Disney CEO Bob Iger had a giddy grin on his face earlier this week. He was halfway around the from the problems of the Hollywood strikes and the discussion of the shrinking cable bundle. As he watched Anna, Elsa, and an impressive Olaf puppet send drones and fireworks into the sky at the dedication of the new World of Frozen – the first Frozen land that Disney has ever built – I bet he was taking a moment of release after a very long year.
Iger received a heroes welcome back to Disney. Last year at the Disneyland Candlelight event, Iger was greeted by echoing cheers across Main Street at Disneyland by guests. One Disney executive remarked to me that the overwhelming joyous energy felt like the Beatles had just appeared in the middle of the parks. I said hello to Iger, his wife Willow Bay, and Head of Parks Josh D’Amaro a short while after this that day and they were clearly thrilled with the reception. The year that followed was much more difficult than Iger expected according to Bloomberg reporting.
Until the Frozen opening, Iger hadn’t made any high profile appearances in the parks recently as his focus has been elsewhere with the ongoing strikes in Hollywood (which are now finally wrapping up), full acquisition of Hulu, and focus on the future of Disney’s cable television business. Could all of those problems be melting away? What’s next for Iger and Disney? It’s been a year since Bob Iger returned as CEO and removed Bob Chapek and today we are diving into his progress in that year with a focus on the Disney theme parks but also touch the other aspects of the company. Then, we’ll look ahead at what his recent comments could mean for the company.
Two weeks ago Disney announced new strategic priorities for the company as they move from “fixing” the Bob Chapek era mistakes into a growth phase once again. One of those strategic priorities was turbocharging the Disney theme parks with increased investment. Below we discuss that priority and the other three Iger is using to lead into 2024.
Disney’s Big Focuses & Challenges From 2023
Initially when I was drafting this article I started off taking a “wins and fails” approach as a framing for looking back at Bob Iger’s big year. After a long time maneuvering the article I decided that the focuses were all far too fluid to name true wins or fails. Generally all of the challenges represented below are fluid and much more about how Iger reacted than anything he caused. This really was a clean-up year as he stated. We are just now getting into the growth possibilities as we’ll discuss them at the bottom of this article.
First up, Iger’s big focus on returning power at the studio to creatives. When Iger returned he worked to decentralize the decision making power around content distribution at the company. Under Bob Chapek, the power to decide where different shows and movies would be distributed was shifted from the creative heads of the studios to finance focused executives that controlled the streaming services. Iger believed that this stifled creativity and created redundant teams. It’s a win to have the leadership of the studio now back in the hands of creative executives who have a better ability to drive their creative output. This reorganization has resulted in over 7,000 layoffs across the company so the bad comes with the good here.
The two big external threats that Iger faced upon his return were activist investor Nelson Peltz and Florida Governor Ron DeSantis. While both of these threats are still present, the narrative was successfully shifted by Iger. He arrived at Disney and made impressive moves to placate Peltz and demonstrate to DeSantis that Disney would not put up with being used as a political punching bag.
Nelson Peltz and his investment firm arrived at Disney to try to demand budget cuts and a focus on returning the “magic” at Disney. Basically they wanted to make a lot of noise about how to improve the business and then have the Disney stock go up so that they could profit. Peltz may have helped to push Iger to make some of other decisions seen here but the suggestions made by Peltz were largely obvious and much more dependent on the execution than the idea. Generally this activist investor model can be very distracting for the entire company so it was critical that Iger take care of this early. Peltz was considered dealt with. He praised Iger on CNBC and said that he was happy with the direction of the company, but recently (over 7 months after those comments on TV) he is back buying up more shares and rattling for company improvements. So, this is a part win and part ongoing situation. We will see if Peltz ever gets his desired two board seats at the company.
Governor DeSantis got pretty quiet right after Iger came back. It’s easy to forget how tenuous the situation was in Florida. Disney vs DeSantis was splashed across mainstream news pages. Thanks to Iger’s presence, poise, and exacting use of the legal process this conflict is largely out of the media cycle and is on track to be handled soon. Note – the Walt Disney World public relations machine is in overdrive to support the ongoing legal fight. Check out the new study that they just released demonstrating the Walt Disney World impact on Florida.
Continuing at the theme parks, Iger made it clear that he was not happy with the complaints of uncharges at the parks and frustration from guests. In an early set of announcements this year, the parks announced a set of sweeping changes to push back on guest complaints. This announcement included a increase in the lowest-cost single day tickets, changes to park hopping, return of complimentary hotel parking at Disney World, and free on-ride photos. This was just the beginning of the changes made at the parks.
