To save Walt Disney Co this time, Bob Iger must show a different side of his character.
According to analysts, the legendary CEO, who made Disney the most powerful entertainment company in the world, must show how quickly he can cut costs and restore profitability.
Disney shocked investors late Sunday evening by announcing the removal of CEO Bob Chapek and appointing Iger, 71, to a two-year deal to get the company back to growth.
The astonishing development comes two weeks after Disney’s quarterly financial performance fell far short of Wall Street expectations in terms of both profit and revenue, a rarity that caused stocks to fall by 12 percent. The Walt Disney Co shares have fallen by 40 percent this year.
The company’s stock rose 8 percent at the opening bell on Monday. Iger’s appointment came into effect immediately.
The move prompted further return commitments, such as Steve Jobs’ return to Apple and Howard Schultz’s return to Starbucks in times of crisis.
“The bold move (Iger’s return) could feel like the right one. However, the company is in a different phase of growth,” said PP Foresight analyst Paolo Pescatore, adding that short-term measures could include curtailing some areas of business.
The most immediate target could be Disney+, the streaming service that Iger launched in 2019. The unit’s losses more than doubled to $1.5 billion in the last quarter under review.
The business has affected earnings as Disney spends a lot on content to gain subscribers, testing investors’ patience.
“Disney+… could probably do better if fewer end-state subscribers consist of super fans who are willing to pay high RPU (rates per user), which would result in much higher margins,” said analysts at MoffettNathanson.
They also pointed to ESPN as another target for profound cost reductions, including a review of all upcoming sports rights as the network loses cable subscribers.
Activist investor Dan Loeb’s Third Point had also pushed ahead with a potential spinoff from ESPN when the company took a stake in the company in August, although it later rejected the idea.
Some brokers have also raised concerns as to whether the two-year period that Iger has agreed to return would be enough to transform the business and find a successor.
“The problem is that Iger can’t go on forever. He has hindered the transition to Tom Staggs back in 2016 and now (Bob) Chapek,” Rosenblatt Securities said.
The commotion on Disney came quickly with reports that Iger was first approached by board members about a potential return on Friday.
Iger completely separated from Disney at the end of last year after staying on board as CEO for two years. He helped Chapek manage Chapek and ensure a smooth transition.
That transition was anything but smooth, and on Sunday, Iger agreed to a two-year deal to redirect Disney’s development and help find a new managing director.
Iger spent 15 years in public as Chief Executive Disney’s face before handing over the job to Chapek in 2020. During this time, he scored a number of victories that were praised in the entertainment industry and by Disney fans.
Chapek oversaw Disney during one of the most difficult periods in the company’s history, which began with a pandemic and ended with rising inflation, at least under Chapek’s reign.
However, his time as managing director was also marked by unforced mistakes, which many thought was a company that could obviously do nothing wrong under Iger.