Iger Lays Out Vision for Disney’s Future

Nearly a year after returning to Disney as chief executive, Bob Iger laid out his vision of the company’s future, putting streaming and live entertainment at the centre, fed by a studio business that he plans to personally help reinvent.

Iger told investors in a fourth-quarter earnings call that Disney will focus on four “building blocks” that provide the foundation for future growth: streaming, theme parks and cruises, studios and the ESPN sports network.

Disney said Wednesday it would slash $2 billion more in costs than previously planned as the company sharply narrowed losses in its streaming business.

There are still major challenges to overcome. Disney’s streaming business has lost nearly $11 billion since the launch of Disney+ in late 2019. Its movie studio is in the midst of a box-office slump that has been exacerbated by delays caused by Hollywood strikes, and ESPN is looking for strategic partners as it plans to eventually transform into a streaming-only business by 2025.

“A lot of time and effort was spent on fixing in the last year,” Iger said during a conference call Wednesday. The company’s progress means Disney can “move beyond this period of fixing and begin building our businesses again,” he said.

Iger said the studio would focus more on quality than quantity and that it lost some of its focus during and after the pandemic. “We’re all rolling up our sleeves, including myself, to do just that,” he said.

Some of Disney’s core franchises, including its Marvel superhero movies and series, have struggled to attract big audiences to theaters in recent years.

Lucasfilm, the Disney-owned studio behind the lucrative and popular “Star Wars” movies, hasn’t released a feature film since 2019 and doesn’t have one in production currently, meaning it will likely be several years before the next one comes out. And Pixar, the marquee computer animation studio that has dominated the box office for the last several decades, has had a series of box-office flops.

The common thread underlying Disney’s recent challenges and potential opportunities is the transition from traditional media like film and legacy TV to streaming, which has upended Hollywood’s business model and roiled nearly every entertainment company.

In his comments Wednesday, Iger stressed the importance of getting streaming right. The company’s main streaming service, Disney+, added 6.9 million “core” subscribers—those in North America and other markets such as Europe and Asia, excluding India, where it is able to charge higher subscription prices—in the most recent quarter, about twice what Wall Street analysts polled by FactSet predicted. Disney+ added 500,000 domestic subscribers.

The company highlighted the popularity on Disney+ of recent movies including “Elemental,” the Marvel superhero film “Guardians of the Galaxy Vol. 3” and the recent live-action remake of “The Little Mermaid.”

“One thing that we have recently really come to appreciate is the performance of our big title films,” Iger said. The strength of its films on streaming means Disney can spend less on TV series, which is a differentiator for the company, Iger said.

The entertainment giant said Wednesday it is seeking $7.5 billion in cost cuts, up from the $5.5 billion it targeted at the beginning of this year.

Disney reported that its streaming business is making progress in narrowing its losses. The business, which also includes Hulu and ESPN+, lost $387 million in the most recent quarter, down from $1.47 billion a year earlier. The company reiterated that it believes streaming will break even by next September.

Disney has begun reporting more detailed results from its ESPN sports network as it seeks strategic partners to invest in the flagship sports network’s future.

ESPN’s operating income for fiscal 2023 fell 1.7% to $2.8 billion, while revenue rose 2% to $16.4 billion. Disney owns 80% of ESPN through a joint venture with Hearst, and Iger has said the company is working to transform the network into a fully direct-to-consumer platform, with live sports and other sports content streamed to consumers outside the cable bundle.

Excluding ESPN, Disney’s traditional TV networks saw revenue fall 9.1% for the quarter to $2.62 billion. Operating income from the networks was flat at $805 million.

During a CNBC interview Wednesday, Iger said the company has been considering strategic options for each of its TV networks, though “not necessarily all of them,” and has been reviewing its TV operations for opportunities to reduce costs and improve the business. This past summer, he said the legacy networks may not be core to Disney, suggesting it could sell them.

Other bright spots in Wednesday’s quarterly earnings included Disney’s experiences segment, which includes theme parks, cruise ships, a family-adventure travel-guide business and merchandise licensing. The unit’s operating income rose 31% from the year-earlier quarter to $1.76 billion. Disney has raised prices at its theme parks and announced major investments in its cruise ship business in the hopes of capitalising on rising demand for in-person entertainment experiences.

The entertainment giant, which just passed its 100th birthday, generated sales of $21.2 billion for the quarter, up 5% from a year earlier. Revenue for the period was slightly below the $21.4 billion predicted by analysts polled by FactSet.

Disney’s net income rose to $264 million in the September quarter, from $162 million a year earlier. Disney’s earnings per share, excluding certain items, were 82 cents, beating Wall Street’s projections by 11 cents.

Disney shares rose nearly 3% in after-hours trading. Before the earnings report, the stock had fallen 2.7% in 2023.

