The Problems Facing Disney’s Next CEO
Last week, a friend of mine, a smart and generally level-headed person, was calling for Bob Iger’s head.
He wasn’t alone, as Disney’s latest PR crisis underscored several hard truths.
Photo: Getty
First, Disney keeps getting dragged into fights it doesn’t want or need.
Second, being the CEO of The Walt Disney Company has evolved into one of the most thankless jobs in corporate America.
Walt Disney Company
Sure, the perks are great, but nobody mentions you when things are going right.
Should things go wrong, well, smart and generally level-headed people call for your head.
The Walt Disney Company
By all accounts, four different Disney executives are currently vying to replace Iger as CEO at Disney.
Here are the problems facing the next Disney CEO, no matter who it is.
The Implosion of Linear Television
The Walt Disney Company
Let’s start with the one that had many of my friends raging at Disney. Remarkably, they did so for different reasons.
A talk show host said some stuff, the words weren’t clearly written and thereby up for debate, and people got mad.
Some of those people happened to run Nexstar Media Group and Sinclair Broadcast Group.
Why is that a problem? Well, they’re two of Disney’s most powerful affiliates.
Photo: Nexstar
Between those two companies, that’s how 22 percent of all ABC viewers watch network programming.
Currently, Nexstar is trying to buy Tegna, Inc., another corporate owner of several ABC affiliate stations.
Disney allegedly ended this tiff by threatening to pull live sports if the affiliates didn’t get in line.
That’s the power move Disney can always play, as everyone shuts up when college football broadcasts are on the line.
Photo: ESPN
Still, this battle underscores the hallmark changes occurring in media consumption.
The owners of these affiliates think they should get to call the shots even though they’re not producing the content.
Photo: Disney
Disney doesn’t want to cede that control nor should the company. It holds all the power.
Perhaps the best comparison involves the film industry, where movie theaters license content to display.
Tegna
As such, they have no control over the content, nor should Sinclair or Tegna.
Nexstar DOES have control over some content, but that’s because it purchased The CW.
CW
That’s another problem Disney’s next CEO faces. One of its top affiliate owners possesses a conflict of interest.
Nexstar purchased The CW as a cheap dumping ground for content it licenses.
So, Nexstar is somehow a business partner AND the competition. It’s a weird structure anyway, but there’s more to it.
The Hard Choice Coming Soon
Photo: Ivan Marc / Shutterstock.com
I’ve discussed the decline of linear television since the inception of MickeyBlog in 2017, but we’ve reached the endgame now.
NBC and Warner Bros. Discover have announced their intentions to abandon linear television as we’ve known it.
Warner Bros discovery
Both will spin off their conventional broadcast channels into standalone companies.
Those businesses will eventually consolidate, leading to one giant entity owning most of linear television.
Warner Bros discovery
The debate centers on how viewers will still be watching by that point, as many people have switched to streaming.
In fact, according to Nielsen’s The Gauge, we’ve already reached the tipping point where most people consume content via streaming.
Nielsen
Why does that matter? Only one company has committed to remaining on linear television. It’s Disney.
Bob Iger’s professional career started in broadcast television, and it’s where he earned his reputation.
Nielsen
So, I understand why he wants to keep a stake in this business, which remains quite profitable…just less so than in the past.
Here’s the thing, though. The next CEO won’t be anywhere near as beholden to the idea.
Comcast
Comcast, the corporate owner of NBCUniversal, and Warner Bros. Discovery have already confirmed their plans.
They intend to saddle their spinoffs with some of their corporate debt. And Disney has debt.
Photo: skillastics.com
We’ll find out the exact totals next month, but at last count, Disney’s long-term debt stood at $36.5 billion.
The company could banish one-third of that to the shadow realm by spinning off the Linear Networks division.
Photo: Washington Post
Those numbers may look quite tempting in 2027 if the current television ratings decline continues unabated.
After all, the entire purpose of the Disney Bundle has been converting Disney’s fandom to streaming.
Photo: Wikimedia
Basically, the only things keeping Disney in the linear business right now are revenue and Bob Iger.
With the revenue plummeting each quarter and Iger leaving in less than 15 months, well, you do the math.
The High Cost of Live Sports
Photo: NBA
Along those lines, the one power play Disney had during the recent hubbub was live sports.
As I said, people bow to college football, just as they do with NFL football and the NBA.
NBA
We should focus the most on the NBA, as its situation has proven problematic for Disney.
The league’s ratings declined last season, while the new streaming rights kick in later this month.
Basically, Disney is paying more to get less, although that’s a bit misleading.
Disney signed an 11-year licensing rights deal for the NBA. So, it’ll be more expensive at the start.
NBA
This is the whole ‘a dollar now versus a dollar later’ value proposition, but it’s true.
The current pricing of the NBA contract shouldn’t seem as worrisome in five years as it does today.
The problem is that more live sports contracts will inevitably come up at some point.
We just learned with that comically bad UFC deal on Paramount that big-pocketed companies will vastly overpay.
The NFL and a Potential Candidate
NFL
The demand for streamers to carry live sports has escalated so quickly that Disney could get priced out of the NFL.
The company knows this, which explains why Disney just did the complicated NFL Network deal.
Photo: ESPN
Disney wants to tether itself to the NFL in hopes of getting sweetheart deals during future negotiations.
Still, this will be a recurring theme for the next CEO. Is the escalating cost of live sports a dealbreaker?
ESPN
Disney desperately needs the ESPN app to succeed and is paying a fortune to make the product viable.
What happens a few years from now if the ESPN app isn’t doing better?
ESPN
That will force some hard choices by Disney’s next CEO. It’s also why I don’t dismiss Jimmy Pitaro’s candidacy.
He told people he was dropping out of the CEO race yet he’s still frequently mentioned as a contender.
ESPN
His vast knowledge of the sports market elevates his candidacy.
I view him as a milquetoast candidate, but his business relationships could save Disney billions.
Photo: The New York Post
Remarkably, I’ve only scratched the surface with these problems. So, I’ll add more in a companion article.
Suffice to say that I view the next Disney CEO as walking into a potential hornet’s nest.
Photo: MickeyBlog
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