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- [00:00]
David Brown
Wondery subscribers can binge all four episodes of Business the Unraveling of Boeing early and ad free right now. Join Wondery in the Wondery app or on Apple Podcasts. I'm David Brown and this is Business Wars. The recent boardroom battles at Disney were intense, to say the least. Plenty of large and powerful personalities competing for their seat at one of the most influential tables in the whole media industry. And although Disney CEO Bob Iger prevailed once again, the House of Mouse is still on shaky ground. For years now, the company's stock has had more ups and downs than a roller coaster at one of their flagship theme parks. In 2023, the company pledged to cut 8,000 jobs as part of a $7.5 billion cost cutting effort, which was supercharged by billionaire investor Nelson Peltz and his investment company Trion when Peltz tried to take control of the Disney board. Now, as Bob Iger plans his final retreat from the magic kingdom in 2026, the board is tasked with finding his replacement while trying to avoid another Bob Chapek situation. He was the person ousted from the position of CEO after just two years when the board begged Bob Iger to step back in here to unpack the recent news from Disney and beyond. Sean McNulty he's a reporter at the Ankler, where he covers the business of Hollywood. His newsletter, the Wake up, shares commentary and analysis on the latest topics and trends in the entertainment world. Sean also co hosts the Angler podcast where he's covered Disney and its CEO shakeups at length. And today, Sean's taking us deeper into the fallout of these proxy battles and exploring what a Disney without Bob Iger might look like. All that's coming up, you know your team spends over half their time writing, and we all know how that happens. One confusing email turns into 12 confused replies and a meeting to get all lined up again. Well, Grammarly is a trusted AI writing partner that saves your company from miscommunication and all the wasted time and money that goes with it. What I love about Grammarly is that it doesn't just correct grammar, it helps you strike the right tone for your audience so you can improve both the substance and the style of your writing. And you know, four out of five professionals say Grammarly helps them get buy in and action through their communication. Plus it integrates seamlessly across 500,000 apps and websites so there's no cutting, no pasting, no context switching. Join over 70,000 teams and 30 million people who trust Grammarly to get results on the first try. Go to Grammarly.com enterprise and learn more Grammarly Enterprise Ready AI this episode is.
- [03:13]
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- [03:47]
David Brown
Sean McNulty, welcome to Business Wars.
- [03:50]
Sean McNulty
Thank you for having me.
- [03:51]
David Brown
Tell us a little bit more about Nelson Peltz. Before the Disney battle, he seemed to have a reputation for, I think his critic would say, weaseling himself onto the boards of companies like Cisco, Proctor and Gamble, Wendy's, that sort of thing. What were his goals at those previous companies?
- [04:07]
Sean McNulty
Sure he calls himself a quote, constructivist, not an activist. You can interpret that as you like personally, but as you said, it's a lot of cpg, so it's a lot of Pepsi. You know, Wendy's. So kind of a consumer facing products. And then Procter and Gamble is a big one. Snapple was a huge one in his evolution there in Hinds. So no background in entertainment per se here, but he would say that I think he comes in to help these companies probably become more efficient. It's not for the necessarily the good of the people go to the company, but for the good of the stock. So he comes out on the other side of it with a much more valuable stake in the company and increases his wealth.
- [04:44]
David Brown
Why did he set his science on Disney?
- [04:46]
Sean McNulty
This is a good question and I, I don't know that I actually really have an answer here other than he's part of a Palm beach set in Florida there where certainly, you know, there's a lot of media people down there. Perhaps that was where this originated from. Again, he doesn' history of doing this in the entertainment business. So presumably he saw an opportunity. He's looking at stock prices at companies that have a beleaguered stock price. And in 2022 Disney was falling into this category due to the cost increases from the streaming war is really taking their effect. 2022 was about their peak spending year for streaming there at Disney. So the stock wasn't doing great. They had a CEO battle or contentious part of it, whatever you want to call it, between Bob Chapek and then Bob Iger, which was not going well in 2022. So I think he saw an opportunity to come in at a company where he could get a stock price that was on the lower side of the historical low side of the stock price, get on the board and make a difference and get that stock price up and do what he usually has done at other companies. Why he wanted Disney, per se, I don't know that was ever really expressed again. That wasn't really his background in corporate America.
- [05:58]
David Brown
Well, it seemed like he really wanted to be hands on here. I mean, he was offered an observer seat on the Disney board in 2023, kind of compromise, but he refused to take it. Why? He just wouldn't have enough sort of personal hands on. What do you think was going on there?
