Disney Headlines for November 19th, 2024
The Walt Disney Company just basked in one of its most successful weeks since the Avengers: Endgame era.
That’s not even hyperbole, with the stock increasing by $12 in less than 36 hours and the company’s market cap soaring.
Photo: Disney
Disney did everything right last week. We’ll discuss the how and why of it in Disney Headlines.
Iger Retools
A couple of weeks ago, I wrote an admittedly controversial piece entitled “How Bob Iger Has Fixed Disney’s Worst Problems.”
While I was on vacation, I did the unthinkable and read some of the comments about the article…and I had a good laugh.
Photo: Kevork Djansezian/Getty Images
At the time, I realized that it wasn’t the popular opinion at the moment, but I had a solid idea about what was about to happen.
Last year, Bob Iger harshly evaluated his first year back at Disney, and he admitted some things that many of us had said about him.
Bob Iger – 2023 Annual Shareholder Meeting
For starters, Iger returned to a weaker Disney, one with an unsound balance sheet.
Also, Iger lacked the allies he’d always enjoyed throughout his first tenure.
Photo: Variety
Even former cohorts like CFO Christine McCarthy and Chairman of the Board Susan Arnold were no longer necessarily on his side.
So, Iger spent the next six months obsessing on fixing two things. First, he worked on the balance sheet.
Photo: NBC News
To do that, Iger realized he needed battle-proven experts to provide wisdom as Disney faced an activist investor struggle.
Iger replaced McCarthy with seasoned vet Hugh Johnston, quite possibly the calmest executive on Wall Street.
Photo: PepsiCo
Then, Arnold reached her 15-year term limit, allowing Iger to help Mark Parker lead the Board as its new Chairman.
Along the way, Iger also imported James Gorman, who had just demonstrated his succession skills at Morgan Stanley.
Photo: Disney
In NFL terms, Iger cleaned house, brought in a new coaching staff, signed some elite free agents, and had a strong draft class to boot.
Disney was back in business, although only a few Wall Street tycoons fully understood that fact in April.
AP Photo/Richard Drew, File
Even those who didn’t still sided with Iger in his battle against Nelson Peltz, who suffered a blistering defeat.
Everything’s Coming up Disney!
As Justin Hermes discussed the other day, Peltz expressed his faith in Gorman to handle Disney succession.
However, there’s an underreported second part to this story. During the same batch of interviews, Peltz said something else.
Photographer: Patrick T. Fallon/Bloomberg via Getty Images
In the hours before Disney revealed its quarterly and annual fiscal earnings, Peltz made a blatant threat.
The activist investor suggested that if Disney stock dropped into the $80s again, he’d buy more and return for Round III of his Iger feud.
Nelson Peltz
You’re not hearing much about that today, but the word was on the street early in the morning of Thursday, November 14th.
That’s when Johnston appeared on CNBC and revealed Disney’s overall performance.
Photo: CNBC
History won’t remember this fact, but the stock quickly dropped more than $3 as CNBC presented the news as negative.
The network, which frequently has Peltz appear as a guest, was hopeful for another investor battle.
HEIDI GUTMAN/CNBC/NBCU PHOTO BANK/NBCUNIVERSAL/GETTY IMAGES; SLAVEN VLASIC/GETTY IMAGES
Alas, the smarter Wall Street investors recognized what they were witnessing, causing Disney stock to recover quickly…and soar!
Iger and Johnston took a bold approach, offering guidance for three upcoming years.
Photo: CNBC
Basically, Disney stated, “Not only are we great today, but we’ll be even better in fiscal 2025, 2026, and 2027!”
To wit, Disney expects $1 billion in operating income from its Direct-to-Consumer division in 2025.
Photo: Disney
As a reminder, when Iger returned two years ago, DtC was losing $1.4 billion in a quarter and $4 billion in a year.
Presuming expectations hold, Disney has turned this division around by $5 billion in three years.
Photo: Deadline
And that’s why we won’t hear Nelson Peltz’s name linked with Disney this year. He’s too busy abandoning Wendy’s.
Meanwhile, Iger just converted Disney’s greatest weakness into a long-term strength.
Photo: Willow Bay on Instagram (via PEOPLE)
Peltz can’t even sell cheeseburgers to hungry Americans.
It All Starts with Disney Entertainment
The jaw-dropping nature of Disney’s performance paints a picture of total dominance.
All of Disney’s 2023 weaknesses had flipped into 2024 strengths.
Image: Pixar
For example, the infamous 2023 film debacle turned into a stunning comeback story.
Disney’s movie division netted nearly half a billion more in fiscal 2024, switching from a $149 million loss to a $346 million profit.
Photo: Marvel
Overall, Disney Entertainment’s profit margin more than quadrupled from the previous year.
We’ll call that the Inside Out 2/Deadpool & Wolverine Effect.
Image: Pixar
Since new movies drive Disney’s flywheel, the expectation is that DtC will benefit dramatically from the improved content pipeline.
To wit, Disney predicts double-digit operating income in DtC in 2026 and 2027.
Photo: Marvel
Much of that optimism stems from the impending introduction of ESPN Flagship, the streaming service replacement to ESPN’s cable empire.
Disney+ will add an ESPN+ tile in December in anticipation of this 2025 product, underscoring how interconnected Disney’s operations are.
Another Masterful Deal
Speaking of which, Disney pulled off another masterstroke in taking advantage of Warner Bros. Discovery’s (WBD) weakness.
Disney is so overfull with live sports content that it worked out a trade with WBD.
Photo: Warner Bros
TNT and TBS will air 13 Big 12 NCAA football games and 15 Big 12 NCAA basketball games under a Disney subcontract.
In exchange, Disney gains the broadcasting rights to Inside the NBA, the premier sports entertainment program in the history of television.
Photo: DirectTV
Ostensibly, Inside the NBA would have undergone open-market bidding, but ESPN Chairman Jimmy Pitaro skipped the line.
Pitaro offered a deal directly to WBD, which will earn the latter company $350 million over the next five years.
Photo: Disney
Disney assisted an ally and benefited greatly in the process. It was that kind of week for Bob Iger and his team.
As you’ve learned during the seven years of MickeyBlog, everything at Disney is cyclical.
The Walt Disney Company
Still, we will remember this past week as one of the most successful in recent Disney history.
Overall, I think it’s one of the two or three best weeks Iger has had since he returned as Disney CEO. Everything went right.
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