Disney’s new CEO may have to cut costs to regain profits as the influx causes him to lose money



Bob Iger should show a new side of his Wall Street persona when he returns to lead Walt Disney by cutting costs and winning back profits in just two years after pouring money into acquisitions and streaming business one last time around.

The entertainment giant shocked investors late Sunday night declaring ousting CEO Bob Chapek and appointing Iger, 71, to a two-year contract to return the company to growth.

The move sparked other backlashes such as Steve Jobs‘ Back to apple Howard Schultz returns Starbucks in times of crisis.

“A bold move (Eger’s return) may seem the right move. However, the business is in a different phase of growth,” said Paolo Pescatore, analyst at BB Foresight, adding that short-term measures could include restricting some operations.

It could be the most immediate target for that Disney +the streaming service that Iger helped launch in 2019. Losses in the unit more than doubled in the most recent reported quarter to $1.5 billion (nearly Rs. 1,220 crores).

The business has become a drag on profits as Disney spends heavily on content to attract subscribers, testing the patience of investors and contributing to a 40 percent drop in its shares so far this year.

“Disney+…perhaps can do better with fewer end subscribers consisting of superfans who are willing to pay high per-user prices, which will generate much higher margins,” said Moffett Nathanson analysts.

They also pointed out ESPN as another target for drastic cost cuts, including a review of all upcoming sports rights as the network loses cable subscribers.

Third Point also pushed activist investor Dan Loeb into a potential spin-off of ESPN when it took a stake in the company in August, though it later backtracked on the idea.

Some brokerages have also raised concerns about whether the two-year period Iger agreed to return to would be enough to turn the business around and find a successor.

“The problem is, Egger can’t stay forever,” Rosenblatt Securities said. “He really messed up the move to Tom Staggs in 2016 and now (Bob) Chapek.”

However, Disney shares rose 10 percent in pre-market trading Monday, in a sign of confidence in the CEO who has led the company for 15 years.

© Thomson Reuters 2022

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