Disney beat back activist investor Nelson Peltz. Now the real work begins

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.”

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.”

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
month.

Disney
risks
confusing
consumers
with
its
multiple
offers
and
will
need
to
roll
out
its
new
products
with
clear
messaging.
Disney
has
already
offered
ESPN+,
a
sports
streaming
service
that
has
some
but
not
all
of
ESPN’s
content.
That
costs
$10.99
per
month
and
can
be
bundled
with
Disney+
and
Hulu.

ESPN
will
also
stay
an
essential
part
of
the
cable
bundle.
Subscribers
will
want
to
know
what
they’re
paying
for
and
what
content
they
do
and
don’t
get
with
their
additional
subscription
dollars.

Disney
has
been
mired
in
a
yearslong
box-office
slump,
from
live-action
flops
to
Pixar
disappointments,
from
Marvel
fatigue
to
the
absence
of
Star
Wars
(the
last
movie
released
in
theaters
came
in
2019).

Disney

hired
David
Greenbaum,
previously
co-president
of
Searchlight,
on
Feb.
26
to
take
over
as
president
of
Walt
Disney
Motion
Picture
Studios,
replacing
Sean
Bailey.
He’ll
report
to
Disney
Entertainment
co-Chairman
Alan
Bergman,
who
is

on
the
hot
seat
to
change
the
division’s
fortunes.

Other
than
2022′s “Avatar:
The
Way
of
Water,”
which
Disney
acquired
as
part
of
its $71
billion
deal
for
the
majority
of
21st
Century
Fox,
the
company
has
not
had
a
movie
generate
more
than
$1
billion
since
the
last
Star
Wars
release
in
2019,
according
to
data
from
Comscore.
Sony
produced
and
distributed “Spider-Man:
No
Way
Home,”
which
made
$1.9
billion,
although
Disney’s
Marvel
Studios
did
serve
as
a
co-producer.

Several
big-budget
franchise
films
have
flopped. “Indiana
Jones
and
the
Dial
of
Destiny”
in
2023
generated
$378
million
globally. “Ant-Man
and
the
Wasp:
Quantumania”
secured
$476
million
worldwide,
unusually
low
for
a
Marvel
film
(until “The
Marvels”
reached
just
over
$200
million
late
last
year).
And
Pixar’s “Lightyear”
collected
less
than
$250
million
globally
in
2022.

Trian
Partners’
Nelson
Peltz,
who
failed
to
join
Disney’s
board
Wednesday
after
securing
just
31%
of
the
vote,
publicly
questioned
what
he
has
called
Disney’s “woke”
content
strategy.
The
company’s
creative
team
has
actively
sought
to
create
films
and
television
shows
centered
on
people
of
color
as
well
as
exploring
narratives
outside
heteronormativity.

“People
go
to
watch
a
movie
or
a
show
to
be
entertained,”
Peltz
said
in an
interview
with
the
Financial
Times. “They
don’t
go
to
get
a
message.”

Iger
said
Wednesday
that
while
the
company
wants
to
instill
positive
messages
into
its
content,
that
shouldn’t
be
the
first
priority.

“Our
job
is
to
entertain
first
and
foremost,
and
by
telling
great
stories,”
Iger

said
during
the
company’s
annual
shareholder
meeting. “We
continue
to
have
a
positive
impact
on
the
world
and
inspire
future
generations,
just
as
we’ve
done
for
over
100
years.”

The
biggest
existential
question
for
Disney
is
who
follows
Iger
as
CEO.
This
was
Trian’s
strongest
argument
to
land
Peltz
a
board
seat.
Iger
has
five
times
pushed
back
his
retirement
as
CEO,
and
when
he
did
leave
in
2020,
he
stuck
around
as
chairman
for
22
months,
butting
heads
with
his
successor
Bob
Chapek
as
the
two
jockeyed
to
co-run
the
company
during
the
pandemic.

Iger
returned
in
late
2022
as
the
CEO
when
the
board
fired
Chapek.
Iger’s
plan
to
hand
over
Disney
to
a
new
leader
has
been
to
name
a
successor
in
or
around
early
2025
and
then
stick
around
to
teach
that
person
the
job,
CNBC
reported
last
year.

He’ll
want
to
make
sure
that
person
is
prepared
to
run
an
expansive
company,
with
a
flourishing
parks
business,
a
declining
legacy
TV
unit,
a
still
young
streaming
division,
and
a
struggling
but
legendary
movie
studio.
Internal
candidates
include
Bergman,
ESPN
Chairman
Jimmy
Pitaro,
Parks
and
Resorts
Chairman
Josh
D’Amaro,
and
Disney
co-chairman
of
entertainment
Dana
Walden,
who
could

be
the
first
female
CEO
in
the
company’s
100-year
history.

“The
problem
is
how
do
you
replace
Bob
Iger?
They’ve
been
trying
to
do
it
for
10
years,
and
it’s
very
difficult
for
multiple
reasons,”
said
TD
Cowen’s
Creutz. “Bringing
someone
from
the
outside
into
Disney,
which
has
a
very
strong,
unique
culture,
is
risky.
Then
you’re
down
to
internal
candidates,
and
if
there
isn’t
anyone
internally
you
think
can
step
into
the
role,
you’ve
got
a
problem.”

The
board
has
now
been
given
the
greenlight
to
proceed
with
its
search
process.
That’s
a
win
for
Iger,
and
shareholders
voted
Wednesday
they
believe
it’s
a
win
for
them,
too.

—
CNBC’s
Sarah
Whitten
contributed
to
this
report.

WATCH:
Disney
still
needs
to
cut
costs
on
streaming
side
to
get
to
profitability,
says
Needman’s
Martin