Commentary

Disney Proxy Battle Is Over - But Its Media Wars Wage On

It's all about the word "ego" about when it comes to why things don't really work at Walt Disney, according to Nelson Peltz, co-founder/chairman of Trian Partners,  in speaking to CNBC on Thursday.

This includes a “succession” issue of how the company will replace Bob Iger, CEO of Walt Disney. Iger came back in 2022 but agreed to do so for a limited time.

But it also includes a lot more. Maybe why growing competition in the media space -- from all kinds of players, digital-first companies and otherwise, will continue to put Disney under the microscope.

For two years now, Peltz has been upset about the billions of dollars in net losses Disney has racked up with its upstart direct-to-consumer (D2C) business.

Disney says that in its fourth-quarter period, it will start to make money. 

In addition, Peltz has considered all kinds of ways to reinvent Disney’s business including asset sales -- for example, spinning off ESPN.

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While Disney posted a big win this week, it is not out of the woods. 

Future, more costly TV sports rights deals might be more troubling for Disney,  as well as some potential issues about admission pricing for Disney theme parks.

Movie-theater business has steadily improved for many studios -- but is still down from the highs of the pre-pandemic period.

This all means that although Disney has improved its profitability at its D2C business, more breakup talk will consume it -- and other legacy media companies.

“There is a strong argument for break ups across the big legacy entertainment conglomerates,” said Barton Crockett, media analyst of Rosenblatt Securities, on CNBC.  “Certainly we have seen that discussion at Paramount, Warner Bros. And I think we can have it at Disney.”

Crockett says this may include seeking other kinds of partnerships and dealmaking, especially as it concerns new technology platforms. 

“Should ESPN be part of Disney? Should it be part of Apple? Should ESPN be part of Amazon? Arguably it could be a better business if it is a part of those tech platforms.”

Evidence of this he says, for example, is the success Amazon has had with “Thursday Night Football” in its now second year on Prime Video. Previously “TNF” was a money losing operation when Fox Corp. owned the franchise. 

All this suggests that while the Disney highly public proxy fight is over, the drama will continue.

Higher scrutiny will continue, which means activist investors might take another shot at the big media company down the road.

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