- [06:12]
Sean McNulty
I think, look, he's been on many boards throughout the years. All those companies we named, you know, it's part of his probably ego and image. Like, you know, it's. He does not want to be consulted. He wants to have a seat at the table. You get people of that ilk in, you know, the hedge fund world, they're not looking to come in and get a phone call with Bob Iger every month. They're looking to get. You really have a. I was voted on. They want to say, I'm on the Disney board when they're at, you know, the fancy dinners in West Palm Beach. So that is part of it. And secondly, you know, it's. Without a seat on the board, you don't have an official say. So otherwise you're just a large, you know, stockholder or semi large stockholder externally, but you have no, you know, official say and you don't really know what's actually going on in the room. A board is a very official role. You're seeing official numbers where if it's just a phone call, it could be a very broad slate of information that you're getting there. So that's where I see that that was, was after. And once you get the eye on the prize, you don't want anything less at that range.
- [07:06]
David Brown
Enter Ike Perlmutter. In March 2023, Ike Perlmutter, head of Marvel Entertainment and friend and neighbor of Peltz, was fired. Bob Iger, who had recently been reinstated as CEO, made it seem like Pearl Mutter was getting let go regardless of his involvement with Pelts in the proxy battle. But Pearl Mutter had his doubts. How much of a factor was Peltz in this decision, do you think?
- [07:27]
Sean McNulty
The friction between Bob Iger and Ike Perlmutter goes back years. So this is really a culmination of many things through the history of Marvel and Disney. Obviously Iger, you know, was the architect of bringing the Marvel brand into Disney. And that was Ike's brand. It is Ike's brand. So they've, you know, not seen eye to eye on some matters throughout the 2010s and I think this was just another log on the fire that probably burned brighter than even Bob Iger probably thought it would get in terms of Nelson becoming a real problem for Disney in a sense, with his request. This was churning for a while. Probably Iger saw a window and probably took it to make his move and get rid of Ike from the company.
- [08:06]
David Brown
I wonder how smart that was, though, because then you have Perlmutter, who'd been with Marvel for decades, joining forces with Peltz, and I wonder whether Iger saw that one coming.
- [08:15]
Sean McNulty
I guess I think Ike and Nelson are well known associates of each other. I don't think Iger would be caught flat footed in that regard. Ike was already kind of a thorn in the side, you know, of Iger for quite a few years there. Whether he's on the inside of the outside, Ike still held his shares in the company, which is, you know, again, the seat at the table that he had. Again, not a great percentage of the company, but, but significant. But Ike's role at the company, he was, you know, he's the Marvel person, but he was really relegated by the time of his departure to running the comic book side of the business. It was pretty small. It wasn't, you know, he wasn't running Marvel films. He wasn't involved in any of that stuff. So his role there, and he probably had a pretty nice paycheck at Disney as well. And this was a time of austerity at Disney where they're looking for, you know, to cut costs and things like that. So I think that was Iger's opportunity to, I think, you know, excise Ike from the company. And Ike was going to team up with Nelson, I think, no matter what, in a sense. So this was not really a matter of like, oh, this will get rid of that situation with Nelson.
- [09:12]
David Brown
Yeah, okay. So at the end of 2023, Peltz tries to buy Disney again. It looks like an act of revenge. What was different in round two?
- [09:21]
Sean McNulty
So in February of 2023, Peltz never actually took the seat to a vote to be the. To be on the board. He kind of recanted his campaign at a certain point once Iger made larger changes at the company, namely large cost cut, playoffs, and things along those lines. So he comes Back around again. Yeah, in the end of 2023. And, you know, he's amassed a larger stake in the company. Clearly, this is something he wants. I mean, this is where, you know, again, back to, why does he want to do this? You know, who knows? That's the big mystery here that I don't know that's ever really been answered as to what. Why was he harping on this? Seemingly he came back with about a, I think, $2.5 billion stake in the company of owning Disney stock at that point, which is much larger than anything he had previously amassed. This is. Iger had just come back in to run the company. So when Peltz came back into the picture, Iger had been running the company for about a year, and the stock was still, you know, not doing great again, 2023 was a very painful year at Disney. You know, There were over 7,000 layoffs. There were $7.5 billion in cutbacks. So Wall street was still not seeing the love on Disney. So he probably looked at the stock and was like, well, you know, it still hadn't really moved much in that sense. The streaming business was still in disarray, quite frankly. Hollywood was not doing great. The strikes were also in process at the time. So there are a lot of clouds around the Hollywood business at that time. So Nelson probably saw another opportunity, again with a depressed stock price, the thing he saw a year ago, and an opportunity to come again, have a seat at the table. And, you know, and it's. It's also good for the Nelson Peltz business. He was on CNBC a lot. It gets his name back out there, try on partners, you know, was having some trouble with Unilever. It had a really not great experience with its efforts at ge. It could use a win. And he probably saw this as an opportunity to do so. So don't never neglect the PR factor for anybody in these players and private equity takeovers or in board seed proxy battles.
