Bob Iger Is Pulling Back the Reins on Disney’s Spending on “Path Toward Profitability”

A lot has changed at The Walt Disney Company over the past few years.

After significant losses in Disney’s streaming division led to Bob Chapek being ousted from the company, Bob Iger returned to help “set the strategic direction for renewed growth,” and now we have a better idea what that means.

Bob Chapek was hand-picked to lead Disney by Bob Iger, but he didn’t prove to be the leader the company needed. Now that Iger has returned to “set the strategic direction” of Disney, he has dismantled what Chapek built seemingly overnight.

Chapek poured all his focus into Disney’s Media and Entertainment Distribution (DMED) division, including on cost-cutting measures to bring profits up after the pandemic and losses caused by streaming, Chapek created DMED to “further accelerate the company’s Direct to Consumer (DTC) strategy.”

Ultimately, this structure didn’t prove to be successful, and Disney continued to struggle in the streaming department. In November 2022, we learned that Disney’s streaming business had a loss of nearly $1.5 billion, which was one of the reasons Chapek was fired.

As of the most recent earnings call, the average monthly revenue per paid subscriber had gone up from $4.84 per month per subscriber in Q3 2022 to $5.53 per month per subscriber in Q1 2023.

However, that dropped in just the U.S. and Canada from $6.10 per subscriber per month to $5.95 per subscriber per month. And, in the U.S. and Canada, Disney’s subscriber count held relatively steady with a small jump: from 46.4 million to 46.6 million.

Despite his regrets about choosing Chapek as his successor, Iger has set his sights on Disney’s streaming division as well — naming it his “number one priority.”

During the recent earnings call, Iger noted that his priority is at ensuring enduring growth and profitability when it comes to streaming. Disney had previously indicated that they expect Disney+ to become profitable by the end of fiscal year 2024. Iger reaffirmed that expectation during the call.

Not only that, but Iger shared Disney will be focusing more on its core brands and franchises, which deliver higher returns. He noted that they’d be working to curate entertainment content, reassess certain markets, adjust their global content, adjust their pricing and promotion strategy, and fine-tune their advertising on streaming.

In the same call, it was announced that three hit Disney films would be getting sequels.

According to Iger, the new organizational structure that has been put in place will help this effort by reestablishing a direct link between the decisions being made about Disney’s content and its financial performance.

Iger also told investors that the company plans on $5.5 billion in cost-cutting, starting with 7,000 job cuts. Some of that cost-cutting will trickle down into the “curation of content” put forth by Disney.

“We want the quality on the screen but we have to look at what it costs us,” said Iger during the call. Essentially, the cost to produce movies and shows has increased, and Iger plans on pulling back the reins when it comes to streaming spending in order to accomplish that.

He made it clear that Disney would be carefully “curating” the content it produced moving forward, and that includes reassessing “all markets [Disney] has launched in” and determining “the right balance between global and local content.”

“We’re going to be fairly aggressive at better curation when it comes to general entertainment…we think we have an opportunity to, through more aggressive curation, to reduce some of our costs in the general entertainment side and, in general, in volume.”

They’ll also be looking at their pricing strategy and doing “a full examination of [Disney’s] promotional strategies.”

And, when it comes to gaining subscribers, Disney will “have to be better at curating the Disney and the Pixar and the Marvel and the Star Wars of it all,” by focusing on core franchises.

There’s a lot of work to be done on Disney’s streaming division, and whether or not Disney+ hits its profitability goals remains to be seen. We’ll keep an eye out for the latest updates, so stay tuned to AllEars for more!

Read Everything You Missed from the Recent Disney Earnings Call Here

What do you think Iger’s next move will be? Tell us in the comments.

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