It's been six months since Bob Iger returned to the helm at Walt Disney (DIS 0.15%), and investors have to wonder if it's been a roundtrip to nowhere. The stock closed at $91.80 before Iger was reintroduced as the media giant's CEO in late November. It ended Monday's trading session at $91.82, essentially unchanged.
Unlike the stock price, Iger isn't simply marching in place. He has a lot to do as he plays out his two-year contract as the Big Cheese at Disney. Let's take a look at some of things that should be high on Iger's CEO bucket list before his term is up at the end of 2024.
NYSE: DIS
Key Data Points
1. Make Disney+ profitable
There's no confusion about the primary objective on Iger's punch list. Disney+ is losing a lot of money. The entertainment tastemaker's direct-to-consumer streaming segment posted a $4 billion operating loss in fiscal 2022, and the deficit stands at $1.7 billion through the first half of fiscal 2023.
The goal at Disney+ shortly after its launch ahead of the 2019 holiday season was to turn a profit by the end of 2024. It didn't seem viable with costs spiraling out of control, but Iger is making moves to make sure it's on track to meet that objective, which conveniently lines up with the end of his two-year CEO deal.
It's not just lip service. The largest component of the $5.5 billion in annual savings that Iger is looking to achieve is a $3 billion reduction in non-sports content costs. The streaming business has posted sequential bottom-line improvement in Iger's first two quarters as CEO.
Lowering overhead isn't the only lever at his disposal. Disney introduced an ad-supported tier of its namesake streaming service in December, lifting the price of its ad-free platform by 38% in the process. Iger expects to increase the monthly rate for the commercials-free tier again this year. It's going to be a delicate balance to increase subscription prices while scaling back on content, but if Iger succeeds the platform should be out of the red by the end of fiscal 2024.
Image source: Disney.
2. Set its theme parks up for a future of growth
Disney's domestic theme parks have had round milestones and "revenge travel" as favorable tailwinds lately. Disney World turning 50 -- in an 18-month celebration that concluded in March -- and both stateside resorts celebrating the company itself turning 100 this year have been a springboard for record operating results. What will happen next?
This summer could prove challenging, and theme park operators are pushing out more deals than usual as heading into the peak travel season. Iger's biggest concern has to be what he sets in motion for what will happen to Disneyland in California, Disney World in Florida, and its international gated attractions after he's gone.
Disney World will face the biggest competitive threat it has faced when rival Comcast opens Epic Universe in 2025. Iger has been improving the guest experience in recent months by bringing back pre-pandemic perks and experiences. It will need more ammo than that when Epic Universe unlocks the turnstiles at its next-gen theme park in two years. It's too late for Disney to complete a bar-raising expansion or open a fifth theme park in Florida by 2025, but Iger's legacy might rest in the blueprints and concept art he introduces before handing the keys to the kingdom to somebody else.
3. Putting the success in succession
Iger's two-year deal is a short wick. Who will replace the charismatic leader? It has to be the right choice.
The next Disney CEO will have to follow Iger's lead in trying to please fans and shareholders alike. The new leader will also have to navigate the tricky political tightrope that Florida has become, uniting the masses while avoiding the pitfalls of alienation. There is a lot on Iger's plate right now, and Disney circa 2025 may not seem like a priority for the media stock bellwether. However, fiscal 2024 is now just a little more than four months away.
There can always be a wick extender. Iger and Disney's board can agree to make his tenure longer. However, if he's able to set up everything that he hopes to accomplish in the next year and a half there won't be a reason to stick around. His legacy will be secure. Shareholders won't be back where they started. Iger's fairy tale ending will be someone else's new beginning. Disney can't blow this handoff the way it did last time.
