By Gary Symons
TLL Editor in Chief
The Walt Disney Company has extended CEO Bob Iger’s contract by two years, to the end of 2026.
The 72-year-old Iger originally said he would only come back to the role for a maximum of two years. However, Iger has said there are issues to deal with at Disney that will take longer to address.
“I think what I’m saying is it’s time,” Iger said in an interview. “After coming back, I realized the company is facing a lot of challenges, some of them self-inflicted.”
Iger first served as CEO from 2005 to 2020 and handled the acquisitions of Pixar, Marvel, Lucasfilm and 20th Century Fox, transforming Disney into the world’s largest entertainment and licensing conglomerate.
Iger had retired from Disney, but returned in November, 2022, after the company ousted Bob Chapek as it suffered a $1.5 billion loss in its streaming division in the fourth quarter of 2022.
In his time back at the big desk, Iger has certainly been busy.
The new-old CEO acted to aggressively cut costs, laying off 7,000 employees and restructuring the company. Among the changes, he hired Dana Walden and Alan Bergman to head Disney General Entertainment, and separated that part of the business from its theme park operation and ESPN.
Iger has also been forced to contend with a major legal and political threat from Florida Governor Ron DeSantis, after Disney criticized the lawmaker’s controversial ‘Don’t Say Gay’ legislation.
He has so far been judged to have outsmarted DeSantis and his allies, as Disney gutted the power of the Reedy Creek directors that DeSantis had hoped would be able to essentially govern the land on which Disney World operates in Orlando.
Iger Says Critical Work Remains to be Done at Disney
As if that wasn’t enough, Iger said in an expansive interview on CNBC that a great deal of critical work needs to be done before the company can bring in a new CEO.
In that sense, Iger is acting like a ‘turnaround guy’; a term from the finance industry that refers to a CEO hired to help a struggling company return to prosperity.
Like many companies in the entertainment space, Disney was devastated by the COVID-19 pandemic, as theatre audiences crashed and theme parks were shut down and/or heavily restricted in their operations.
Disney took the opportunity to build up its own streaming service, which did in fact succeed in adding more than 160 million subscribers to the service.
However, the streamer continued to bleed money under Chapek’s management, and in its recent Q2 results, Disney+ has also lost 4 million subscribers. The main reason was a drop in subscribers for the Disney+ Hotstar service in India, where the streamer decided to drop the streaming rights for the Indian Premier Cricket League.
However, in Q1 Disney+ also reported its first subscriber decline since starting the streaming service, dropping 2.4 million subscribers.
The good news is that the streamer is performing better financially, having decreased its losses to $659 million for Q2, down from $1.1 billion in Q1.
The Major Priorities for Disney
In various statements, including the CNBC interview, Iger has hinted or outright described what he sees as the major changes coming to the company, all of which will impact on licensing.
As he said in a statement, “There is more to accomplish before this transformative work is complete.”
Those include:
- Continuing the layoffs and cost reductions;
- Potentially unloading the company’s linear TV operations;
- Bringing the streaming service to profitability;
- Dealing with a decline in box office revenues from the Marvel franchise;
- The possible acquisition of Hulu.
By the time the layoffs and cost reductions are complete, Iger expects $5.5 billion in annual costs will be cut from Disney’s budget.
The bigger news is that Iger has opened the door to selling the company’s linear TV assets.
Iger said assessing the linear TV business is at the top of his ‘to do’ list right now, adding the “model is broken,” and that traditional TV “clearly is a business that’s going to continue to struggle.”
The issue, obviously, is that streaming is taking over from cable in a major way. In fact, the Neilsen rating agency says streaming surpassed linear TV in July 2022, and a forecast by the accounting firm PwC predicted the industry will lose $30 billion in revenue by 2027.
That opens the door to a sale of the assets to companies that may be better placed to deal with linear TV, as Iger says the TV networks like ABC “may not be core to Disney.”
The one linear TV operation Disney will keep is ESPN, which Iger says is very different from other cable channels, as fans want to see sporting events live. Instead, Iger says Disney may seek out a strategic partner, which might see the service becoming part of a joint venture or even see Disney selling a share of the division to a partner with the right experience.
Major Changes Coming to Disney+
At the same time, most analysts have said the intense competition for eyeballs in the streaming space has made that sector a rough place to achieve profitability.
To deal with that reality, Iger has increased the pricing for Disney+, streamlined the operations, dropped some of the existing content, and initiated a new ad-supported tier with lower subscription prices.
But Disney also faces an issue with a lack of broad content as compared to Netflix and Max. The service is heavily weighted toward content for younger viewers, such as Disney, Pixar, Marvel and Star Wars, and not so much for the large demographic of older viewers who may not enjoy space operas, cartoons and superheroes.
As a result, Iger has made it clear he wants to acquire the remainder of the shares in Hulu from Comcast, and roll it into Disney+, saying the company “is better off having Hulu.”
Disney currently owns 66% of the shares in Hulu, and intends to add Hulu as a channel on Disney+ by the end of this year.
“The combination of those apps is designed to obviously help the (streaming) business become profitable,” Iger said.
Is Disney Suffering From a Superhero Surplus?
In one surprising statement, Iger has also hinted that we may see fewer new series from Marvel, which has suffered from a series of poorly performing films over the past year.
Iger now believes that having so many spinoff series from Marvel on Disney+ has diluted the demand for Marvel films in the theatres. For example, the new Captain America played by Anthony Mackie will appear in an upcoming film, but he has already been seen in a miniseries called The Falcon and the Winter Soldier.
As well, the villains in the upcoming Captain America 4 film are the same as the ones now getting their backstory in the series Secret Invasion, starring Samuel L. Jackson as Marvel super spy Nick Fury.
All of this has Iger thinking the public may be suffering from superhero fatigue, resulting in fewer people being willing to spend money on movie tickets.
“They had not been in the TV business at any significant level,” Iger explained. “Not only did they increase their movie output, but they ended up making a number of television series, and frankly, it diluted focus and attention. That is, I think, more of the cause than anything.”
In fact, Marvel released more MCU movies and TV shows in the past two years than all Marvel projects over the previous 20 years. That is a LOT of spandex.
Several films could be described as flops, including the Black Panther sequel, the Eternals, and Antman and the Wasp.
As each major release incurs a massive investment, usually in excess of $100 million just for production alone, Iger believes producing more content that fails to make a profit threatens to drive the franchise into the ground.
Even as early as February, Iger was laying out hints that his approach will be to choose quality over quantity, producing films that will earn much higher profits, while lowering the overall spending on production and marketing.
More Background
Disney is Restructuring and Laying Off Staff: Six Takeaways From the Earnings Call
First Woman Chair At Disney Takes The Reins On New Year’s Eve