Overall, Disney+ ended the quarter with 150.2 million global subscribers, including those signed up to its Hotstar service in India. That service has shed millions of customers over the last year after Disney lost a bidding war for the rights to stream matches from a popular cricket league, and Disney is exploring a sale of its India unit, The Journal has reported.

Although the company fended off an activist campaign by Nelson Peltz earlier this year, Iger now faces the specter of another battle.

The Wall Street Journal reported in October that Peltz’s Trian Fund Management is planning a fresh push for board seats. Billionaire and former Marvel executive Isaac “Ike” Perlmutter has said he has entrusted his stake in Disney to Trian for that effort, giving the investment fund control over a stake worth upward of $2.5 billion.

Iger said in the CNBC interview that he had spoken recently with Peltz but he doesn’t “know what Nelson is really after.”

For decades, Australia has leaned into its reputation as the lucky country. But luck, as it turns out, is not an economic strategy.

What once looked like resilience now appears increasingly fragile. Beneath the surface of rising property values and steady headline growth, the Australian economy is showing signs of strain that can no longer be ignored.

Recent data paints a sobering picture. Australia has recorded one of the largest declines in real household disposable income per capita among advanced economies.

Wages have failed to keep pace with inflation, meaning many Australians are working harder for less. On a per capita basis, income growth has stalled and, at times, reversed.

And yet, on paper, things still look relatively solid. GDP is growing. Unemployment remains low. But that growth is increasingly being driven by population expansion rather than productivity.

More people are contributing to output, but not necessarily improving living standards.

That distinction matters.

For years, Australia’s economic success rested on a powerful combination: a once-in-a-generation mining boom, a credit-fuelled housing market, strong migration and a property sector that rarely faltered. Between 1991 and 2020, the country avoided recession entirely, building enormous wealth in the process.

But much of that wealth is tied to property. Around two-thirds of household wealth sits in real estate, inflated by leverage and sustained by demand. It has worked, until now.

The problem is the supply side of the economy has not kept up.

Housing supply is falling behind population growth. Rental vacancies are near record lows.

Construction firms are collapsing at an elevated rate. At the same time, massive infrastructure pipelines are competing with residential projects for labour and materials, pushing costs higher and delaying delivery.

The result is a system under pressure from all angles.

Despite near full employment, productivity growth has stagnated for years. In simple terms, Australians are putting in more hours without generating more output per hour. The economy is running faster, butgoing nowhere.

Meanwhile, government spending continues to expand. Public debt is approaching $1 trillion, with spending now accounting for a record share of GDP.

The gap between spending and revenue has been filled by borrowing for decades, adding further pressure to an already stretched system.

This is where the uncomfortable question emerges.

Has Australia become too reliant on a model driven by rising property values, expanding credit and population growth?

As asset prices rise, households feel wealthier and borrow more. Banks lend more. Governments collect more revenue. Migration fuels demand. The cycle reinforces itself.

But when productivity stalls and debt outpaces real income, the system begins to depend on constant expansion just to stay stable.

It is not a collapse scenario. But it is not particularly stable either.

Nowhere is this more evident than in housing.

The National Housing Accord targets 1.2 million new homes over five years, yet current completion rates are well below that pace. With approvals falling and construction costs rising, the gap between supply and demand is widening, not narrowing.

Housing is also one of the largest contributors to inflation, with costs rising sharply across rents, construction and utilities. Yet the private sector, from small investors to major developers, is struggling to make projects stack up in the current environment.

This brings the policy debate into sharper focus.

Tax settings such as negative gearing and capital gains concessions have undoubtedly boosted demand over the past two decades. But they have also supported supply. Removing them may ease prices briefly, but risks deepening the supply shortage over time.

That is the paradox.

Policies designed to make housing more affordable can, in practice, make the shortage worse if they discourage development. The optics may appeal, but the economics are far less forgiving.

It is also worth remembering that most property investors are not institutional players. The majority own just one investment property. They are, in many cases, ordinary Australians using real estate as their primary wealth-building tool.

Undermining that system without replacing it with a viable alternative risks unintended consequences, from reduced supply to higher rents and increased inflation.

So where does that leave Australia?

At a crossroads.

The country can continue to rely on population growth and rising asset prices to drive economic activity. Or it can shift towards a model built on productivity, innovation and sustainable growth.

The latter is harder. It requires structural reform, long-term thinking and political discipline.

But it is also the only path that leads to genuine, lasting prosperity.

The question is no longer whether Australia has been lucky.

It is whether it can evolve before that luck runs out.

Paul Miron is the Co-Founder & Fund Manager of Msquared Capital.

Iger Lays Out Vision for Disney’s Future

CEO says streaming, parks, studios and ESPN are the building blocks of the company

As housing drives wealth and policy debate, the real risk is an economy hooked on growth without productivity to sustain it.