- [11:16]
David Brown
Yeah, yeah. Okay. So, of course, Peltz is making this second run for Disney, and he's getting a lot of pushback from Disney's board for not understanding the business. But of course, you know, he's saying, well, look, I have billions of dollars worth of holdings across multiple industries. I understand business. Right. I'm curious. What do you see as the real reason Disney didn't want Pelts on their board?
- [11:39]
Sean McNulty
From an outside point of view, I don't see the added value. I mean, if you have a board member at that point, the head of a wide variety of People, you know, from the different industries, they didn't need anybody from a business that was not involved in entertainment at that point. And Peltz, you know, this famous manifesto, restore the magic, 133 pages of ideas. And a lot of them were when he came back around the second time. Iger had already done them and that was the thing it was know, cut spending on streaming, cut down on sequels, you know, fix animation. This is all Iger year one things he was already instituting. So it wasn't like there was fresh ideas here. But Disney has structural issues that I don't know that Nelson Peltz adds any value other than just to maybe be a detriment and quite frankly divert focus from getting the job done. So I think that's the main thing as to what the thinking was there.
- [12:29]
David Brown
Yeah, well, you mentioned the Restore the Magic campaign from Peltz and his camp. But both sides of this battle were staging campaigns with social media ads, websites, all sorts of industry media blitzes. It makes you wonder how much of a threat did Disney see from Peltz? I mean, this was, at least in the public space, rather ugly, nasty looking battle.
- [12:55]
Sean McNulty
It really escalated there. Yeah. In the first quarter of 2024, over $65 million was spent cumulatively on both sides. Between the two sides being Nelson and Disney on this was a lot of money for a board seat proxy fight. I mean, it's a little ridiculous. And the headlines just kept going. It had a little bit of a snowball effect, I think, where, you know, maybe they were hoping this would just go away for a little while and then was clear that it wasn't and the media was really picking up on it. And then you had people like Michael Eisner and Laureen Powell Jobs and Albigail Disney coming out. And then you had shareholder advisory firms like Egan Jones and ISS supporting Nelson. It was, you know, the narrative kept building and this wasn't gonna be something that had to go away, you know, as to why the big spending in the ads. I mean, it just, it got a bit of a life of its own at some point and it was going to build to a crescendo with the, you know, with the vote there for the board, which was going to be in April. So they had to take it more serious than they probably wanted to there at Disney. But the other side of it is, you know, if you don't spend the money, the negative consequence, outlies, whatever the, you know, the negative of spending the money to fight it would be. But if it, for Some reason they didn't spend and Nelson's campaign worked. I think the downside they figured was much larger there. So they figured it was worth, you know, investing the time and money into it.
- [14:15]
David Brown
Yeah. Well, ultimately, Peltz lost out again, second time, and Disney's board voted in favor of Bob Iger and the old guard remaining in charge. When he was asked about the result on cnbc, here's what Iger had to say.
- [14:27]
Bob Iger
I remain confident and very optimistic about what we're doing. And I just didn't think it was necessary to, you know, essentially bring Nelson Peltz onto the board. Nor did the board feel that given the fact that he didn't bring any new ideas and he wasn't going to have an impact on the company that we've deemed was going to be positive. If anything, there was a belief that it could be a distraction.
- [14:48]
David Brown
All right, you think that's a full story?
- [14:50]
Sean McNulty
It's hard for me to think of anything here that a logical answer is to say what value added Nelson Peltz will bring to the table. There's zero industry expertise, and if anything, you have a big personality, which, you know, Disney's a. You know, that's a very conservative and quiet company. They do not like people, you know, going out in the press every day and talking about what's going on. I mean, who knows if he was in board meetings, what he would be saying in the public. You know, that's a loose cannon. I think, if anything, in that campaign certainly only reinforced that sentiment. So I have a really difficult time seeing, thinking about what. What would be different if he was on the board at this point. I've yet to think of anything in this whole process other than Nelson really wanted it.