Disney also made another set of announcements for Walt Disney World that included the return of the Disney Dining Plan, changes to park reservations, and advanced lightning lane bookings. Both of these sets of announcements demonstrate that Disney is listening and knows that they need to push to return the quality of the guest experience. There’s still more that they could done here to address the difficulties associated with planning a vacation. Walt Disney World in particular is still unnecessarily difficult for families to navigate.
Also in the parks division, Iger helped to motivate the cancellation of the move of Walt Disney Imagineering group to Lake Nona, Florida. Though this cancellation was a little bit messy because some were already in transition, it is a win for Imagineers to get to remain based in Southern California near the Walt Disney Studios and creative heart of the company. Unfortunately this move and then move back again led to a large number of Imagineers leading the company which is bad timing with Disney’s plans to increase spending in the parks.
Finally, another parks win is that the theme parks are being listed as one of the big new priorities for the company (scroll down for more discussion on this). I am pleased to see that Disney is taking the theme parks seriously as a growth engine. As the Disney Parks drive much of the profit for the company, it makes senses that Disney will continue to invest in their growth. The theme parks have always been a difficult business for Wall Street to understand and value for growth because of the long time horizon for increasing capacity at the parks and perception that the theme parks have capped growth potential. Disney is trying to change this narrative with the announcement of the $60 Billion investment in Disney Parks.
The plans to invest into the Disney theme parks seem to be coming at a sluggish pace. With the announcements to spend the $60 billion in parks expansion I would love to have heard concrete announcements. For some it is difficult to get fully excited about the new investment coming to the theme parks without the concrete plans announced. The fact that the investment is coming in the back half of the decade while Universal is preparing to open a brand new theme park in Orlando doesn’t help either. The Imagineering output seems to have fully ground to a halt during COVID. Now it feels like there has to be a full reset of the group to get things going again. Here’s hoping that moves quickly and we get some new great concepts for the domestic parks announced soon.
Other wins of having Iger back this year are really around the content at the company. Though I actually don’t think that Chapek was the terrible CEO he was painted as, he really never established himself as a fixture in the Hollywood creative community. This is something that Iger is a pro at and something that is critical for a leader of the largest storytelling company in the world. You have to be able to speak the language of the storytellers that work for you.
Iger is a pro at building these relationships. He clearly personally relished being on red carpets and connecting with celebrities but he was always able to use this skill in service of the company.
The final win which will lead nicely into our fails is the general announcement of the plan to reduce content output. On the recent earnings call Iger said “I’ve always felt that quantity can be actually a negative when it comes to quality, and I think that’s exactly what happened, we lost some focus.”
It is the right move to reduce quantity to increase the quality of what teams are making. Right now not even the Marvel super fans can keep up with watching all of the shows and movies that division is putting out. There needs to be less. Iger is attempting to place the blame for this increased quantity on Bob Chapek’s shoulders though it was a strategy that was begun in 2019 to ramp up production to juice the Disney Plus offerings with Marvel and Star Wars shows.
Interestingly when Iger became CEO of Disney for the first time in 2005 he actually reduced production then too to focus on quality. He decided that direct to DVD sequels meant only to be fodder for home video were not worth tarnishing the key franchises. This is the same kind of cyclical decision being made here. Hopefully he also focuses on the next part of this also which is finding and creating more original stories that can have the legs that Marvel, Star Wars, and Pixar films have had over the past 15 years. This is a difficult proposition but one that Iger and Disney will need to focus on. Here’s hoping that Disney’s new film ‘Wish’, which debuts this week, is able to deliver.
The push and pull of quality vs quantity will continue to be something that Iger and the other stewards of these brands within the studio grapple with everyday. Just last week from the opening of the Frozen land mentioned above, Disney announced that there would be Frozen 4 even before third Frozen was released. This feels like a quantity decision vs quality one. We will have to see how this focus continues.
Another content piece that hasn’t been mentioned as much but I hope to keep raising is that Disney Plus has left behind some core Disney fans with their Disney Plus programming strategy. The fact that Leslie Iwerks hasn’t been announced as working on a “The Imagineering Story” season 2 baffles me. It’s the one program on the service that we return to. The service is essential for families with children who are in the rewatching phase of Disney movies, but it really doesn’t service the Disney-interested adults. Disney seems to be working to solve this problem with their plan to integrate Hulu into Disney Plus, but I hope that they also work to deliver some high quality Disney-focused series like this one rather than just becoming a general entertainment hub. (No, I won’t count the “Behind the Attraction” series because it is a little bit too slapstick for me. Should have more reverence for the history. I actually like the series style which Netflix uses for the “Movies That Made Us” series but I don’t think it works here.)
This discussion of content also leads into how Disney will handle the shifting demand for cable to streaming. In addition to the Hulu integration, Disney is also working on changing how ESPN is delivered to viewers. We’ll discuss more on both of these in the next section.
