said than done, especially considering that other parts of the company are not as strong as they once were.
Disney Media Networks is struggling as cord-cutting accelerates and once-profitable outlets like ESPN lose viewers. This has hurt Disney’s entire business.
It was a major point of contention for Dan Loeb, the activist investor and CEO of Third Point, who made headlines in August when he suggested “a strong case can be made that ESPN’s business should have a fair amount of debt.” The burden should be passed on to the partners.”
Loeb eventually had a change of heart, but the point was made: streaming is the new frontier for Disney, and Iger needs to prove it can make money while Disney’s legacy networks continue to shrink.
As for the company’s Studio Entertainment, when Iger was fired in early 2020, it came a year after Disney had seven films gross $1 billion each at the global box office. Compare that to this year, which has only two movies each making $1 billion at the global box office across all studios, according to Comscore ( SCOR ).
This fall shows how much the pandemic has disrupted the film industry. Although recovering, box office sales continue to underperform the year before the pandemic.
Now, Disney is trying to figure out how big releases from signature brands like Pixar, Marvel and Lucasfilm fit into the new theatrical ecosystem.
Iger also had to right the symbolic mistakes that his successor — and now predecessor — Bob Chapek made during his tenure.
Chapek did a good job overseeing the park unit during the outbreak. But once the Covid restrictions were lifted, the company raised prices and introduced new innovations, such as the pricey Genie+ system, which drew the ire of Disney’s deeply loyal guests, many of whom felt the prices were low.
Disney’s fragile internal culture and brand also achieved some success during Chapek’s tenure.
The CEO found himself dealing with a salary dispute involving one of the studio’s biggest stars, Scarlett Johansson, that went public. Then there were Disney’s battles with Florida politicians and its own employees, over the state’s controversial law that restricts discussion of certain LGBTQ+ topics in classrooms.
This, in particular, was a hallmark of the Chapek era at Disney. In March, he was forced to apologize for his silence on the bill after initially refusing to comment publicly.
Ultimately, Disney’s board moved on from these PR stunts and Chapek’s contract was extended until 2025 in July. Still, the damage was done to the Disney brand with reason.
Disney’s brand image is vital to its success, portraying the spirit of a magical, family-friendly cultural institution.
In the end, the Disney board decided to bring Iger back because of his long track record of success that earned him an almost legendary status as the only person who could lead the company. In its statement introducing Iger as CEO, Disney said he is “uniquely positioned to lead the company through this critical period.”
Iger was instrumental in the creation of modern Disney. He oversaw the acquisition of major Disney brands, including Pixar, Marvel and Lucasfilm, and he closed a $71 billion deal to buy most of 21st Century Fox. He also started the streaming revolution at the company with the creation of Disney+ in November 2019.
Hollywood insiders viewed Iger’s former CEO as one of the greatest in Hollywood history.
Just the fact that he’s back at the helm helped calm investors’ nerves: Shares rose 6% on Monday.
“Psychologically, his return is a boost to the investors and the team at Disney,” Miller said. “With Iger they know what to expect, which is to focus on excellence and love the brand. I doubt he’s coming back for the money at this stage. He’s coming back for the legacy and the company.
Over the years, Iger’s “decision-making and strategic positioning — which ignored Street’s often misguided short-term focus — would ultimately separate Disney from the media pack,” said Michael Nathanson, at Moffett Nathanson. media analysts, in a note to investors on Monday. .
Nathanson added that Iger’s “communication skills and ability to remain focused and sincerely optimistic in the face of constructive challenges provided constant ballast in the roughest media waters.”
“We believe investors will value transparency and return some of its long-lost magic to Disney with a strong narrative that will drive the stock higher again,” he wrote.
But Iger’s past successes won’t guarantee Disney’s future recovery. Hollywood is growing fast, and Disney’s problems are felt industry-wide. With the media industry in turmoil, Disney is hoping Iger can take on the monumental task of righting his ship.