Now Comes The Hard Part For Iger and Disney

Disney has successfully fended off activist investor Nelson Peltz in a decisive victory. During the annual shareholder meeting, Disney shareholders overwhelmingly voted to maintain the current board, thereby rejecting Peltz’s campaign for change. This outcome solidifies their confidence in CEO Bob Iger and his ability to enhance shareholder value and secure a strong successor.

However, Iger will have to prove it, or he risks facing yet another activist campaign this time next year.

To sustain this momentum and avoid future activist campaigns, he must focus on several critical priorities:

Streaming Profitability: Disney aims to turn its streaming services—Disney+, Hulu, and ESPN+—into a profitable unit.  Iger’s confidence that Disney will make streaming profitable by the end of the fiscal year stems from draconian cost-cutting on content, which includes new movies, sports rights spending and TV production. Disney said in November it was targeting an “annualized entertainment cash content spend reduction target” of $4.5 billion. Achieving this milestone by the end of the fiscal year is crucial. Iger’s cost-cutting measures and strategic content decisions will play a pivotal role in achieving profitability.

ESPN’s Digital Strategy: Disney has set up a two-pronged digital strategy for ESPN. Clarifying this strategy and ensuring its success are essential for long-term growth. This fall, Disney plans to launch a skinny sports bundle that includes ESPN’s linear network, along with sports channels from Warner Bros. Discovery and Fox. The yet-to-be-priced digital streaming service will likely cost about $45 or $50 per month, CNBC reported in February. Disney owns one-third of it. ESPN will then debut its own flagship streaming service in the fall of 2025. It will include new personalized features that cater to sports bettors and fantasy sports players. The Athletic reported last month that service is likely to cost $25 or $30 per month. Disney risks confusing consumers with its multiple offers and will need to roll out its new products with clear messaging. Disney has already offered ESPN+, a sports streaming service that has some but not all of ESPN’s content. That costs $10.99 per month and can be bundled with Disney+ and Hulu.

Box Office Hits: Scoring significant box-office successes remains vital. Disney has been mired in a yearslong box-office slump, from live-action flops to Pixar disappointments, from Marvel fatigue to the absence of Star Wars (the last movie released in theaters came in 2019). Disney’s ability to create compelling content that resonates with audiences will impact its financial performance.

Choosing a Successor: Iger’s transition plan for selecting a capable successor is critical. A smooth leadership transition will reassure investors and maintain stability.

If Disney struggles to show investors the entertainment giant has a coherent strategy, or if Iger kicks the succession can down the road once more, activist investors may be knocking on the company’s door again during next year’s annual meeting to demand change.