- [15:34]
David Brown
And yet that's really the mystery here, at least to me. It's that it wouldn't have made much of a difference if he were allowed on. Why risk the ugly battle? Why risk the brand equity using your own Disney characters in this battle? Good night. I mean, the stakes seemed inordinately high. If all it was was he wouldn't bring much to the table.
- [15:57]
Sean McNulty
It's not bringing ideas to the table, and then it's a detriment to distraction from the company at a time when they were coming out of crisis mode there. And if you're running a board, you don't want disharmony on the board. Succession was a main thing. So if is this person, do you want him really having a say in who the next next leader of this company is? It could lead to him asking for more seats on the board. You know, once you start something that opens a bigger door, you don't want to open that door on the board. And I, that I think is a wise for Disney to have taken in that sense. So they just let him in, you know, and that means, also means somebody has to go. So someone you presumably you like already. So again you're, you're maybe even detracting value from your board. So I think there are negative consequences to that other than, well, if he's one seat or two seats, you know, which is what they were asking for. Jay Brasulo, the former CFO of Disney was also running Team Nelson was the two of them. So that's two seats that we're kind of looking for there. That's, you know, could be a real detriment. And you're looking to again, you don't want to have a lot of noise at a company that way. That's another headache that adds no value. You might want to spend the time and the money to really make sure that doesn't happen.
- [17:05]
David Brown
Anyone else sense that maybe some egos may be at play? I'll tell you what, let's take a moment for a short break. Coming up, we're going to take a closer look at the Bob of it all and whether longtime Disney CEO Bob Igers going to stick it out for another term. Stay with us. As business owners and managers, you use software for your business every day. You use one piece of software to manage your customers, another to manage your employees, another to manage your finances, and the list goes on. You buy these pieces independently and hope they fit neatly together like a puzzle. And then you find out the hard way that they don't. And you end up with a mess at the heart of your business operations. Does any of this sou familiar? Well, fortunately, Zoho offers a solution to this chaos. It's called Zoho One. Zoho One is a suite of around 50 pre integrated business applications that fit together beautifully. So instead of dealing with disparate software from multiple vendors with multiple contracts and price points, you deal with one vendor with all the pieces of the business software puzzle neatly put together, offered at a very attractive price. Now, if this sounds interesting to you, you gotta check out Zoho 1. At Zoho 1, that's z o h o dot o n e with Zoho, you're not just licensing apps, you're licensing peace of mind when it comes to.
- [18:36]
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- [19:15]
David Brown
Hey, welcome back to Business Wars. Our guest is Sean McNulty. He's author of the Wake Up, a newsletter from the Ankler, covering Hollywood and the media industry. Sean, we have to talk about Bob versus Bob because this really catalyzed the first proxy battle. Bob Iger decided to step down as CEO of Disney in 2020. Somewhat good timing on his part, whether he knew it or not. What was the industry buzz surrounding that move at the time? Did folks really believe Iger was. Would actually hand over the reins?
- [19:43]
Sean McNulty
There are still a lot of questions. We're here over four years later to this activity that happened here in February 2020. Of course, pre Covid, Bob Iger been at the company, I guess we're talking 16 years for 15 years at that point. And it happened really fast. And Bob Iger famously. Succession's been even before the Chapek era of this had been a problem. He extended his contract numerous times. So all of a sudden to. To be doing that and then be like, yep, I'm leaving. I'm gonna give the keys to Bob Chapek. And you know, that's. Thank you very much. You know, it was very abrupt, and everybody's like, what did he just do? But he. But the thing is, he wasn't leaving. He was becoming executive chairman, and he wanted to stay in charge of creative. So it was this kind of faux thing that was going on that, yes, he wouldn't be CEO, but he was never. He was never leaving the picture at Disney. So that was even more baffling in a sense that how's this all going to work? Was really the question as well. So on top of that, again, this all happened in the backdrop of COVID and the park shutting down and movie theaters going dark. So it was just a tremendous amount of chaos going on. And you think you'd want a steady hand at that time. Not the best time to be transitioning leadership at a global pandemic on the doorstep there. So that even added more to it. I don't know that anybody has ever gotten a real answer as to you know, what the thinking was there. Exactly.
