- Theme parks and cruise lines that attract millions of people from around the world each year; and
Mentions Cruise Lines, but doesn't mention if they've been mismanaged, too? Perhaps because DCL are doing very well. Under Iger.
- Disney+, an emerging streaming giant with a library of enviable content.
"Streaming giant"! But will later claim it's mismanaged. How does a mismanaged streamer become a 'streaming giant'?
Disney was forced to cut its dividend and only recently restored it3 – meanwhile shareholders missed out on more than $12 billion in expected distributions between 2020 and 2023.4
zomg... Peltz is looking for back dividends payouts.
Despite Disney’s enviable and unique position in media and entertainment, its stock price is half what it was less than three years ago and Disney shareholders – like you and us – have collectively lost nearly $200 billion of our investment in that time.2 Disney’s recent creative efforts have disappointed its once-loyal customer base and have caused losses for shareholders. Disney was forced to cut its dividend and only recently restored it3 – meanwhile shareholders missed out on more than $12 billion in expected distributions between 2020 and 2023.4
Yes, Disney stock is doing worse than Dow or S&P. But so are most content producing companies.
Disney’s stock is down over the last one, three and five years. In fact, over those time periods, Disney’s total shareholder return (“TSR”) has significantly underperformed the stocks of other media and entertainment companies, despite Disney’s superior assets, capabilities and businesses. Disney’s TSR has underperformed the S&P 500 by a wide margin over each of those time periods, too.5
One year ago, three years ago, five years ago or ten years ago, you would have been far better served investing in an index fund like the S&P 500, or in a basket of Disney’s self-selected peers, than in Disney itself.6 Instead, you, like us, have been caught in the Disney mousetrap.
There were two giant leaps in DIS stock in the past five years. The first was an exuberance bubble due to the introduction of Disney+. Which, at that time, Disney said it would take five years to become profitable. The five years aren't up.
The second exuberance bubble was when Disney reported basically almost no net loss during the year of the lockdown and its parks were mostly closed. Investors saw Disney as a safe place to park their money. Once the pandemic protocols were over, they jumped ship.
Comparing stock now to those two bubble is financial negligence, or at best, ignorance.
- The Company’s creative engine has stalled. For the first time in nearly a decade, Disney has lost its position as the highest-grossing movie studio.7 Disney’s last five films have collectively cost over $1 billion to produce, and yet two of those films have lost money, and another barely eked out a profit.8 Disney’s reputation as the world’s preeminent entertainment company – and the flywheel that drives its business – is at risk.
One bad year is not bankruptcy. There were still winners among the losers.
There were: Top tens. Awards. Massive box office which looks bad only when you look at the budget of the movies. Disney's BO was just a tad behind Universal's. But the big budgets made it look bad as a financial endeavor, not as a popular or creative endeavor.
- Disney+, the emerging streaming business, has been poorly managed. Since the service was launched in 2019, Disney+ has failed to achieve profitability in any fiscal year. And while Netflix generates attractive profits, margins and cash flow from its streaming service, success at Disney+ has been elusive. Today, Netflix generates approximately 21 cents of profit for every dollar of revenue; in its 2023 fiscal year, Disney lost approximately 14 cents for every dollar of streaming revenue.9 In total, the streaming businesses have cost the Company more than $14 billion in operating losses over the last six years.10
Yes, Peltz. Read the heckin' road map. D+ wasn't going to produce a profit until this fiscal year. So, saying it wasn't profitable is disingenuous. Or dumb.
Was the spending too exuberant? Yes. But all the streamers were guilty of that and pulled back. And when Disney's CEO didn't pull back, he (Chapek) was fired. Iger came in and pulled back.
