Disney's Iger may have to cut costs as streaming loses money (updated)
21/11/2022 15:58
(Updates shares)
By Aditya Soni and Eva Mathews
Nov 21 (Reuters) - Saving Walt Disney Co DIS.N this
time will require Bob Iger to show off a different side to his
character.
The legendary chief executive who transformed Disney into
the most powerful entertainment company on the planet will need
to show how quickly he can cut costs and restore profitability,
analysts say.
Disney shocked investors late on Sunday evening by
announcing the ouster of CEO Bob Chapek and appointing Iger, 71,
to a two-year contract to return the company to growth.
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The move evoked other return engagements such as Steve Jobs'
return to Apple and Howard Schultz's return to Starbucks in
times of crisis.
"The bold move (Iger's return) might feel like the right
one. However, the business is at a different phase of growth,"
PP Foresight analyst Paolo Pescatore said, adding that
short-term measures might include restriction of some
operations.
The most immediate target of that could be Disney+, the
streaming service that Iger helped launch in 2019. Losses at the
unit more than doubled in the last reported quarter to $1.5
billion.
The business has become a drag on earnings as Disney spends
heavily on content to attract subscribers, testing investor
patience and contributing to a 40% slide in its shares so far
this year.
"Disney+ ... could probably do better with fewer end-state
subscribers made up of super fans willing to pay high RPU (rates
per user), which would generate much higher margins," analysts
at MoffettNathanson said.
They also pointed to ESPN as another target for deep cost
cuts, including a review of all the upcoming sports rights as
the network loses cable subscribers.
Activist investor Dan Loeb's Third Point had also pushed a
potential spin-off of ESPN when it took a stake in the company
in August, although it later backed off the idea.
Some brokerages have also raised concern on whether the
two-year period Iger has agreed to return for would be enough to
transform the business and find a successor.
"The problem is that Iger can't stay on forever. He already
bumbled the transition to Tom Staggs in 2016 and now (Bob)
Chapek," Rosenblatt Securities said.
Still, Disney shares were up 7.5% on Monday, a sign of
confidence in the executive who led the company for 15 years.
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Disney's streaming losses mount in the last 3 years https://tmsnrt.rs/3fU2d16
Magic returns Magic returns https://tmsnrt.rs/3ghEubq
TIMELINE-Disney's Bob Iger returns to lead post-pandemic revamp
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Disney+ vs. Netflix subscriptions https://tmsnrt.rs/3tPnk7S
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(Reporting by Eva Mathews and Aditya Soni in Bengaluru; Editing
by Anil D'Silva)
((Eva.Mathews@thomsonreuters.com;))