Bloomberg Opinion — I took my son to see the musical The Lion King in Hamburg and paid a few hundred dollars, which went to Walt Disney (DIS). But, like millions of other delighted customers, I didn’t love spending so much money to hear a version of The Endless Cycle🇧🇷 Selling optimism and wonder in a world of division and uncertainty is potentially a brilliant business model. So why is Disney so nervous?
Bob Chapek was ousted as CEO on Sunday (20) after just two years. The media and entertainment giant has bounced back from the pandemic, but “Bob C” has failed to assuage the concerns of investors, uneasy studio heads and politicians who have accused the company of becoming “too watery”.
The potential return of conductor Bob Iger, whose storied 15-year tenure as CEO included the acquisitions of Pixar, Marvel Entertainment and Lucasfilm, could be a useful short-term solution, but in theory he will only remain in the job for two years. Iger’s eventual successor will need to step out of the shadow of “Bob I” and make some tough decisions. It’s a daunting task.
Furthermore, opposition to Iger’s reappointment by activist investor Nelson Peltz’s Trian Fund Management after building a stake of more than $800 million, according to the Wall Street Journal, indicates that harmony is not assured.
Chapek had the misfortune to take over Disney in February 2020, just as the pandemic forced its parks and movie theaters to close. He oversaw a swift recovery and the stock hit an all-time high the following year amidst excitement over the rapid growth of its Disney+ streaming service. But markets are fickle; Once interested only in subscriber growth, investors now crave profitability. A $1.5 billion loss last quarter was as popular as the villainous Scar.
Management infighting and a range of political gaffes ranging from the “Don’t Say Gay” protests to Scarlett Johansson’s pay added to the sense of trouble. A major cost-cutting drive cemented Chapek’s (somewhat unfair) reputation as a “cheat hand” rather than a creative soul.
Chapek’s contract was renewed in June, making his ouster look clumsy, but in other respects Iger’s second term is well-timed. He takes over the company at a time when Disney’s stock price is at undemanding levels, having fallen more than 40% this year. The long-awaited sequel to Avatar should finally be released next month, and Disney’s centenary next year is sure to bring some nostalgia. He may also come up with some immediate solutions to appease investors, such as buying Comcast’s (CMCSA) one-third stake in streaming service Hulu.
But Iger doesn’t have a magic wand. Faced with a cost-of-living crisis, customers could end up being turned away by the price increases that Disney is rolling out across Disney+ and its theme parks. It is also unlikely that movie theater audiences will return to pre-pandemic levels. Parameters such as box office no longer have the same importance, affecting the way “talent” is compensated. While Disney has an excellent track record with stories and characters, it spent an estimated $30 billion on content last year to feed the streaming beast, amid competition from major rivals such as Apple (AAPL), Netflix (NFLX) and Amazon (AMZN). Not everyone liked his experiments with the Star Wars and Marvel franchises.
Iger pointed to the problem in September, when he told a conference that the industry was entering an “age of great anxiety,” saying, “The people who run these big companies are anxious. Even streaming companies are anxious. Investors are anxious. Advertisers are eager. The creative community is excited. Agents are excited. Everyone is excited. They are anxious because this is an era of great transformation and there are still many unknowns.”
I would add to that list the difficulty of satisfying diverse international audiences in an era of political polarization and culture wars.
Iger’s track record and diplomatic skills give him an edge in meeting these challenges. However, recognizing these challenges is one thing, solving them is quite another.
This column does not necessarily reflect the views of the editorial board or Bloomberg LP and its owners.
Chris Bryant is a Bloomberg Opinion columnist covering industrial companies. Previously, he worked for the Financial Times.
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