- ESPN is challenged and lacks a clear strategy. ESPN is one of the most respected brands in sports media, but the once-lucrative business has suffered as cord-cutting has accelerated and sports rights costs have dramatically increased. ESPN has continued to shed subscribers, and investments into the direct-to-consumer app appear to lack clear return targets and payback is uncertain. Operating income for Disney’s Sports segment, which includes ESPN, dramatically declined in 2023.11
A clear strategy was announced at the last Quarterly call. It's clear Peltz isn't doing his homework.
- Prices have gone up in the Parks even as investment has been deferred. Disney’s parks have long been a crown jewel of the Company and remain an important part of its future. But even though admission prices have increased by more than 35% over the last ten years,12 Disney recently revealed the need to invest a whopping $60 billion into its parks and cruise lines over the next ten years, seemingly to catch up for delayed or deferred investment.13 Disney has failed to answer how it plans to compete with Universal’s new attractions, why it has not kept pace with development, how and where this money will be spent, or what returns shareholders can expect to earn on this massive investment.
The "need to invest"? As if no one's showing up due to lack of investment?
They've been spending billions over the past decade. The focus on streaming, which is existentially vital to be as success once all the linear TV income is gone, was the wise move, even to the detriment of the parks. Linear advertising saved Disney during the lockdown. The parks are susceptible to the next pandemic and Disney needs a diversified revenue stream for if that were ever to happen again.
- Lack of Alignment: Disney’s CEO, Bob Iger, has sold nearly all of his Disney stock, reaping proceeds in cash of more than $1 billion; today, he is left owning comparatively few shares.17
You know he sold the stocks because he left his position after the board executed a successful CEO transitions (notwithstanding who they chose), right? We can fix this by giving Iger more stocks!!
- Lack of Accountability: Despite years of Disney underperformance and shareholder discontent that has been repeatedly expressed at Disney’s annual shareholder meeting votes,18 the Board continues to claim it knows best, refusing to heed input from shareholders or add shareholder-selected directors to the Board who can bring fresh perspectives to Disney’s challenges.
You mean the once-a-year meeting where one person promotes a radical right agenda and the next a radical left agenda?
There's no meaningful input from the peanut gallery at those meetings.
We do not believe the current Board can solve Disney’s problems. To Restore the Magic, we need new perspectives, fresh thinking and tangible goals. We certainly do not expect this same Board that has sat idle, watching Disney’s decline, to suddenly change and have the drive to fix Disney.So, to ensure a better future for this great company, we, its owners, must act!
Going all-in on streaming was a very fresh and bold idea. And one that was vital for the company to survive in the next decade. Peltz would never have done that since it would put his precious dividends in jeopardy.
Disney’s current directors do not want our candidates inside the board room. Perhaps they do not want the hard questions and focus on shareholder value. The Disney Board is seeking to exclude them and appease shareholders with its own appointments, adding two new, hand-selected directors that were chosen without shareholder input. You should be wary of cosmetic “change” orchestrated by the same directors who have consistently failed shareholders.
What happened to making Disney great for consumers? What happened to "restore the magic"?
If elected, Nelson Peltz and Jay Rasulo will seek to work diligently and collaboratively with the other Disney directors and management to:
- Initiate a Board-led review of the Company’s creative processes and structure so that Disney can once again claim its #1 position at the box office while consistently delivering industry-leading content and Disney hallmarks;
Disney's BO returns was only a few tens of thousand dollars from being number one. Universal's BO was $4.91B and Disney's was $4.83. About a one and half percentage point from claiming its #1 position!
- Insist that management finally develop and implement an executable plan for the streaming business in order to achieve Netflix-like levels of profitability;
Peltz's plan: Be like Netflix. They give dividends!!
I'm kidding. His real plan is: Come up with a plan!!
- Press management to disclose the expected returns on the $60 billion of announced investments in the Parks and Experiences business;
See, all you park fans: If that $60B for the parks doesn't bring about "expected returns"... then that investment is not going to happen.
- Finally execute a successful CEO succession process, while cultivating a deep bench of capable, next-generation leaders.
Finally? They did it once. Unfortunately, it was Chapek as the replacement.
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