The biggest challenge for Disney CEO Bob Iger will be controlling Disney Plus costs, which Bob Chapek failed to accomplish.
CEO Bob Iger will now need to reset expectations by clearly communicating the goals for Disney Plus moving forward. Iger has a tough choice to make. He can either focus on slower growth by increasing subscription prices and dialing back the content spending to show profitability OR focus on growing subscribers and raising prices later, which will ultimately be a loss for Disney in the near term.
The Walt Disney Company has always been challenging to analyze because of its different business segments. Disney has theme parks, experiences, movie production, traditional TV, streaming, and so on.
When Bob Iger was CEO last time around, the analysis for shareholders of Disney was somewhat easier to understand vs. today. You had a slate of theatrical releases to map out, projected how much income they would bring in at the box office, and then made a simple cash flow projection of how much its theme park and experiences division would give the company each year. There was no major content capital expenditure line item to contend with.
However, under Bob Chapek, that strategy changed with the launch of Disney Plus. In a certain way, Chapek boxed himself into this strategy by providing investors with long-term subscription goals. Chapek quickly realized that for Disney to reach its stated guidance, new content releases were vital to success.
The formula was simple. The more original content, the better the subscriber numbers were. This strategy was acceptable for investors when interest rates were nearly zero. But once inflation started to spike, the appetite for growth at all costs was thrown out the window.
What strategy do you think Disney should choose?