- [21:09]
David Brown
Let's talk about the decision to name Bob Chapek as Iger's successor. I mean, you know, on paper and in some interviews, I mean, Chapek was like the foil to Iger. The two couldn't be more different. And I wonder, I mean, if you're Bob Chapek, I mean, looking back, you got to be thinking, wow, how fair was that? And how do you see it?
- [21:28]
Sean McNulty
I think it's a relationship that turned. I mean, Bob Chapek was there for over 20 years. This wasn't like some guy. They brought it off the street or just had come in three or four years ago. So they had worked side by side for, you know, for many, many years, and by all accounts, had a good relationship. Bob was promoted throughout his tenure. He was a home entertainment for his first spell there, moved over, you know, to consumer products and then moved up to run the theme parks ever since 2015. So until this era, he'd been running theme parks for five years, a rather large business at Disney. So, yes, Iger and Chapek knew each other quite well. And then, you know, the good news, you know, Bob Chapek, we're giving you the CEO role, but I'm not leaving. So that's not really instilling confidence. And typically the CEO role at many companies, including Disney reports into the board. Iger wanted Chapek to report into him still. So then it's like, well, what's changing here? The compromise they reached was that Chapek would report into the board and into Bob Iger. And reporting into two people is always tenuous at best and often a disaster, which is what it turned out to be. So let's.
- [22:31]
David Brown
Let's stop down for just a moment because here's what I'm just throw out the unspoken. This is the elephant in the room. It seems to me no one really knows why Bob Iger decided that he wanted to walk away when he did. It's still the stuff of speculation, as you were saying earlier. And then Chapek comes in and Disney is flailing. Do you think Iger saw something coming and in a way, threw Chapek under the bus?
- [22:55]
Sean McNulty
That's the probably popular narrative, I think, that exists out there. And that's just, you know, it's very external. But if you're looking on paper and looking at what happened in the end of Iger then returning so he can.
- [23:08]
David Brown
Be the hero in a way.
- [23:09]
Sean McNulty
Exactly. That's the way it worked out. So one could really make that Argument and there's very little evidence you'd have against that. Now, did Czech screw up a lot of things when he was there? Yeah. So to be fair, he had his own problems as a CEO. I will caveat that, but you could definitely paint that narrative. And again, as we said, iger left, it's February 2020. He saw it was they have a park in Shanghai. He saw exactly what was happening overseas. You know, again, this is all speculation, so to be fair about that, but you could say that fast forwarded whatever thing he was thinking into that mode and he get to stay around and do what he likes to do is to, you know, run the creative work on the movies and work read scripts and famously gives notes on every project and all this kind of thing. And then Bob Chapek did not help himself out during his tenure, but he was also set up to fail.
- [23:58]
David Brown
But I think we're getting at the heart of something that perhaps is lost a lot of times when we hear about these proxy wars. So much of it comes down to these human dimensions. And I want to ask you about something you said on the Ankler podcast. You and your, your co hosts were talking about the mythologization of CEOs, especially in the media. Can you break down what you meant by that and share how that shows up in this Bob Iger succession narrative.
- [24:21]
Sean McNulty
As you see it, 100%? I mean, you know, Bob Iger is seen as and arguably is one of the best CEOs Hollywood has had in its tenure. You remember when he came in in 2005, what that company was, it had just come off a very, very tumultuous period with Michael Eisner, you know, in the battle with the board for three years where Iger was coo, he was front row seat to all of that had. And he made massive big bets. I mean, look, Marvel, Star Wars, Pixar, these were not things at the time where like, oh, that, you know, these are major, major multi billion dollar bets that he made that paid off and the strategy paid off for his first, you know, ten years of his. Of his tenure there. The transition to streaming was much bumpier. And that was the kind of the second half of this tenure here. So there is that cult of Iger. When you have a. Your first 10 years is. That's not a bad track record record. You know, Marvel, the Star wars, the Pixar. I mean, this was a combination of a lot of factors that worked. So he seemed like he had the magic sauce, you know, at that point. And once you have it. Once you're perceived that way, you want to keep that. The one thing I could never do was land the plane on who's ever going to succeed him. And this is the narrative we're still talking about here as we, you know, begin 2025. But, you know, Hollywood has a grand history of this. I mean, go back to Jack Warner, the top of the business at the start of Hollywood. Here, moguls and CEOs have defined mythology behind the scenes. You can go back to the, you know, the wars for Paramount with Summer redsknow and Barry Diller, which was well documented. This podcast that, you know, there's been. These are larger than life characters. Bob is much more reserved than those kinds of things, but he's really the only executive left of that ilk.
