Bob Iger Makes His Last Pitch
Bob Iger, the CEO of The Walt Disney Company, appeared at the annual Morgan Stanley Technology, Media & Telecom Conference.
This Q&A session represented Iger’s final attempt to persuade investors to vote against activist investor Nelson Peltz.
While Peltz continues to try to force his way onto Disney’s Board, Iger is looking forward to Disney’s future.
This appearance gave Bob Iger a chance to make his last pitch before the shareholder voting begins.
As you might imagine, Iger addressed a wide range of topics. Here are the primary takeaways.
Iger Claims Disney Creative Is in Better Shape
Obviously, Iger wasn’t about to admit weakness at such a prestigious event.
Still, Morgan Stanley interviewer Ben Swinburne asked Iger about the current state of Disney.
As a reminder, Iger has been back at Disney for roughly 15 months now, although that time feels like dog years.
For his part, Iger recognized how arduous that time has looked from the outside.
The CEO acknowledged that his primary goal during his first year was turning Disney’s Direct-to-Consumer business into a profitable venture.
Iger explains, “(Disney’s) zeal to attract global subs took our losses down considerably, and (we) definitely needed to create a robust path to profitability.”
Later, he added, “There wasn’t enough accountability, particularly in the creative side.”
“Creatives make the product, spend the money that it costs to produce the product.
“They need to be held accountable for how it’s monetized, and they weren’t, and that was a big issue.”
Iger also admits that the film studio had struggled, a blame that directly ties back to his first tenure since he was in charge of Creative at the time.
In the wake of Disney’s 2023 film struggles, the CEO states that he has spent countless hours working to improve the movie pipeline.
Specifically, Iger highlights the following releases:
- Kingdom of the Planet of Apes
- Inside Out 2
- Deadpool and Wolverine
- Moana 2
- Mufasa: The Lion King
- Avatar 3
- Zootopia 2
- Fantastic Four
Afterward, Disney’s leader suggested that he had canceled some previously announced films, but he didn’t say which ones.
The purpose of these comments exemplifies Iger’s signature brand of transparency about failures and course corrections.
The CEO is telling shareholders that Disney made mistakes, but they’ve learned and will do better with the next wave of films.
Iger’s Park Promises
Here’s the part of the conversation that should grab your attention.
The head of Disney made some bold claims about what’s happening soon at the parks.
Iger describes Disney Experiences, the parks division, by stating:
“They’ve had some record quarters, and we delivered great numbers in that segment this last quarter.”
He adds in a not-so-humble brag that the current quarter is trending toward double-digit growth in operating income.
Now, here’s what matters most. Iger says, “We’ve really entered into a phase where we can start building again…”
Yes, that statement strongly hinted at new attractions and themed lands coming to the parks.
As MickeyBlog discussed yesterday, Disney could add as many as seven new themed lands (!).
The parks apparently have room for all this potential expansion, with Iger indicating that Disneyland alone could grow by 50 percent.
The CEO then makes his argument to investors about Disney’s $60 billion expansion plan.
“So, you look at the returns and where you’re going to place your bets in terms of capital to deliver value to shareholders, that’s the business to do it.”
In other words, Disney would earn the best return on investment by spending in the Disney Experiences division.
That’s precisely what you want to hear from Disney, right? Iger appears confident that investors feel the same.
Iger includes Disney Cruise Line in his ambitious expansion plans.
“We have five. We’re building three more. And I’m very excited about the expansion there.
“This includes one which will carry 7,000 passengers and will be based in Singapore because we’d like to open the family cruise ship business in Asia.”
Iger casually mentions that every Disney park has room for expansion, too.
In short, there’s plenty of cause for optimism here.
Iger Explains Streaming Challenges
During the conversation, Swinburne asks about Disney+ and the company’s overall streaming challenges.
Igers adds a bit of essential context. “(In) 2019, our goal was to have basically robust video projection or video experiences at scale.
“And we needed that because we signed up 10 million subs in the first 24 hours, and we got to 100 million very fast.”
He’s saying that because Disney+ grew so much quicker than anyone expected, Disney scaled up content creation.
In the process, costs escalated, which caused a math problem for Disney.
Iger had priced Disney+ as a loss leader, expecting to lose money on each subscriber.
Well, when you have more subscribers, you lose more money. Also, you’re suddenly paying for unexpected, expensive content.
Even worse, the BAMTech infrastructure that Disney purchased proved expensive to operate at such scale.
“We’re now in the process of creating all and developing all of that technology.
“And obviously, the gold standard there is Netflix, we need to be at their level in terms of technology capability.”
That’s Disney acknowledging that its streaming services need to be more like Netflix, which everyone knows.
We have a clear pecking order in streaming right now, with Netflix first and Disney fighting Amazon for second.
Everyone else is battling for a distant fourth, with Iger believing Disney can compete closer with Netflix after infrastructural improvements.
Iger Makes His Point with Streaming
Along those lines, Iger adds an important aspect of the math problem.
In the process, he shows the importance of industry knowledge various outsider inexperience and/or overconfidence.
“(Disney’s) expenses are significantly higher, (and) our churn rates are higher than they need to be.”
At this point, the CEO quietly undid one of Peltz’s arguments.
In his white paper, Peltz inexplicably asked Disney for the wrong changes to Hulu.
His white paper called for eliminating the Hulu tile on Disney+ and forcing the consolidation of the two services.
Iger’s Q&A rejoinder was pointed. “In putting basically Hulu into a Disney+ app experience…we are not only increasing the volume of content that we have on the platform.
“But with that comes significantly more engagement. And in bundling Hulu with Disney+, we’re finding wherever we bundle churn rates are down significantly.
“So, that’s a path to profitability.”
That’s Iger saying that he has data to prove these ideas are working, yet his foe recklessly wants to undo all that strategy.
While Iger answered several other questions, that’s his last pitch to investors.
“Our stuff is working. Are you gonna trust us or an 80-year-old tech novice with Disney’s digital future?”
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