Bob Iger Returns from Private Equity to Publicly Fix Disney

Iger Saves Disney

Did No One See This Coming? Really?

Walt Disney Company, Inc. (DIS.N) is not the only publicly-traded media-conglomerate to have suffered a forced retreat in shareholder value. The Media C-Suite reported on November 15th that publicly-listed media giants had suffered their worst stock market year in three decades.  We wrote, “As the board rooms and C-suites of US media conglomerates convulse to the rhythm of finger pointing and job preservation, publicly-listed media companies haemorrhage cash.” 

Read the Media C-Suite Article here (Wall Street Punishes US Media as Cord Cutting Accelerates (mediacsuite.com))

The senior officers of these Media Majors presented a litany of explanations in recent earnings calls to investors describing temporary market conditions that would adhere to their long-term strategies.  Share price movements indicated that no one listened.  

But when a celebrated former media monarch like Bob Iger tours with highly-respected media analysts who have the power to move share prices, those being toured take note. Particularly when it is painfully obvious that the former king regretted vacating the throne and when the publicly-listed company he once led has lost more than 40% of its shareholder value in the last year. 

Iger’s return to the CEO’s office at Disney comes within a week of reported off-the-record meetings with Hollywood leaders along-side Michael Nathanson, the Senior Research Analyst and Senior Managing Director at equity research firm MoffetNathanson. According to people familiar with the meetings, when pressed by Nathanson, Iger shared concerns about Disney’s recent performance and strategy.

“That adheres to what I’ve been hearing lately from people in Iger’s circle”, writes Matthew Belloni, former editor of The Hollywood Reporter in a Puck.News article published on November 17th, “… privately, lot’s of folks ask what he [Iger] thinks, and when he answers, it’s not favorable.”

“The recent stock dive has only exacerbated those feelings, say people who have met with him.” According to Belloni.

Read the Puck.News article here (Disney’s Bob vs. Bob Blame Game – Puck)

Disney’s share price rose strongly on the news that Bob Iger is to retake the CEO job from Bob Chapek (who replaced Bob Iger as CEO less than three years ago). But that may be an indication of market psychology more than an immediate solution to Disney’s over-reliance on now declining affiliate fees to subsidise its content and SVOD subscriber acquisitions. The market knows something has to change within the publicly-listed Media Majors.

Private equity, meanwhile, is poised to capitalise on the M&E industry’s US$2.4 trillion in annual revenues that are dominated by the large, conglomerated publicly-listed Media Majors with no apparent answer to stagnation and increasing vulnerability to disruption.  

According to PwC, the global accounting firm, investment activity within Media & Entertainment continues to rise with a record US$469 billion in announced deal value spread over 1,014 deals during 12 months to the end of June 2022, a 28% year-on-year increase.  Private Equity directly accounted for 42% of those with US$194 billion.  

See the PwC report here (Media and telecommunications: Deals 2022 midyear outlook: PwC).

Private Equity fund managers and other professional investors provide finance support to much of the US$275 billion in corporate deals within the Media & Entertainment industry.

Bob Iger may be perfectly placed to understand this, having now spent the last three years firmly embedded within Private Equity in the lead up to retaking his throne at publicly-listed Disney. Iger has built his own private equity portfolio, including the delivery startup Gopuff and Metaverse avatar company Genies before joining as a partner at Thrive Capital, the US$15 billion venture capital firm founded by Joshua Kushner.

His return from Private Equity exile to publicly-listed Disney may come with few complaints from his new Private Equity allies or himself.

Certainly, Chief Executive Officers of multi-billion dollar public media companies don’t have the right to complain about much of anything. Wealth, glamour and a lot of power are heaped upon them. The CEO’s office of a multi-billion dollar public media company is really a modern-day throne room, and executives spend entire careers plotting to get as close to the palace as they can. Close to it, but not usurp. Why? Because being the CEO of a multi-billion dollar public media company means everything rides on you. Few have the shoulders for it. 

At the same time, they do have an obligation to come clean. A form of Noblesse Oblige. Especially with Other People’s Money. Especially when the tides of the Streaming Wars are beginning to turn, as both the public markets and Private Equity investors so clearly see.

Many of the largest public media companies have reported on their respective company’s financial performance for the 3rd quarter of 2022 in SEC filings and well-attended earnings calls. As the Media C-Suite reported earlier, these very large publicly-listed companies have suffered their worst year of share price performance in three decades. Few, if any, highlighted the decline or loss of supporting revenues from legacy cable and satellite networks at a time when they are now, finally, evenly-matched with Netflix.

Their self-celebrated efforts to compete directly with Netflix, ushering in the era of the “Streaming Wars”, has been directly subsidised by revenues from the pre-war “Pay TV” business models of subscription cable and satellite television networks. Those days now seem to be over. Netflix, with no such corporate subsidies, continues to outspend them and remains the bell weather. 

It will be telling if the old/new CEO of Disney will openly discuss the changes required to pull ahead in the Streaming Wars on a level playing field. 

Of course, even Netflix is now a large, publicly-listed company that, perhaps, no longer has the finger on the pulse of audiences outside of Wall Street. Netflix was the upstart. The disrupter. Now it is not. Bob Iger’s time in Private Equity exile might have given the old king some new ideas on how to wean Disney off of its legacy revenues and truly grow into its heritage.

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