Breaking News
Investing Pro 0
New Year’s SALE: Up to 40% OFF InvestingPro+ CLAIM OFFER

Disney's Iger may have to cut costs as streaming loses money

Stock Markets Nov 21, 2022 03:36PM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
© Reuters. FILE PHOTO: Disney's Chief Executive Officer Bob Iger attends the opening event of Disney-Pixar Toy Story Land, the seventh themed land in Shanghai Disneyland in Shanghai, China April 26, 2018. REUTERS/Aly Song/File Photo
 
AAPL
+1.48%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
SBUX
+1.66%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
NFLX
-0.84%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
DIS
+1.46%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 

By Aditya Soni and Eva Mathews

(Reuters) - Saving Walt Disney (NYSE:DIS) Co this time will require Bob Iger to show off a different side to his character.

The legendary chief executive who transformed Disney into the most powerful entertainment company on the planet will need to show how quickly he can cut costs and restore profitability, analysts say.

Disney shocked investors late on Sunday evening by announcing the ouster of CEO Bob Chapek and appointing Iger, 71, to a two-year contract to return the company to growth.

The move evoked other return engagements such as Steve Jobs' return to Apple (NASDAQ:AAPL) and Howard Schultz's return to Starbucks (NASDAQ:SBUX) in times of crisis.

"The bold move (Iger's return) might feel like the right one. However, the business is at a different phase of growth," PP Foresight analyst Paolo Pescatore said, adding that short-term measures might include restriction of some operations.

The most immediate target of that could be Disney+, the streaming service that Iger helped launch in 2019. Losses at the unit more than doubled in the last reported quarter to $1.5 billion.

The business has become a drag on earnings as Disney spends heavily on content to attract subscribers, testing investor patience and contributing to a 40% slide in its shares so far this year.

GRAPHIC: Disney's streaming losses mount in the last 3 years - https://graphics.reuters.com/DISNEY-RESULTS/byvrlogozve/chart.png

"Disney+ ... could probably do better with fewer end-state subscribers made up of super fans willing to pay high RPU (rates per user), which would generate much higher margins," analysts at MoffettNathanson said.

They also pointed to ESPN as another target for deep cost cuts, including a review of all the upcoming sports rights as the network loses cable subscribers.

Activist investor Dan Loeb's Third Point had also pushed a potential spin-off of ESPN when it took a stake in the company in August, although it later backed off the idea.

Some brokerages have also raised concern on whether the two-year period Iger has agreed to return for would be enough to transform the business and find a successor.

"The problem is that Iger can't stay on forever. He already bumbled the transition to Tom Staggs in 2016 and now (Bob) Chapek," Rosenblatt Securities said.

Still, Disney shares were up 7.5% on Monday, a sign of confidence in the executive who led the company for 15 years.

GRAPHIC: Magic returns - https://graphics.reuters.com/WALTDISNEY-CEO/lgpdkwogavo/chart.png

GRAPHIC: Disney+ vs. Netflix (NASDAQ:NFLX) subscriptions - https://graphics.reuters.com/WALTDISNEY-RESULTS/zjvqjkylmpx/chart.png

Disney's Iger may have to cut costs as streaming loses money
 

Related Articles

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.
  • Any comment you publish, together with your investing.com profile, will be public on investing.com and may be indexed and available through third party search engines, such as Google.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Comments (4)
Roberto Santos
Roberto Santos Nov 21, 2022 11:44AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Die groomers.
Teena Marie
Teena Marie Nov 21, 2022 11:39AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Subscribers peaked in 2020. It's a systemic issue for media and entertainment companies including Disney. Analysts have it wrong that increasing RPU, shifting price increases to fewer customers, will reverse losses. Reducing content is more practical with less impact on customer retention. Increasing subscription rates lowers retention.
Dennis Chuck
Dennis Chuck Nov 21, 2022 9:43AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Cut costs? Who doesnt know? I can do better!
Mark Manley
Mark Manley Nov 21, 2022 8:48AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Well, the problem is that superfans like my family have left Disney in disgust, and with Disney trying to ram a radical woke agenda down our throats, we're not likely to return
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Continue with Google
or
Sign up with Email