wabbott
DIS Veteran
- Joined
- Aug 4, 2021
On the same day as his first conference call with Wall Street analysts since returning to the company and succeeding former Chief Executive Bob Chapek, Mr. Iger is also expected to present a plan to reorganize Disney’s corporate ranks and cut costs, which the company has been promising since last year.
He and the company face pressure from activist investor Nelson Peltz, whose Trian Fund Management LP last month launched a proxy campaign against Disney with the goal of convincing shareholders to add him to Disney’s board of directors. In addition, Disney is facing questions about the health of its streaming business, what to do with Hulu and ESPN, and how to navigate a challenging economic climate with its debt-heavy balance sheet.
When Mr. Iger took the reins for his second stint as CEO in late November, he began dismantling Disney Media and Entertainment Distribution, set up by Mr. Chapek, with hundreds of employees and broad powers to make decisions over whether shows and movies should be streamed or shown in theaters.
Mr. Iger fired Kareem Daniel, DMED’s chief, and established a committee of top executives—finance chief Christine McCarthy, general entertainment content chief Dana Walden, studios chief Alan Bergman and ESPN head James Pitaro—to figure out how to replace the old structure and delegate decisions about content, distribution and marketing spending.
Disney is expected Wednesday to reveal the plan hatched by the “fabulous four,” as the committee is known internally, according to people familiar with the matter. Both Mr. Chapek and later Mr. Iger have warned that layoffs are likely, and Disney executives expect a large portion of them to come from DMED’s ranks, as well as a shrinking of head count in Disney’s various marketing departments.
The company has kept details of the reorganization under wraps, but Mr. Iger said in a November town-hall meeting with employees that he plans to give more power to content executives, a departure from Mr. Chapek’s practice of largely concentrating authority in the hands of a small group of executives with minimal experience on the creative side of the business. That approach was unpopular among some top Disney studio executives.
A key question among Disney leadership is chain of command: With Mr. Daniel gone, the segment heads of Hulu and Disney+, for example, have no obvious boss.
Mr. Peltz has been meeting with company directors and executives since last summer and has accumulated Disney shares valued at roughly $1 billion. The activist investor has pushed for significant cost-cutting and criticized executive compensation and succession planning at the entertainment company.
He has also said Disney’s 2019 purchase of 21st Century Fox’s entertainment assets for $71.3 billion was a mistake and damaged the company by saddling it with debt.
Disney has responded by saying Mr. Peltz isn’t qualified to join Disney’s board and defending the company’s record under Mr. Iger.
Mr. Iger delayed his retirement to see the Fox deal through to a close. Months later, in November 2019, the company launched Disney+, its flagship streaming service. Disney bundled the service with Hulu, in which the company had acquired a controlling majority interest through the Fox deal, and the sports service ESPN+.
“Disney could have had on its own a very successful, profitable streaming service from day one” without buying the Fox assets, which include popular shows such as “The Simpsons,” but it would have had to settle for a smaller pool of subscribers, said Cowen & Co. analyst Doug Creutz in an interview. “Strategically the idea was that if we get big enough fast enough, there will be two or three streaming services left standing, and they’d be one of them.”
But a challenging economic climate and fierce competition from rival streamers have complicated that plan. In August, Disney lowered its target for the worldwide number of Disney+ subscribers signed up by the end of fiscal 2024 to a range of 215 million to 245 million, from a range of 230 million to 260 million.
In addition, Mr. Iger is under pressure to achieve the company’s goal of profitability for its streaming business in fiscal 2024. So far, Disney’s direct-to-consumer business, which includes all its streaming-video platforms, has lost more than $8 billion. In the September quarter, losses in the segment peaked at $1.47 billion, as Disney spent heavily on content to attract subscribers.
For Wednesday’s earnings report, Wall Street analysts polled by FactSet expect streaming losses to narrow to $1.22 billion and predict that Disney+ had 162.7 million subscribers, down more than 1.5 million from the previous quarter.
Overall, the analysts see Disney’s fiscal first-quarter earnings falling to 78 cents a share, excluding certain items, on sales of $23.45 billion, up 7.5% from the year-earlier quarter, according to FactSet.
In December, seeking to increase profit for the streaming segment, Disney raised prices for Disney+ and some streaming bundles, and added a lower-priced ad-supported tier for the service. Mr. Iger said in the November town-hall meeting that he plans to focus on achieving streaming profitability over subscriber growth.
Media-analytics firm Antenna reported this week that in the December quarter, Disney+ represented 9% of total U.S. sign-ups to premium streaming services, down one percentage point from the previous quarter and trailing competitors Netflix Inc., Paramount+ and Peacock. Of those new sign-ups, 21% came from the lower-priced ad-supported tier.
Other significant decisions Disney faces include whether and when to buy the remaining one-third stake in Hulu that is owned by Comcast Corp.’s NBCUniversal and whether to spin off the sports network ESPN.
