The Walt Disney Co. CEO Bob Iger said the proxy battle mounted by activist investors is a “distraction” for him and senior managers as they try to make a complex company more profitable.
“We’re at this hard every day, and when you go from fixing [the company], which was significant and heavy lifting, to really creating meaningful growth for our shareholders, the only way to achieve that is by focus and this campaign is in a way to distract us, to take our eye off all those balls,” Iger said, speaking at the Morgan Stanley Technology Media and Telecom Conference on Tuesday.
“Focus is necessary to generate what we need to generate for the shareholders,“ he said. “It’s that simple. And I am working really hard to not let this distract me because when I get distracted, everybody who works for me is distracted, and that’s not a good thing.”
Iger was upbeat, saying that in the 15 months since he returned as CEO, the company had accomplished a restructuring that put creative at the center of Disney’s management structure, and that the company was likely to exceed its $7.5 billion cost-cutting goal.
He said he expected operating income to grow by the low to mid teens in the second quarter compared to a year ago, exceeding the company’s recent guidance. The company is also pacing ahead of its cash-flow guidance, he said.
Iger addressed the business’s dissident shareholders who would like to see a different approach.
On streaming, Iger noted that Dana Walden and Alan Bergman, the executives now managing Disney’s streaming business, also manage the company's film and TV content creation.
“That’s really important when it comes to streaming, because streaming is a path to monetizing what they make in a much more efficient, more effective way,“ he said. ”So it starts with that.”
Catching Up to Netflix
But Iger conceded that Disney was behind Netflix in streaming technology.
Iger said that Disney Plus quickly grew to 100 million subscribers but “what we didn’t have was the technology that we needed to lower customer acquisition and retention costs, to increase engagement to essentially grow our margins by reducing marketing expenses.”
He said Disney was now in the process of creating all of that technology.
“Obviously, the gold standard there is Netflix,“ he said. “We need to be at their level in terms of technology. One of the reasons why their margins are so much more significant than ours is because they have that technology,” he said.
Iger added that Hulu is part of Disney’s strategy to increase engagement with its streaming business. Having Hulu within the Disney Plus app increases the volume of content available to consumers. And bundling that way tends to bring down churn rates.
“We’re finding wherever we bundle, churn rates are down significantly. So that’s a path to profitability,” he said.
Trian Asset Management, one of the shareholders seeking seats on Disney’s board, wants streaming to be more profitable. It is also against the expense of creating a new streaming version of ESPN.
Iger didn’t indicate any changes in how Disney’s sports business will be managed. The joint venture with Fox and Warner Bros. Discovery is expected to launch this year. A streaming, a la carte version of flagship ESPN would come next year.
“What we’re trying to do is be very pro-consumer,” Iger said of the company’s sports strategy.
“You've got a lot of young people who have not subscribed to the multichannel bundle. You have a lot of people that used to be subscribers that lapsed,” Iger said. “We want them in they want to watch the sports they want to watch. We're trying to provide them a less expensive, more focused opportunity for them.”
Iger noted subscribers who subscribe to the joint venture’s offering will be able to upgrade to the digital version of ESPN, which will have additional features, including betting.
Next Up: NBA
ESPN’s big negotiation now is with the National Basketball Association.
“Negotiations are unfolding,” He said. It’s our goal to stay in that relationship because we love the sport.”
Iger also said that he felt good about the upcoming films from Disney’s studio — which will eventually generate engagement on Disney Plus — and that there was room to grow Disney’s parks and cruise businesses.
