With new CEO, Disney may cut cost due to streaming loss

Bob Iger is expected to show Wall Street a new side of his character as he returns to the leadership of Walt Disney by cutting costs and regaining profitability in just two years after spending money on acquisitions and streaming in his last stint at the company.

The entertainment giant shocked investors on Sunday night by announcing the departure of chief executive Bob Chapek and appointing Iger, 71, to a two-year deal focused on restoring the group’s growth.

“The bold move (Iger’s return) could feel like the right one. However, the business is in a different phase of growth,” said Paolo Pescatore, an analyst at PP Foresight, adding that short-term measures could include restrictions on some operations.

The most immediate target of this may be Disney+, the streaming service that Iger helped launch in 2019.

Losses at the unit more than doubled in the last reported quarter, to $1.5 billion.

The deal has become a drag on the group’s profits as Disney spends heavily on content to attract subscribers, testing investors’ patience and contributing to a 40% drop in its shares so far this year.

“Disney+ … could likely do better with fewer subscribers made up of superfans willing to pay high prices, which could generate much higher margins,” said analysts at MoffettNathanson.

They also singled out ESPN as another target for deep cost cuts, including a review of all future sports rights as the network loses cable subscribers.

Some brokerages have also raised concerns about whether Iger’s two-year deal will be enough to turn the deal around and find a successor.

“The problem is that Iger will not be able to stay forever. He already messed up the transition to Tom Staggs in 2016 and now (Bob) Chapek,” Rosenblatt Securities said.

Disney shares soared 10% earlier in trading on Monday, as a sign of confidence in the executive who ran the company for 15 years. At 1:07 pm (Brasília time) the shares were up 6%, at 97.38 dollars.