In recent years, Abigail Disney has become a vocal critic of the company that bears her last name. The Disney family heiress has made company management and missteps in the business a focal point. She hasn't been shy about expressing her views as a social activist railing against overpaid CEOs and supporting worker compensation.
Criticism of Walt Disney (DIS 0.05%) has been fueled by a lack of blockbuster movies, continued losses in its streaming business, and a culture feud with Florida governor and presidential candidate Ron DeSantis. Most recently, Abigail Disney called out CEO Bob Iger in an interview with Fortune, saying, "I think money and power have hijacked his sensibilities." She thinks Iger has lost touch and is negatively affecting the company's execution. Is she right?
Navigating a tough environment
Judging by Disney's stock performance, the company does appear to have lost its way. Disney shares have lost 33.3% and 23.5% over the last three- and five-year periods, respectively. The stock is also down by about 12% since Bob Iger returned last November for his second stint as CEO. That compares to a gain of 12% for the S&P 500 index in that time.
Like many businesses, the company had to pivot its approach to operations due to the pandemic. Disney was impacted severely in all its segments, as cruises, sports, movie theaters, and theme parks were brought to a virtual standstill.
Abigail Disney -- the grand-niece of Walt Disney -- thinks Iger is partly to blame for the company's poor performance as it has worked to recover from the pandemic. As she stated in the interview regarding Iger, "I don't think he really appreciated how the climate, emotional climate, of this country changed in those [pandemic] years."
Her criticism was prompted by Iger's recent comments addressing striking Hollywood writers and actors when he said union workers' demands were unrealistic.
Recovery underway
Changes brought on by the pandemic led Disney to accelerate the launch of its Disney+ streaming service. Paid subscribers quickly grew early on but have since leveled out. Core Disney+ subscriptions were up only 1% in the fiscal third-quarter period ended July 1 compared to the prior year.
Yet, Iger still believes Disney will achieve profitability for its overall direct-to-consumer streaming offerings by next October, the end of its fiscal year 2024. At the same time, Disney's theme parks continue to recover well, with revenue growing pretty steadily over the past year.
Data source: Walt Disney. Chart by author.
The theme park segment represents more than one-third of total revenue, which has increased by about 6% in the first nine months of the current fiscal year versus the prior-year period.
Disney 2.0
While the effects of the Hollywood strikes on Disney's media segment are still unknown, Iger continues to work on guiding that segment forward. In a recent CNBC interview, he made it clear that he was considering various options for the linear television business that is no longer growing. He specifically said assets that include the ABC network and even ESPN may no longer be core to Disney.
Subsequent to those comments, Disney announced a $2 billion deal for ESPN to enter a sports betting arrangement with Penn Entertainment. Penn will rebrand its sportsbook as ESPN BET to include betting in the 16 legal betting states where the brand is currently licensed. Iger might ultimately be looking to entice sports leagues to invest in the popular sports network, too.
On Disney's recent earnings call for investors, Iger also said the company is on track to reduce costs across the business by more than $5.5 billion. Additionally, Disney just announced a price increase for its premium streaming products and non-advertiser-supported offerings.
While Abigail Disney's criticisms have some merit, the film producer may have taken Iger's recent comments about the striking Hollywood workers a bit personally. Iger is working to make the company more efficient and increasingly monetize some of its popular assets. For investors, that might not mean an imminent jump in the stock's return, but it's a good step in the right direction for longer-term gains.
