This battle with grown-ups might not go the disruptor’s way
I’ll be brief today because I am still thinking. But some things can be said.
Disney, the entertainment behemoth, the beloved House of Mouse, produced some better-than-expected results this week.
If you like numbers, here are a few wins:
Operating losses for the direct-to-consumer segment narrowed to $138m (loss was early $1bn in Q4 ‘22)
Revenue from domestic parks rose 4% yoy to $6.3bn
Total segment operating income was up 27% yoy at $3.9bn
All these were significantly better results than analyst expectations.
Other positives that helped lift the stock price 6%:
The massively successful Taylor Swift “The Eras Tour” film will arrive exclusively on Disney+ shortly.
Bob Iger has been openly pondering what to do with ESPN, and has come to an interesting solution. This will take the form of a new sports streaming service that brings together Disney, Warner Bros. Discovery and Fox with all their combined sports rights.
And there is the new deal with Epic Games to build a new entertainment universe based on Fortnite (and invest).
This does not mean that Disney has left all its problems behind, far from it. Linear networks remain a problem across the board, and there have been issues with its movies (we’re all a bit tired of some of them, aren’t we, Marvel ahm).
But all in all, things seem to be going in the right direction. In a perhaps defensive move, they also announced a 50% dividend boost and a $3bn stock buyback, which tends to please shareholders.
Disney and Iger do need the wins. Aside from the business turnaround, activist investor Nelson Peltz has been trying to get on the board and oust Iger via proxy fights ever since the latter came back as Disney CEO. These results will surely take at least some of the wind out of the proxy challenges. You don’t replace a CEO when they are gaining traction and getting results. And they pay shareholders.
Anyway. Although I don’t follow celebrity news, I couldn’t help but notice a certain very rich person showed up at the premiere of a film by Nicola Peltz Beckham who is the daughter-in-law of a certain Spice Girl and Goldenballs; and is the daughter of Nelson Peltz. And this very rich person has been spoiling for a fight with the CEO of Disney. He’s also been attacking Disney on DEI and all.
(Some journalists still just take this person’s statements at face value and report it verbatim, breathlessly. Please don’t. E.g. that particular DEI chart wasn’t leaked, it was published by Disney. But I digress.)
To be fair, in manoeuvrings in a proxy fight, no doubt one can use a powerful, disruptive man with deep pockets who likes to loudly brute-force through problems. If nothing else, it will provide negative noise and distraction and give the other side’s lawyers more work. But the Disney lawyers are known to be pretty, pretty good. They don’t let things slide.
So, briefly, Musk is financing a lawsuit against Disney, a lawsuit that was filed by an actress who was fired because of certain unacceptable views she was not willing to apologise for, but this is not really important. The important thing is that Musk is trying to attack Iger and Disney itself, because he is mad that they stopped advertising on that platform everyone’s been abandoning because of the proliferation of the type of content no company wants to be seen next to.
The reason why I find this whole thing interesting is that this time this man is going up against an established corporate behemoth in Disney that just got some major wins under its belt and is led by an experienced player, a longstanding, sophisticated-in-corporate ways, respected, well-liked CEO, who’s seen it all. On top of it, Iger is an established, successful deal-maker. Anyone would be mad to underestimate Iger as CEO or the House of Mouse as a company.
Musk can’t just brute-force his way through this like he did with Dorsey’s Twitter. And this is, again, an industry he does not understand. Twitter has already done a lot of damage to him, this might end up causing even more.
And one more point on this. Musk has a support network on social media that nowadays largely consists of fanboys who scream and shout and will sacrifice themselves to protect their hero. They will say anything in his defence and against whoever attacks (or ignores) him. Some of them just cannot understand that a considered opinion on business issues is not about loving one player or the other. It’s not sports, nor politics. Ideologies have little place here.
If some of us find Bob Iger’s and Disney’s position strong here, that’s not because we looooove them and can’t see the issues they face or the mistakes they have made. This is not personal. It’s business. And as a business, they seem to have found some interesting ways forward that started to bear results. They are also a serious business, not edgelords fighting with memes. And, in the longterm, I’d always bet on the serious business. (And the Delaware Court of Chancery, but that’s a different story.)
Have a good weekend.
PS: Go on, watch a good movie, Disney or not.