Iger Takes His Victory Lap

Sometimes Bob Iger wonders why he even brings the thunder.

Apologies to non-Hamilton fans, but I’ve thought about this lyric a lot in the aftermath of Disney’s Annual Shareholder Meeting.

The catchy lyric from Hamilton is, “You don’t have the votes.”

Never has that statement been truer than during Nelson Peltz’s activist battle with Iger.

Peltz just suffered his second humiliating defeat, but hey! The third time’s a charm, right?

This is the type of nonsense Disney’s CEO just avoided thanks to a dominant win.

Then, on the morning of Thursday, April 4^th, Bob Iger appeared on CNBC to take his victory lap.

Let’s talk about Iger’s impromptu State of Disney address.

Coffee’s for Closers

CNBC interviewer David Faber has spoken with Bob Iger on many occasions, but he found himself dancing without a partner at first.

In the aftermath of his shockingly dominant victory, Iger showed up 30 minutes late for his live CNBC interview.

Given how much CNBC tried to tip the scale in Peltz’s favor, Iger’s behavior felt somewhat karmic.

Also, let’s not ignore that Iger came across as confident, self-satisfied, and even a bit smug at times.

Disney’s CEO knows how much Peltz cares about his perception among the CNBC crowd, so Iger rubbed salt in the wound at times.

Still, the central focus of this conversation was succession.

That’s a weird thing to say after so many investors just threw their full-throated support behind Bob Iger.

In fact, one of the primary reasons why Peltz failed to gain traction – other than his lack of media experience – was Iger.

Many investors, including those at BlackRock and Vanguard, recognized the danger of placing Peltz on Disney’s Board of Directors.

In that scenario, Iger might have said, “Screw this!” and left for a second time since 2020.

That was a legitimate concern, making conversations about who replaces Iger a bit odd.

Disney shareholders just stated in no uncertain terms that 94 percent of them want Iger running Disney.

However, Wall Street remembers the February 2020 debacle of Bob Chapek’s sudden promotion to CEO.

So, investors want to know who’s next. Iger demurred on naming names.

However, the CEO indicated that recent Board additions have prioritized succession.

Some of us remain squarely in the category of “I’ll believe it when I see it.”

Iger Claims Credit

Peltz and Trian’s comments took credit for Disney’s recent success, which reminds me of a cornerback claiming credit for a receiver scoring on them.

Losing with dignity isn’t really a thing that many billionaires do, which explains Peltz’s later (glum) appearance on CNBC.

The reporter asked whether Trian deserved that credit. Iger’s body language answered for him here.

Disney’s CEO feels strongly that the company’s bold gambits over the past year have paid dividends.

During the interview, Iger demonstrates an awareness of investor frustration with topics like succession, 2023 Disney films, and politics.

Moreover, the executive indicates that the distraction of the investor vote has ended. So, Disney can prioritize these issues.

Iger clearly views Peltz and his comrade, Isaac Perlmutter, as an annoyance.

In fact, at times during the interview, Faber and Iger referenced Perlmutter rather than Peltz.

Last year, Iger famously fired Perlmutter as part of the layoffs Peltz had requested.

When that happened, I mentioned the danger of pulling such a stunt against someone as powerful as a billionaire.

Sure enough, that move created animosity that Iger addressed during the interview.

Disney’s head stated that the activist feud was never personal for him, but he suspected it was on Perlmutter’s side. And he’s right.

Yesterday, Marvel announced the casting of a woman to play the Silver Surfer in Fantastic Four, and you shouldn’t miss the meaning.

Perlmutter never would have signed off on that casting when he was in charge of Marvel.

That’s the past Iger is trying to leave behind as he moves Disney into its future as a powerhouse media conglomerate.

The CEO views Perlmutter and Peltz as an impediment toward that goal rather than the asset that Trian claimed in a press release.

The Netflix Problem

Faber asks about one of Wall Street’s biggest fears about Disney.

For 25 years, the company feasted off the Linear Networks model, earning massive revenue and glorious profit margins.

Now, we live in a post-cord-cutting environment, one where many consumers never subscribed to cable television.

For Disney to turn a profit at the same levels, it must invent a new revenue model.

As you know, that model is Direct-to-Consumer, aka streaming. Disney has placed MANY eggs in this basket. 

Iger points out a staggering overlooked fact.

At this moment, Disney+ is four years and five months old. It’s not old enough for kindergarten yet.

Despite this fact, people constantly compare it to the industry leader, Netflix.

Based on recent sporting events, I’ve realized the accurate comparison here is that Disney+ is Victor Wembanyama.

Meanwhile, Netflix is akin to Nikola Jokić, who is the defending NBA world champion and about to become a three-time MVP.

Wemby is coming for Jokić’s throne, though, and he knows it.

Similarly, Iger – and others interviewed on CNBC on Thursday – believe Disney+ will eventually earn mid-teens profit margins.

In financial terms, that’s not just exceptional; it’s also far ahead of the pace Netflix managed.

If you don’t believe me, here’s a Statista link showing Netflix’s net income by year.

That’s not at all what you expected, is it? Despite that fact, Wall Street constantly pressures Disney to perform similarly.

Iger takes this opportunity to remind everyone how young the service is, while emphasizing Disney’s stunning turnaround.

When Iger returned, the streaming division was in the process of losing $4 billion in a fiscal year.

Last quarter, Disney lost only $130 million and is still projected to turn a profit by the end of September.

That’s shockingly rapid growth.

Iger Discusses the Future

Let’s start with an unheralded headline from this interview.

Disney+ will perform its crackdown on password sharing in June “in a few countries in a few markets.”

He expects full implementation of password sharing prevention measures by September.

That’s terrible news for you and me to the point that my brothers and sister were complaining about it at Easter Dinner…no joke.

Iger also points out that Disney+ needs smarter, better programming outside the United States.

He clearly believes that the company has wasted money in these markets thus far.

When asked whether Disney aspires to be the “clear number two” streaming service, Iger bristles.

His physical reaction is so severe that Faber quickly backtracks, noting that Iger isn’t one to accept second place in anything.

Iger laughs and nods, which is a telling part of his personality. I doubt this guy ever allowed his kids to win at Monopoly.

Anyway, Iger speaks glowingly of Netflix, as he should. They are the gold standard.

Then, Disney’s CEO proceeds to name the many forms of content Disney owns, ones that have allowed it to corner the market.

I recently read a lengthy research paper on this topic that reinforces everything Iger says here.

As Iger mentions, the Fox and Hulu acquisitions have solidified the engagement numbers at Disney+.

Iger’s Victory Lap

Later, the entrepreneur comments on topics like the Reedy Creek settlement and Sports Hulu.

He notes that the Reedy Creek resolution works for everyone involved, while he doesn’t expect any regulatory issues with Sports Hulu.

Sadly, those are mere surface-level responses, though. His deepest dives involve succession and streaming.

But, on the bright side, we learned soon afterward that Disney is ready to expand the parks.

Would this have happened if Peltz had won? Thankfully, we’ll never know.

Iger has once again emerged victorious, which may be his greatest skill as a CEO. He always seems to win in the end.

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