Disney’s Iger Plays Offense, Touting New Investments, Streaming Initiatives After Earnings Win

Bob Iger came roaring back during Disney’s earnings presentation on Wednesday, announcing a series of new investments including a $1.5 billion foray into gaming and a plan to transfer the value of ESPN into a new sports streaming platform, while leaning into a tighter Marvel Films strategy.

After months of being under fire from an activist investor group that is trying to meddle in his board structure and has criticized Disney’s moribund stock performance, Iger seemed determined to show he was firmly in control of Disney’s strategy.

“Just one year ago, we outlined an ambitious plan to return the Walt Disney Company to a period of sustained growth and shareholder value creation,” Iger said in a statement. “Our strong performance this past quarter demonstrates we have turned the corner.”

Iger’s earnings call and an appearance on CNBC drew a strong market reaction, as Disney shares jumped about 7% in after-market trading, foreshadowing a big day on Thursday for the entertainment giant, whose stock had been trading at decade-ago levels in recent months. Indeed, the stock surged 10% Thursday morning.

A Wall Street darling during his previous 15-year tenure as Disney CEO, Iger has struggled with challenges on all fronts since coming back to lead the company in November of 2022. But in the quarterly earnings call on Wednesday, Iger left analysts with little to criticize, outside of concerns that a joint venture sports deal with Warner Bros. Discovery and Fox, announced on Tuesday, could cannibalize ESPN’s declining linear business.

Disney reported $2.15 billion in net income, a 58% increase from the previous-year period, on revenue of $23.55 billion that was essentially flat. Disney attributed the results to progress in a “strategic transformation” which included cost cuts, record quarterly results from its Experiences segment and improved numbers at its unprofitable Direct-to-Consumer services, which includes streaming platforms Disney+ and Hulu.

The DTC segment saw losses diminish 86% to $138 million on revenues of $5.5 billion, up 15% from 2023. Gains on the entertainment side, which showed positive earnings of $874 million, up from a loss of $103 million in Q1 of 2023, drove the overall DTC segment improvement.

But the linear slide continued, driven largely by lower advertising revenues at ABC and the Hollywood strikes’ impact on content production. Operating income for the company’s linear TV networks, which include ESPN, ABC, National Geographic and FX, slid 7% to $1.24 billion on revenues of $2.8 billion, down 12% from the 2023 quarter.

Disney+ performance also continued to be sluggish, as the service lost 1.3 million core members, or 1%, which it previously had forecast for the market. The dip was partly offset by higher pricing and more advertising revenue. Iger and new CFO Hugh Johnston outlined plans to crack down on password sharing and set a goal of achieving double-digit operating margins in streaming, with Johnston promising “a sense of urgency to get there.”

Leaning into sequels and franchises

On the content front, Iger outlined plans to fine-tune the creative strategy. Even with reduced streaming output, Disney is focusing its theatrical plans around making sequels from its golden era of the late 2010s, when it was the box office king.

“I’d say we’re leaning a little bit more into sequels and franchises,” Iger said during the earnings call. “Given the environment and given what it takes to get people out of their homes to see a film, doing that…is actually a smart thing.”

Disney said Wednesday that it will release “Moana 2,” a sequel to a film that grossed $687 million worldwide, this Thanksgiving. The company also slated a previously announced sequel to the $1 billion hit “Zootopia” for Thanksgiving 2025, signaling that familiar faces will guide Disney’s plans for the crucial holiday release slot after the original films “Strange World” ($73 million) and “Wish” ($244 million) were November busts over the last two years.

While that move is more of the same for Disney, it also reflects what families say they want. Pixar’s summer 2023 film “Elemental,” which rebounded from a poor opening weekend to gross $496 million worldwide, is the highest grossing original animated film since the pandemic, while other films like DreamWorks “Ruby Gillman,” Illumination’s “Migration” and the aforementioned “Wish” and “Strange World” have struggled. Families are only showing up for familiar IP, something that Iger acknowledged.

$60 billion parks expansion

Disney’s Experiences segment, which includes parks, resorts and cruise ships and represents more than a third of the overall business, reported operating income of $3.1 billion, up 8%, on revenues of $9.13 billion, up 7% — both first-quarter records, the company said, which were driven largely by performance at parks in Hong Kong and Shanghai.

Iger laid out plans to expand Experiences through a previously announced 10-year $60 billion capital investment program. The money will be spread across Disney’s parks in Asia, the U.S. and Europe, he said, and will include building three new Disney cruise ships.  “Every single one of our locations will be the beneficiary of increased investment,” Iger said Wednesday.

Next year is important for Disney because Universal Studios Orlando plans to open its new cutting-edge theme park Epic Universe, with lands devoted to Nintendo properties, the “Harry Potter” franchise and the Universal Monsters franchise. Disney has yet to announce a concrete response to the new park.

ESPN and DTC future are still uncertain

As Disney’s linear TV businesses continue to decline, Iger seemed to double-down on squeezing as much value as possible from ESPN.

As TheWrap has previously reported, Iger is disinclined to part with his linear networks, and instead has in mind a strategy to pivot the content into a digital format.

One day after announcing the joint sports app with ESPN, TNT and Fox Sports, Iger set a launch date of August 2025 for Disney’s long-awaited flagship ESPN direct-to-consumer service, to be called ESPN Flagship. The two sports offerings come at a time when linear TV is bleeding subscribers and sports-rights costs are rising.

Analysts on Wednesday challenged Iger to explain how to judge the success of Disney’s sports ventures, which could eat away at ESPN’s linear cable revenues even as it builds up the DTC business. The price point of the app with TNT and Fox is expected to be cheaper than YouTube TV, which charges $72.99 per month for its basic plan, an individual familiar with the matter told TheWrap on Tuesday.

Iger said the ESPN apps are intended to target consumers who want multiple channels but at a more attractive price point “than the big fat [cable] bundle.” Success in the migration, as Iger called it, would be “to maintain ESPN’s position in sports in general” and the “attractiveness of ESPN to advertisers and sports leagues.”

Jeremy Fuster and Drew Taylor contributed to this report

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