Disney needs new ideas from its cast of in-activist investors

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Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.

Disney chief executive Bob Iger likes to say that the company he runs is fuelled by storytelling. If that is the case then someone needs to punch up the script. Disney’s share price is down by more than 50 per cent from its 2021 peak. Despite input from two CEOs and multiple activist investors, radical ideas for recovery are thin on the ground. 

This week, investor ValueAct Capital used its stake in the company to strike a deal to consult on strategy. It will also support Disney’s board nominees. The move is a counter to activist investor Nelson Peltz, who has restarted his battle to join the media company’s board. 

Everyone agrees that the stock is underperforming as it transitions to streaming. No one has a new plan to address it. Peltz wants Disney to cut costs. Iger is cutting costs. His predecessor Bob Chapek left before he could begin to cut costs. 

On the surface, everyone also agrees that a leadership succession plan is needed. In reality, Peltz has backed down from a proxy fight on the issue once before. The arrival of ValueAct makes it more likely that Iger will stay put. 

The scale of Disney’s $7.5bn cost-cutting plan is impressive. Enjoy the Marvel blockbusters while you can because content spend is falling. Dividends are back. At less than 0.7 per cent, the yield is not head-turning, but if free cash flow increases to $8bn from less than $5bn in the past financial year there is scope to raise it. 

But those don’t address the longer-term problem of lacklustre franchises, quieter theme parks and the end of television. If Disney wants a radical change it needs to consider sales. Sports network ESPN, which once bankrolled splashy purchases elsewhere, is slowing. Competition from the likes of Amazon is raising rights fees. Disney’s sports division reported a fall in revenue and profits for the year.  

Iger is considering “partnerships”. His long history at Disney may leave him reluctant to unwind a business that he helped to grow. Time for one of the activist investors around him to step forward.