The clock is ticking at Walt Disney (DIS -1.01%). The market cheered at the return of Bob Iger as CEO two weeks ago, but he has said that he's going to be at the helm for only two years. He has no intentions of leading the media giant for 15 years the way he did before. He simply wants to stabilize the company, point it in the right direction, and hand control to someone else for long-term steering.
Two years? It has taken Disney nearly five years to complete a new roller coaster at Disney World's Magic Kingdom that won't open until early next year. You know that 100 weeks isn't a long time when media reports are already starting to talk about his eventual successor just a couple of weeks into his tenure. Deadline is reporting that current CFO Christine McCarthy -- the one who reportedly led the efforts to remove Bob Chapek last month -- is emerging as the top candidate for the post. She would be the first female CEO in Disney's 100-year history.
Time is ticking on Iger. He has a lot to do. He just doesn't have a lot of time to get it all done.
Image source: Disney.
The bare necessities
Disney's poorly received fiscal fourth quarter in early November highlighted the long punch list the Iger is facing. Losses are widening at the otherwise successfully growing Disney+ streaming platform. The legacy media networks business is stagnant. Disney's not the box office king it was when it dominated the local multiplex in 2019. The iconic theme parks make up the one segment that is growing nicely on both ends of the income statement, but there are pressure points with its biggest fans.
Iger's initial priorities appear to be instating cost controls at Disney+ and restoring power to the conglomerate's content creators. The two goals may seem mutually exclusive. How do you chip away at the $1.5 billion segment operating loss that Disney's streaming business posted in its latest quarter while also still giving the historically spendthrift creatives a bigger sandbox?
It can happen. You can give someone the keys to the family car and warn them that there's less gas in the tank this time. You can cut corners while also improving morale by prioritizing what makes an entertainment company -- well -- entertaining.
Some languishing segments are beyond Iger's control. Folks aren't going to the movie theater in the same numbers as before the pandemic. The trend has been worsening for the the last two decades, and the pandemic lull simply sped up the shift of consumption away from the corner multiplex. Linear television has been dealing with cord-cutters for a long time.
If Iger can simply get Disney's streaming business to the point where it's generating positive free cash flow -- something that the company early in Chapek's tenure had targeted as happening in 2024 but that seemed highly unlikely by the end -- it will check off a lot of items on the list. If gains at Disney+ can offset the gradual declines at the media networks and theatrical distribution, it will be an overall victory.
The theme parks division is another beast entirely. It is thriving financially but sputtering socially. A company can brag about per capita revenue at domestic theme parks being up 40% since 2019, but how do you think the guests paying 40% more than they were just three years ago feel? How do you think employee morale is holding up when salaries and benefits aren't up a similar amount? Disney World and Disneyland are still grappling with staffing problems, and that obviously wouldn't be happening if cast members were tripping on pixie dust.
So yes, Iger has a lot to do in the next two years -- and shrinking -- to save the media stocks bellwether. It boils down to fixing Disney+ and improving the theme parks product to the point where it seems 40% better than before the pandemic. Those are just two tasks, but they are huge tasks. Iger's legacy hangs in the balance. No pressure.
