Bob Iger Facing New Challenges at Disney Following Rough Quarter for Disney Plus
Bob Iger is back in town, but it seems that the honeymoon is over as the returning CEO of Disney has had some bad financial news to break and hard calls to make in the process.
Once upon a time, Bob Iger succeeded Michael Eisner as the head of the Walt Disney Company. The previous leadership under Eisner had managed to be instrumental in uplifting what was once a dying movie studio into a massive multimedia empire, but Iger took things to a completely new level. Iger pushed to renovate Disney’s parks presence, building upon what already worked and expanding their brands to new markets altogether. Iger took charge by revitalizing a wayward Walt Disney Animation Studios, and patching things up with Pixar before making them an official subdivision of the company. On top of getting Pixar, Iger expanded Disney’s horizons by making massive acquisitions that would allow Disney to reach new demographics, purchasing Marvel Studios and Lucasfilm wholesale and eventually merging with the company once known as Twentieth Century Fox (later swapping the “Fox” name with “Studios”). And perhaps most ambitiously of all, Iger moved to transform Disney into a streaming company with an increased focus on Hulu and the launch of Disney Plus, a service which would disrupt the entire market, on top of greenlighting a slate of films that ensured dominance in the field of the box office as well, with 2019 having multiple billion-dollar hits and scoring the highest revenues ever for a single company, a feat that might not ever be matched. Iger had hoped to leave the company in stable hands and have his happily ever after, getting a well-deserved retirement after nearly 15 years as Disney’s CEO.
That was then for Bob Iger, and this is now: a present where Iger’s chosen successor, Bob Chapek, found himself to be incredibly unpopular with creatives, leaving Disney, who were previously on the top of their game, in a financial bind. Many of the company’s revenue sources had been disrupted by the pandemic, and while the shift to streaming proved to be a shining light in such a period of turbulence, Disney Plus still hasn’t reached profitability, and the company just revealed that the streamer has had their first-ever quarterly loss in subscribers, shedding 2.4 million subscribers compared to the previous three months (largely due to 3.8 million subscribers unsubscribing from Disney Plus Hotstar in India). Parks are nickel and diming their customers to help offset some of the excess costs of Disney Plus’s ambitious programming, while innovations and new attractions have not been prioritized. The debt for Twentieth Century Studios still looms over the company, even with the blockbuster success of Avatar: The Way of Water and the promise of three (and potentially up to five) sequels serving as some well-needed encouragement for the once-independent major. Lucasfilm hasn’t had a Star Wars movie in theaters for over three years now, with the next opportunity said to be three Christmases from now. Marvel’s only billion-dollar-grosser since Avengers: Endgame was a film co-produced by Sony Pictures, who got a majority of the shared profit. Disney Animation and Pixar productions have either skipped theaters entirely or had abbreviated runs at the box office, with projects like Lightyear and Strange World, which might have succeeded in more conventional times, turning up a lot of red ink for the studio that once built its entire model off of animation. It’s not been smooth sailing.
Bob Iger certainly has his work cut out for him as the initial wave of excitement for his return (and the forced exit of Chapek and his hires, like Kareem Daniel) dissipates. He has given himself until the end of 2024 to right the course of the company before a new successor, and perhaps a better inheritor to the House of Mouse than his first pick, can take over. Some good news: Disney’s annual revenues are up by 8% compared to last year, ahead of Wall Street expectations. Park revenues are up between 21% and 25%, and streaming operating losses have narrowed from $1.5 billion to $1.1 billion. In the quarterly call, Iger has reaffirmed his commitment to ESPN, which he stated was not for sale despite speculation to the contrary. Disney are setting up three divisions for all of their content: one for sports, which ESPN and ESPN Plus will take center stage for, one for entertainment, which includes all direct-to-consumer streaming efforts, and one for parks, which are at risk of lagging behind their peers after Universal announced two dedicated parks for Frisco, Texas and Las Vegas, Nevada. On the subject of both the direct-to-consumer model and theatrical, he reiterated that providing content for theaters will remain a high priority, while the company continues to shoot for the goal of making Disney Plus profitable by the end of 2024 – the service, at this time, has 161.8 million subscribers, making gains in the United States and Canada despite the drawbacks in India. Hulu has also reached 48 million subscribers, and ESPN Plus is only a few thousand subscribers away from hitting 25 million. Iger also announced three sequels to animated movies that made over a billion dollars each (likely to soften the blow for investors after some bad news, as the promise of new Toy Story, Frozen, and Zootopia movies are likely too enticing to ignore), along with a new Avatar attraction for Disneyland.
Still, despite these business initiatives set to put Disney on-course to continue expanding, Bob Iger has made the tough decision to announce major layoffs and scale back on spending. The current plan is to cut down on $5.5 billion in spending, $2.5 billion of which will be for general operating costs and $3 billion of which will be in content costs. As part of this, 7000 people will be laid off, or 3% of the company, with several of these job cuts being from the now-defunct Disney Media and Entertainment Distribution division. Right now, the plans for spending cuts for content is unclear. What seems more likely to meet the axe, should it come to that, is non-branded content. Most of the appeal for the platform of Disney Plus is through content tied to its biggest brands, such as Star Wars, Marvel, Pixar, and Disney’s wealth of animated and live-action content tied to their own intellectual properties; demand for original content that might otherwise be greenlit on other streaming services is comparatively lower. As such, it would be likely that those sorts of projects would be more likely to be sacrificed than the biggest draws to the service. Beyond this, the company is also considering licensing out or outright selling some of their films and shows to other streamers, despite the previous intent to keep all movies produced by Disney and its subdivisions on Disney Plus or Hulu, and there’s still the matter of a possible corporate proxy battle looming ahead. And despite conventional thinking suggesting that Disney should acquire Hulu to consolidate its programming with Disney Plus, Iger has stated that he’s open to selling the streaming service. Decisions, decisions.
There is still plenty of time for sweeping changes to happen at Disney, Lucasfilm, and other places before Iger re-retires, so we will cover more news about the company’s corporate changes as it breaks.
Grant has been a fan of Star Wars for as long as he can remember, having seen every movie on the big screen. When he’s not hard at work with his college studies, he keeps himself busy by reporting on all kinds of Star Wars news for SWNN and general movie news on the sister site, Movie News Net. He served as a frequent commentator on SWNN’s The Resistance Broadcast.