One key theme that will remain to be critical is succession planning. It feels as if Iger’s succession planning has fallen off as a public focus. He has now extended his contract at Disney through 2026 as CEO and no clear prospects for a successor have been identified from the internal or external candidates. In the most recent round of priorities for the company, the thought of succession planning was not even mentioned. I don’t want to see Iger get too comfortable in the chair again where we then don’t see a smooth transition the next time around. Hopefully behind the scenes Iger is grooming a successor and working more closely with the board. With the digital transformation that the entire business is going through, it would have really benefited Disney to have their strongest leader solidly in control during that period. I don’t want to see another waffling attempt to transition leadership in the coming years.
Though Iger is not officially chairman of the board this time around, the majority of the board was still selected by him and will likely follow his lead. No board likes conflict and its far easier to just keep agreeing with your star CEO. Hopefully we see a collaborative process play out as new candidates are selected. Iger will have to step down at some point. Though it was stated many times at the time that Iger returned that this was a top priority it feels like it is being pushed off again.
With all of that stated, let’s look ahead to where Disney goes from here.
Where Disney Goes From Here
Disney outlined four strategic priorities for the company moving forward. The building priorities for the company are:
- Achieving significant and sustained profitability in our streaming business
- Building ESPN into the preeminent digital sports platform
- Improving the output and economics of our film studios
- Turbocharging growth in our Experiences business
Each of the above priorities relate to different problems facing Disney.
The first two priorities are based on the problems facing Disney from the decline of the cable business as consumers switch over to streaming. The streaming business will continue to be a challenge for Disney as they work to both grow the amount of subscribers and increase prices for those subscribers. This will put pressure on the streaming service to deliver even more value for consumers. Adding Hulu into the streaming service and charging just one unified price should help here.
Disney seems to want to increase prices, increase subscribers, and decrease the amount of money that they spend on content all the same time. I’m curious how they are able to manage this. One way that Disney referenced on the recent earnings call is emphasizing the biggest blockbusters on the service even more.
For ESPN, Disney wants to find a technology or sports league partner to help to grow this business. I would read this as make the business less expensive or get paid a huge amount for getting to be associated with the ESPN brand. This feels like a deal that they could’ve swung a couple of years ago when Amazon was spending dumb money on MGM Studios but feels a little bit like they are trying to get a minority investment at a time that every major media company would like a minority investment for their declining cable business.
The ESPN problem really goes back to the fact that every cable subscriber in the United States had $9 of their cable subscription fee to paying for ESPN whether they watch sports or not. Replicating this revenue in a digital streaming world will be difficult and a key priority for Disney. In fact, Kevin Mayer, a former Disney executive and current advisor to Iger, stated that this is actually Iger’s highest priority for the company currently.
Next up Disney’s move to improve their studio output. This goes back to a win for Iger. I like his playbook of swinging back to quality vs quantity for intellectual property. When something is so ordinary and always on, it loses its sheen. Disney needs to tee up their biggest franchises for big reveal moments like the return of Star Wars during the “The Force Awakens” premiere, the culminating Marvel moment in “Avengers: End Game”, or the launch of a new franchise like “Frozen”. The biggest question here is whether Disney’s actions can even have an impact on the quality vs quantity metrics in the broader marketplace. With so much content to consume all the time, it is more difficult than ever to break through and have new stories make an impact. This is a large part of the reason that Disney has relied so heavily on existing stories. Here’s hoping that original storytelling like the upcoming “Wish” film that opens this week can bring people back to the theaters and help kick off another big Disney Animation run.
The final priority, thankfully, is a focus on turbocharging growth at the Disney theme parks. This is great news for theme park fans as Disney looks to invest $60 Billion in the theme parks over the next 10 years. We just broke down what this entire turbocharge could actually mean for Disney. I highly recommend reading that piece for my full take.
We expect to see investment in the parks in the US towards the back half of the coming decade. That investment requires announcements beforehand so yes it means that we can once again get excited for a D23 Expo of big announcements to look forward to. After the Destination D23 in September where more big announcements were half made and teased to the audience like the new Indiana Jones / Encanto area for Animal Kingdom we are ready for some solid announcements. That event was before the big investor comments so we are hopeful that the parks will finally be teed up to make a big splash with news for all of us next summer at D23.
Generally we are hopeful about The Walt Disney Company and where they can go to evolve as a storytelling company. Iger did a great job driving the company to massive scale during his previous tenure and now we are excited to hear him say that the company is once again ready to be a growth phase after a year of fixing. So, a year into Iger’s return at CEO he has basically said we are reset and ready to go. Looking back it is difficult to believe that four years have past since the Disney Plus service launched. That year, 2019, the Walt Disney Studios had six billion dollar theatrical grossing titles. I am excited to see Iger level-setting and ready to return the company to that massive place of success.
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