- Kyle Chua
Disney’s Returning CEO Iger Hopes To Finally Make Streaming Profitable
In what came as a surprise to many, the Walt Disney Co. announced on Sunday that Bob Iger would be returning to the company as CEO, retaking the reins from Bob Chapek who took over two years ago.
Iger, however, could have his work cut out for him, with the entertainment giant now in a different position than it was when he last left it.
According to Reuters, the legendary chief executive, who led the successful acquisitions of Pixar, Marvel, Star Wars and Fox, has to right the ship at the House of Mouse by cutting losses and restoring profitability.
The company's share price dropped more than 40% over the past year, wiping close to US$120 billion in market value. And a significant part of the blame goes to Disney+, the streaming service Iger helped launch in 2019. The unit recorded US$1.5 billion in losses last quarter alone. Chapek also admitted that the unit was facing a subscriber slowdown, with only a small growth to the 235 million global total expected for the next reports.
Analysts believe Disney's initial push to "grow streaming at any cost" is now hurting the profitability of Disney+ and testing investor patience. ESPN, which is part of the Disney+ banner, is also said to be struggling as viewership continues to decline. The popular American sports platform could similarly be a target for deep cost cuts, including a review of all the upcoming sports rights.
"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 research boutique MoffettNathanson said.
Disney is expected to raise the price of Disney+ subscriptions in some markets next month and debut a more affordable ad-supported plan, both of which could perhaps help profits down the line.
There's also been some concern among brokerages about whether Iger's new two-year contract as Disney's boss would be enough to "set the strategic direction for renewed growth" and find a successor. But the executive's return did manage to kick the company's shares up by 7.5% on Monday.
"The problem is that Iger can't stay on forever," said Rosenblatt Securities. "He already bumbled the transition to Tom Staggs in 2016 and now (Bob) Chapek."
Iger has been with Disney for more than four decades, becoming CEO in 2005 and chairman in 2012. He stepped down as CEO in February 2020 but remained executive chairman until December 2021.
The Walt Disney Co. announced on Sunday that Bob Iger would be returning to the company as CEO, retaking the reins from Bob Chapek, who took over two years ago.
Iger's top priority, according to analysts, is to cut the entertainment giant's losses and restore profitability.
The immediate target would likely be Disney+, which recorded US$1.5 billion in losses last quarter alone.
Disney's share price dropped more than 40% over the past year, wiping close to US$120 billion in market value.