Bob Iger Moving Quickly To Get Walt Disney Company Back On The Right Track

Shares in Walt Disney Corp. opened at $118.04 today, an increase of 5.6% over yesterday’s close of $110.78 after returning CEO Bob Iger laid out a massive restructuring and undid much of the work his predecessor Bob Chapek (who was terminated by the Board in November).

Former CEO Bob Iger agreed to leave retirement and return to his old job for just two years and many questioned whether this was enough time to get the media giant on proper footing. After the market closed yesterday, Iger held his first earnings call since returning as CEO and laid out a number of important changes.

On the company’s earnings call Iger said that he had led the company through two significant transformations, first in 2005 when he conferred greater creative control and authority to the creative business to focus on great brands and franchises, which ultimately led to the acquisitions of Pixar, Marvel and Lucasfilm.

The second began in 2016 when he laid the foundation for Disney to become a true digital company, culminating with the acquisition of most of 21^st Century Fox and the launch of Disney+ in 2019. The third comes now, with a new structure aimed at returning greater authority to the creative leaders and making them accountable for how their content performs financially. Reversing the structure former CEO Bob Chapek put in place, Iger said, “Our former structure severed that link, and it must be restored. Moving forward, our creative teams will determine what content we’re making, how it is distributed and monetized and how it gets marketed…Under our strategic reorganization, there will be 3 core business segments, Disney Entertainment, ESPN and Disney Parks, Experiences and Products.”

The major changes announced on the call include:

· Eliminating the Disney Media and Entertainment Distribution (DMED) division which had been headed by Kareem Daniel who was fired when Bob Iger returned to the company;

· Severing 7,000 jobs, most of them from the DMED division;

· DMED will be replaced by a new division called Disney Entertainment, co-chaired by Alan Bergman and Dana Walden;

· Cutting $5.5 billion in costs by giving more power to the company’s content executives and cutting out middle management. About $3 billion will come from reducing non-sports spending and another $2.5 billion will come out of SG&A;

· Putting a greater emphasis on sports media;

· Iger will push the board to reinstate the company’s dividend which was suspended in 2020;

· Implementing a significant change to the company’s slate of movies and TV shows;

· Possible changes in pricing for its streaming services;

The streamlining efforts were recommended by a committee that Iger put together and nicknamed “The Fabulous Four.” They include CFO Christine McCarthy, studio chairman Alan Bergman, ESPN chief Jim Pitaro and TV head Dana Walden.

Disney blew by analyst forecasted earning excluding certain items of 78 cents per share to post 99 cents per share. That’s below the $1.06 posted a year ago but a great performance given all of the turmoil. The company also narrowed its loss from its streaming business where subscribers declined, although this was expected in Asia when Disney lost streaming rights to cricket’s Indian Premier League. Analysts had forecast a lost of $1.22 billion in the quarter but it came in at $1.05 billion.

Eisner also said that they will no longer be providing long-term subscriber guidance to eliminate looking at short term quarterly metrics. However, he did say that Disney+ will hit profitability by the end of fiscal 2024, which should be a relief to investors. Additionally, CFO Christine McCarthy said they expect a $200 million improvement in Direct-to-Consumer results in the second quarter.

In other great news for Walt Disney, the poxy battle with activist investor Nelson Peltz is over. Peltz announced this morning that he is no longer seeking to join the Board. “This was a great win for all the shareholders. Management at Disney now plans to do everything that we want to do,” he said on an interview with CNBC.