Here's what CEO Bob Iger must do to revive Disney's magic
Walt Disney Co. shocked the entertainment world last weekend when it fired CEO Bob Chapek and replaced him with former chief executive Bob Iger.
Iger, who previously led Disney as CEO for 15 years before stepping down in 2020, returns after a string of disappointing financial results, while the company's stock price has tumbled 48% this year. Layoffs loom. Here are three things Wall Street analysts say Iger is likely to focus on to restore the entertainment giant's mojo.
Make streaming profitable
The company reported earlier this month that Disney+, ESPN+ and Hulu have more than 235 million subscribers combined. Disney+ added 12.1 million customers this quarter, while ESPN+ added 7 million and Hulu added 3.4 million. Despite those figures, however, streaming hasn't been a profitable business for Disney.
The direct-to-consumer, or DTC, arm of Disney (which includes streaming services) reported a $1.5 billion loss in the fourth quarter, up from $800 million in the previous quarter. Chapek previously said Disney expects Disney+ to be profitable in 2024 "assuming we do not see a meaningful shift in the economic climate."
Analysts think Iger will likely ditch the wide range of content on Disney+ and tighten its focus although no such plans have been formally announced.
"A return to a superfan product focused on franchises should lead DTC losses to come down," MoffettNathanson said in a research note after news of Iger's shock return.
Repair relationships with Florida lawmakers
Under Chapek, Disney expanded its entertainment offerings from Marvel Studios and Lucasfilm, helping both franchises garner billions of dollars in revenue. He also guided Disney through perhaps its most challenging period in recent history, as the coronavirus pandemic closed the company's theme park for months.
But Chapek also made key missteps along the way, including engaging in a public spat earlier this year with Florida Gov. Ron DeSantis over the state's "Don't Say Gay" bill. Chapek said he opposed the measure after it passed, prompting DeSantis to lash out at Disney and call it one of those "woke corporations."
The feud may cost Disney its special tax district status, a special arrangement that allowed the company to govern itself at Walt Disney World Resort in Orlando. DeSantis signed a bill earlier this year that will officially dissolve the Reedy Creek Improvement District in June 2023. Florida taxpayers will be saddled with nearly $1 billion in debt from Disney if the district indeed dissolves.
Iger, who also opposes the "Don't Say Gay" measure, hasn't publicly detailed how he plans to address Reedy Creek or Florida lawmakers.
Restore employee morale
Another key initiative during Chapek's tenure was restructuring Disney's media and entertainment division. Under the changes, Disney's studios, entertainment and sports brands were moved into one unit and content distribution was placed under another.
But that move, while it may have been organizationally justified, also increased bureaucracy within the company, slowed decision-making and ultimately hurt employee morale, according to Wall Street analysts.
Iger is now expected to take a second look at the restructuring. Iger on Tuesday told employees that he plans to come up with a new way to organize the entertainment and media divisions, CNBC reported, citing an internal company memo.
"Our goal is to have the new structure in place in the coming months," Iger wrote, adding that he believes "storytelling is what fuels this company, and it belongs at the center of how we organize our businesses."
