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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 and Howard Schultz's return to Starbucks 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.
"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.
(Reporting by Eva Mathews and Aditya Soni in Bengaluru; Editing
by Anil D'Silva)
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