The company’s transition to a streaming-first business seemed to lose momentum during the nearly three years that previous CEO Bob Chapek was in charge, and the company also spilled a lot of red ink on the income statement. As you can see from the graph below, throughout Chapek’s time as CEO, Disney stock severely underperformed the S&P 500.
Disney Chart YCharts’ DIS data
The fact that Disney stock increased 6.3% on the day the news broke indicates that Iger has the support of the investor class, but will the corporation benefit in any way from his return? Here’s why the boomerang CEO might once more change the course of events at the House of Mouse.
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1. He is a skilled negotiator.
Bob Iger, who served as Disney’s CEO from 2005 to 2020, completed a number of transactions that gave the company a massive collection of intellectual property, including the purchases of Pixar, Marvel, Star Wars owner Lucasfilm, and ultimately 21st Century Fox.
Disney has tapped into this fresh IP to create blockbuster films, thrilling attractions for its theme parks, toys, and streaming series. For instance, its $4 billion purchase of Marvel is probably one of the best buys in recent history given that the Marvel Cinematic Universe, or the Marvel films Disney has produced, has earned close to $20 billion in total revenue through 2019.
Warner Bros. Discovery recently formed, and it seems that almost every streaming service is looking to either beef up its content or partner with a larger player, proving that we are still in the heyday of M&A deals in the entertainment industry. Iger has the knowledge and skills to steer Disney on the best course in streaming, making him arguably the greatest person to navigate this era of consolidation.
2. He enjoys widespread esteem in Hollywood
Leadership is important in every sector because CEOs establish the company’s culture and tone. A well-respected CEO like Iger will motivate and attract top talent to Disney. In Hollywood, effective leadership may be even more crucial because it’s essential to lure talent to produce blockbuster films and TV shows.
With Iger back in the driver’s seat, Disney should advance in this regard. Upon his return, even Netflix co-CEO Reed Hastings tipped his hat to Iger, writing on Twitter:
Many Disney employees, including some senior executives, reportedly applauded his return, claiming that Chapek’s reorganization to give the streaming division priority had left creative departments feeling undervalued and stoked resentment within the firm.
Some even referred to Iger’s comeback as a “pipe dream”; yet, in this instance, it has materialized. There is a lot of anecdotal proof that Iger’s return has improved the mood of Disney employees on the front lines.
The Motley Fool was informed by Orlando-based reporter Gabrielle Russon that the local reaction from Disney World employees and others has been favorable.
3. He’s already started working.
Iger didn’t waste any time addressing Chapek’s errors during his first week on the job. Kareem Daniel, the chief of the Disney Media and Entertainment Division that Chapek established, was fired by the new leader, and he has plans to further reorganize the media giant.
He highlighted that narrative would be at the core of the company and that the new organizational structure would be in place in a few months. In addition, he stressed the need for a more effective cost structure, hinting that the business would reduce some of the costs that caused the streaming segment to lose $4 billion in the previous fiscal year.
Iger seems to think that the company’s focus should be on producing the best content since he feels that the pendulum has swung too far in favor of the streaming industry.
Iger’s actions have been swift and forceful, which is not surprising. In accordance with the board’s decision, the 71-year-old would serve as CEO for two years and assist in the search for a successor during that time.
Even if the Disney streaming unit is losing money and needs to undergo another restructuring, his work won’t be simple, it’s impossible to question that he’s the ideal candidate for the job given his track record of accomplishment.
Disney stock appears to have significant upside potential given its wealth of intellectual property and its flywheel business model, where video entertainment, theme parks, and consumer products all reinforce one another and the overarching Disney brand.
It will take time for Iger’s changes to pay off, though. It’s challenging to match that assortment of assets. It’s about time it started generating income for investors.
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