According to recently minted (and returning) Disney CEO Bob Iger, the company is now entering its building phase. Iger returned to take over the ship last year and made a mandate to take the company in a new strategic direction, and it seems that focusing on the growth of its various businesses is the primary focus of that direction.
Bob Iger Building Disney Back
Iger made the statement during the company’s fiscal quarterly earning call, saying, “While we still have work to do, these efforts have allowed us to move beyond this period of fixing and begin building our businesses again.”
He added, “We have a solid foundation of creative excellence and innovation built over the past century, which has only been reinforced by the important restructuring and cost-efficiency work we’ve done this year, and we’re on track to achieve roughly $7.5 billion in cost reductions (via The Hollywood Reporter).”
As part of Iger’s shift to move Disney into the building phase, he set out four strategic priorities for the company.
These priorities include making streaming profitable, building out ESPN’s digital future, expanding the company’s live experiences side of the business, and enhancing the output and economics of its film studios.
So far, it appears that Iger isn’t all talk, as the $7.5 billion in cost reductions he mentioned is a $2 billion increase from the $5.5 billion cost reductions the company initially set out to hit under Iger’s leadership.
Disney Needs More New IP
These major cost reductions will presumably allow Disney to focus on the building efforts that Iger laid out.
Iger also emphasized that his strategy will reduce the company’s overall output to focus on quality rather than quantity while also creating new original IPs.
This strategy isn’t dissimilar to other companies like Netflix, which are paring down their content efforts to focus on fewer projects that are of a higher caliber of quality.
From a numbers perspective, Disney also seems to be within Iger’s margins for error, as the company reported revenue of $21.2 billion, which is only slightly below estimates and a small increase from the previous year.
Operating income also reached $2.9 billion, and the diluted earnings per share of $0.82 surpassed the estimates.
Additionally, the building strategy for streaming seems to be on track as the company added 7 million Disney+ subscribers to its 150 million subscriber base.
However, Disney will need to continue to build its streaming business up, as it is still operating at a loss with a reported $387 million combined loss across entertainment and sports.
The Disney-owned Hulu subscribers stayed relatively stable, but its average revenue per user did drop marginally. As for revenues, in each sector, the company reported $9.5 billion in entertainment, $2.8 billion for ESPN, and $8.2 billion for parks and experiences.
Both ESPN and Parks and Experiences saw their revenue increase by 16% and 13%, respectively.
Disney is also restructuring its financial reporting by notably delineating ESPN’s finances completely separate from other linear and streaming offerings at Disney.
All in all, shareholders seem to be relatively happy with Iger’s building plan, though it remains to be seen if the new status quo continues to pay dividends in the future.