Hollywood Analyst Claims “Disney Reckoning—Sorry, Reorganization—Is Coming Shortly”
Hollywood analyst Matthew Belloni recently claimed that a reckoning is coming for The Walt Disney Company amid massive changes in the entertainment industry that’s seen contractions in spending across many of the major companies.
In an article at Puck that primarily discussed Showtime being consumed into Paramount+ and marketed as a prestige brand on the streamer, Belloni also discussed the major changes in the entertainment industry and how streaming was a losing bet from the beginning.
Specifically, he noted, “Fundamentally, streaming is a bad business. Costs are greater than revenue, and even if/when these services reach profitability, it’s probably never going to be as lucrative as cable. We’ve kinda always known that, but since the Great Netflix Correction, we really know it now.”
Belloni added, “There’s no going back, of course, so these media companies are figuring out how to make streaming work, and in a manner that convinces investors to back their strategies. Hence: subscription businesses have now become subscription + ads, and will soon become subscription + ads + a free tier with many more ads.”
The Puck analyst would go on to point out how many of the major media companies from Netflix to Warner Bros. Discovery are finding ways to cut costs whether that is cutting down on the amount of films and TV series they are creating to removing poorly watched series and films from their streaming services to cut down on hosting expenses.
After outlining these strategies and others these entertainment companies are doing to cut costs and find new sources of revenue he declared that The Walt Disney Company will have its own reckoning as its forced to face the reality of the current entertainment industry.
Belloni declared, “And the Disney reckoning —sorry, reorganization—is coming shortly.”
That reckoning might be coming sooner rather than later for CEO Bob Iger and The Walt Disney Company who not only gambled much of their company on Disney+, but at the same time began not only alienating, but actively insulting and being antagonistic toward much of what used to be their core audience namely families.
The reckoning appears to be coming in the form of activist investor and billionaire Nelson Peltz and his hedge fund organization Trian Fund Management. As noted by That Park Place, Peltz with assistance from former Marvel head Ike Perlmutter requested a seat as a board of director at Disney back in March.
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In January 2023, Trian Fund Management officially nominated Peltz for election to the Disney Board. A press release explained the nomination, “Trian believes that Disney’s recent performance reflects the hard truth that it is a company in crisis with many challenges weighing on investor sentiment.”
It continued, “While we acknowledge that Disney, like many media companies, is undergoing a challenging pivot to streaming, Disney also benefits from owning best-in-class intellectual property, a more diversified business mix, and a Parks business that is enjoying all-time high profitability. As such, we believe that the Company’s current problems are primarily self-inflicted and need to be addressed immediately.”
The press release then detailed all of the problems that Trian sees with Disney including failed succession planning, over-the top compensation practices, minimal shareholder engagement, including an apparent unwillingness to fully engage constructively with Trian, flawed direct-to-consumer strategy struggling with profitability, despite reaching similar revenues as Netflix and having a significant IP advantage, lack of overall cost discipline, overearning in the Parks business to subsidize streaming losses, and poor capital allocation.
Most recently, Reuters reports that Trian sent a letter to Disney shareholders to have Peltz replace current board member Michael Froman.
According to Reuters the letter read in part, “Shareholders need someone in the boardroom who is experienced enough, committed enough and objective enough to insist that Disney live up to its full potential.”
Disney reportedly fired back claiming that Peltz “has demonstrated that he does not understand Disney’s businesses” and he “”lacks the perspective and experience to contribute to the objective of delivering shareholder value in a rapidly shifting media ecosystem.”
The company also claimed, “We are skeptical of his motives and believe he would be disruptive at a crucial period for Disney.”
Even if you haven’t followed the inner workings of The Walt Disney Company, one can see just how accurate Peltz is when he notes Disney has squandered its superior IP and underperformed companies like Netflix.
The last theatrical release for Disney Star Wars was back in 2019, over three years ago. The franchise has been relegated to television, and the quality of the shows has been mediocre at best.
On top of Star Wars, the Marvel brand is quickly following suit as its most recent Phase 4 was axed earlier following poor grosses from films such as Shang-Chi and the Legend of the Ten Rings, Black Widow, Eternals, and Thor: Love and Thunder.
The company also severely damaged its family brand when it embraced immoral identity and gender politics by opposing a bill in Florida preventing the teaching of gender identity and sexual orientation to children in kindergarten through third grade.
On top of opposing this bill, the company made it explicit they want to groom young children into immoral, sinful, and depraved lifestyles through their content programming.
Former CEO Bob Chapek stated, “Because this struggle is much bigger than any one bill in any one state, I believe the best way for our company to bring about lasting change is through the inspiring content we produce, the welcoming culture we create, and the diverse community organizations we support.”
“There’s a reason content is at the top of this list,” Chapek explained. “For nearly a century, our company’s stories have opened minds, inspired dreams, shown the world both as it is and how we wish it could be, and now more than ever before, represent the incredible diversity of our society.”
“We are telling important stories, raising voices, and I believe, changing hearts and minds,” he added.
He later declared, “I firmly believe that our ability to tell such stories-and have them received with open eyes, ears, and hearts -would be diminished if our company were to become a political football in any debate.”
“Powerful content that changes hearts and minds only springs from inclusive cultures, which not only attract and retain the best and most diverse talent, but also give those employees the freedom to bring forth ideas that reflect their lives and experiences. We must work together to ensure Disney always remains such a place,” he asserted.
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Iger said, “This company has been telling stories for a hundred years and those stories have had a meaningful, positive impact on the world. And one of the reasons that they’ve had a meaningful, positive impact is one of our core values is inclusion, acceptance, and tolerance. And we can’t lose that. We just can’t lose that.”
In response to the so-called “Don’t Say Gay” legislation, Iger said Disney would still promote “inclusion,” but suggested that the company must strike a “delicate balance” and “listen to [its] audience” and “have respect for the people that [it’s] serving.” This is a retreat. pic.twitter.com/bZBnQdm616
— Christopher F. Rufo ⚔️ (@realchrisrufo) November 29, 2022
These decisions by Disney leadership rightfully saw Americans significantly lose their trust in the company. An Issues & Insights poll found that 41% of a subset of respondents who had been following Disney’s battle with Florida said they don’t trust the company or have little trust in it.
An NBC News poll from May 2022 also found that only 15% of respondents held a very positive opinion of The Walt Disney Company.
In fact, only 33% of respondents held any kind of positive opinion about the company while 30% held a negative opinions.
To put that in perspective both Joe Biden and Donald Trump had higher positive opinion scores. 37% of respondents had a positive opinion about Joe Biden while 36% had a positive opinion about Donald Trump.
What do you foresee in Disney’s future?