Disney shares closed Tuesday at $111.63, down more than 40% from highs reached in March 2021, when investor enthusiasm for the streaming model peaked.
He and the company face pressure from activist investor Nelson Peltz, whose Trian Fund Management LP last month launched a proxy campaign against Disney with the goal of convincing shareholders to add him to Disney’s board of directors. In addition, Disney is facing questions about the health of its streaming business, what to do with Hulu and ESPN, and how to navigate a challenging economic climate with its debt-heavy balance sheet.
When Mr. Iger took the reins for his second stint as CEO in late November, he began dismantling Disney Media and Entertainment Distribution, set up by Mr. Chapek, with hundreds of employees and broad powers to make decisions over whether shows and movies should be streamed or shown in theaters.
Mr. Iger fired Kareem Daniel, DMED’s chief, and established a committee of top executives—finance chief Christine McCarthy, general entertainment content chief Dana Walden, studios chief Alan Bergman and ESPN head James Pitaro—to figure out how to replace the old structure and delegate decisions about content, distribution and marketing spending.
Disney is expected Wednesday to reveal the plan hatched by the “fabulous four,” as the committee is known internally, according to people familiar with the matter. Both Mr. Chapek and later Mr. Iger have warned that layoffs are likely, and Disney executives expect a large portion of them to come from DMED’s ranks, as well as a shrinking of head count in Disney’s various marketing departments.
The company has kept details of the reorganization under wraps, but Mr. Iger said in a November town-hall meeting with employees that he plans to give more power to content executives, a departure from Mr. Chapek’s practice of largely concentrating authority in the hands of a small group of executives with minimal experience on the creative side of the business. That approach was unpopular among some top Disney studio executives.
A key question among Disney leadership is chain of command: With Mr. Daniel gone, the segment heads of Hulu and Disney+, for example, have no obvious boss.
Mr. Peltz has been meeting with company directors and executives since last summer and has accumulated Disney shares valued at roughly $1 billion. The activist investor has pushed for significant cost-cutting and criticized executive compensation and succession planning at the entertainment company.
He has also said Disney’s 2019 purchase of 21st Century Fox’s entertainment assets for $71.3 billion was a mistake and damaged the company by saddling it with debt.
Disney has responded by saying Mr. Peltz isn’t qualified to join Disney’s board and defending the company’s record under Mr. Iger.
Mr. Iger delayed his retirement to see the Fox deal through to a close. Months later, in November 2019, the company launched Disney+, its flagship streaming service. Disney bundled the service with Hulu, in which the company had acquired a controlling majority interest through the Fox deal, and the sports service ESPN+.
“Disney could have had on its own a very successful, profitable streaming service from day one” without buying the Fox assets, which include popular shows such as “The Simpsons,” but it would have had to settle for a smaller pool of subscribers, said Cowen & Co. analyst Doug Creutz in an interview. “Strategically the idea was that if we get big enough fast enough, there will be two or three streaming services left standing, and they’d be one of them.”
But a challenging economic climate and fierce competition from rival streamers have complicated that plan. In August, Disney lowered its target for the worldwide number of Disney+ subscribers signed up by the end of fiscal 2024 to a range of 215 million to 245 million, from a range of 230 million to 260 million.
In addition, Mr. Iger is under pressure to achieve the company’s goal of profitability for its streaming business in fiscal 2024. So far, Disney’s direct-to-consumer business, which includes all its streaming-video platforms, has lost more than $8 billion. In the September quarter, losses in the segment peaked at $1.47 billion, as Disney spent heavily on content to attract subscribers.
For Wednesday’s earnings report, Wall Street analysts polled by FactSet expect streaming losses to narrow to $1.22 billion and predict that Disney+ had 162.7 million subscribers, down more than 1.5 million from the previous quarter.
Overall, the analysts see Disney’s fiscal first-quarter earnings falling to 78 cents a share, excluding certain items, on sales of $23.45 billion, up 7.5% from the year-earlier quarter, according to FactSet.
In December, seeking to increase profit for the streaming segment, Disney raised prices for Disney+ and some streaming bundles, and added a lower-priced ad-supported tier for the service. Mr. Iger said in the November town-hall meeting that he plans to focus on achieving streaming profitability over subscriber growth.
Media-analytics firm Antenna reported this week that in the December quarter, Disney+ represented 9% of total U.S. sign-ups to premium streaming services, down one percentage point from the previous quarter and trailing competitors Netflix Inc., Paramount+ and Peacock. Of those new sign-ups, 21% came from the lower-priced ad-supported tier.
Other significant decisions Disney faces include whether and when to buy the remaining one-third stake in Hulu that is owned by Comcast Corp.’s NBCUniversal and whether to spin off the sports network ESPN.
Disney shares closed Tuesday at $111.63, down more than 40% from highs reached in March 2021, when investor enthusiasm for the streaming model peaked.
