As Disney celebrates a glittering century of global success this week, behind closed doors its top executives are contemplating what could be the most radical shake-up in the history of the world’s biggest entertainment company.
Bob Iger, Disney’s Mr Fixit, made a shock return as chief executive last November after the ousting of his hand-picked successor, Bob Chapek, following a disastrous reign lasting less than two years. The challenges facing Iger are myriad and formidable.
“There is a lot to do,” Iger told staff at the meeting heralding his official return.
A powerful activist investor is agitating for several seats on the board, talks are under way about selling off crown jewels including ESPN and ABC, a bitter legal battle over the future of its Florida theme parks rumbles on and its blockbuster film dominance is flatlining. And that’s apart from the question of how he transforms a loss-making streaming service into the commercial key to Disney’s future.
“Disney is one of the most successful companies and brands in the history of the world but it is now facing a fork in the road,” says Dan Ives, analyst at US-based Wedbush. “Disney has faced many challenges in its 100 years but this is the defining period.”
Iger’s roll-out of Disney+ just as the pandemic swept the planet was serendipitous, as lockdown conditions resulted in stratospheric uptake of streaming services. Investors dismissed the huge losses Disney was making as it challenged Netflix with a strategy to future-proof the company for the digital viewing age.
Within 16 months of launch, Disney+ passed 100 million subscribers, even as losses started running into billions of dollars. Undeterred, investors drove Disney’s share price to an all-time high of $201.91 in early March 2021 and management basked in the glow of a $370bn market value.
A bullish Disney even predicted that it would overtake Netflix, which has a global subscriber base of 239 million, by 2024. Since then, Disney’s shares have slumped by almost 60% and subscriber numbers have declined to 146m (from a high of 164m) as the post-pandemic streaming market has stagnated.
To pacify investors, a new focus on profitability has seen the launch of an advertising-supported tier, and a crackdown on password sharing is imminent. “They bet on the right horse at the wrong time in terms of streaming and the digital business,” says Ives.
Iger plans to slash 7,000 jobs as part of a $5.5bn cost-cutting drive, and reinstate the dividend.
Last week, Nelson Peltz, the billionaire founder of activist firm Trian Partners, renewed his push for seats on Disney’s board as he boosted his stake in the company to $2.5bn.
Pressure is also on to look at selling off assets such as national TV network ABC – home to shows such as Grey’s Anatomy – and cable sports giant ESPN, which Disney acquired in 1996.
One of Peltz’s complaints has been that Iger overpaid for 21st Century Fox, which it bought from Rupert Murdoch in 2019 for $71bn, and which includes film franchises such as Avatar and X-Men and popular TV programmes such as The Simpsons and Modern Family.
Iger’s previous studio deals have brought lucrative franchises. With Marvel, Lucasfilm and Pixar came the Avengers, Star Wars and Finding Nemo. But appetite for superhero sagas is waning and Disney has not significantly increased its share of the global cinema box office over the past three years.
Elsewhere in the empire, the House of Mouse is doubling down on its booming theme parks and cruises division, announcing a $60bn investment over the next decade.
The investment comes amid a bitter legal battle with Florida governor Ron DeSantis, who is seeking the Republican nomination before the US presidential election next year.
Last year, DeSantis approved legislation stripping Disney of a special tax status created by law in 1967 that allows it to self-govern the roughly 25,000-acre Orlando area where its Walt Disney World theme park complex is located. The move was seen as retribution for the company’s opposition to Florida’s new “don’t say gay” law that limits discussion of LGBTQ+ issues in schools.
DeSantis has argued that “woke Disney” should receive no special treatment in the state.
That land battle notwithstanding, it is how Disney deals with the tectonic shift in the economics and consumption of its on-screen world that will determine its success as it embarks on its second century.
“The challenges we are seeing for all media conglomerates reflects the pace of change in the world, which necessitates a new approach for everybody,” says Josh Berger, former president of Warner Bros UK, Ireland and Spain. “We are still experiencing the convulsions from the onset of the digitisation of media, the most profound of which has been the streaming revolution. It is a different economic landscape and big traditional media companies, who haven’t been known to move incredibly quickly, are just trying to keep pace.”