- [25:59]
David Brown
What is the latest on Bob Iger's succession? I mean, you think he's going to stick around for another term as CEO or maybe his creative director once his contract ends in 2026 things if Bob.
- [26:10]
Sean McNulty
Iger sticks around the 20, 27, 28, I really can't even imagine the response. I think he's learned the lesson. He can't do what he did last time and stick around in that creative role that you just mentioned. Back to the image part of it. This is important for him to end his narrative. And if he can't do that, that will forever stick with him and his story. He'll be the guy who built Disney, you know, into its modern self and, you know, acquired Fox. But he couldn't. Couldn't leave the company, Didn't. Couldn't leave the party. You don't want to be that guy. You know, he's more painfully aware of that. Look, I'm not saying anything new. This was valid in 2020. What happened there, that was bundled about as badly as you could do of a power transfer. Whether that was A, I mean, picking the wrong person or, you know, that's debatable, but clearly, you know, didn't work out. B, sticking around in that role, which was a disaster. You can't be the boss and leave. He kept his office. He didn't even leave the CEO office that he had. What kind of message did that send to? Not even just send to Bob Chapek. Sends to the staff, sends to everybody else. It's like, is this guy still working here? I mean, think about it. If your boss said they were leaving and then you saw them every day on the lot, it's like, well, I thought you left the company. And it's. So he's learned that lesson of it. So I don't, I don't see him staying around at any other when he's leaving. He has to be out.
- [27:35]
David Brown
But then if not Iger, then who? I mean Wall Street Journal was, they were talking about Wall Street Journal article had something on possibility of the CEO of ea Andrew Wilson, former Morgan Stanley CEO James Gorman, although that's, you know, entertainment former Morgan Stanley CEO but I think Gorman's also joining Disney's board. So I guess the bigger question is what does Disney without Bob Iger look like when you squint real hard?
- [28:05]
Sean McNulty
If you ask my colleague Richard Rushfield at the anchor, he will tell you that the big plan for Iger is to make a deal with Apple. But that is, that's out there the ether. I have my own questions about that. But you know, Iger's been back to the mythology of Bot Iger. He's a deal maker. That was what, you know, really the definition of his tenure were four major deals, you know, Pixar, Marvel, Star wars and if he can pull off this one last deal to, you know, seal Disney's future under a larger, you know, tech company. When the tech companies are taking over Hollywood and you know, what, what's the match? That is one theory that's out there. They recently just announced that the decision won't even be made until essentially he has one year left at the company. Now that is raising a lot of eyebrows because that leaves, you know, a good 14 month window there. Maybe there's a deal that's going to go on to Chino. Why aren't they naming it? Why aren't they naming a CEO in that time? Well, that leaves a large window to get another kind of deal done for Disney. Maybe they won't have a CEO at that time. Is a, you know, certainly a thought that's out there in the town.
- [29:11]
David Brown
We're going to talk about Disney's next act as this episode of Business wars continues. But first, another break. When we come back, we'll dive deeper into the future of Disney and some other legacy media studios. Stick around.
- [29:27]
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David Brown
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- [31:07]
David Brown
Welcome back. Sean McNulty hosts the Ankler podcast where he and his co hosts break down the latest media industry trends and topics to make sense of the news. Let's talk numbers here. Sean, we know that Disney had their quarterly earnings call recently. What stood out to you the most about how things are going?
- [31:22]
Sean McNulty
This was a good quarter. This is the end of their fiscal year 2024. A lot of things have turned around. They're at a streaming business profit of $253 million, which is up from a loss of 150 million a year ago at this time. It's even from a loss of about 20 million back in the so Iger had made a promise that streaming would be profitable by this quarter and it was, and it will be going forward. Price hikes are a big narrative here at Disney. And as to what's turned this around, as they've been charging more, that has gotten to them. This place where, you know, this business is no longer a sinkhole, this has a future. You know, that is a big accomplishment to be lauded. It is offsetting the decline in the linear business, which is stark. I mean, you look at the annual rate of decline due to cord cutting for the cable business, it's losing about 7% of their subscribers a year. Other than that, the movie business did very, very well. Again, movies, as my colleague at the Ankler says, it's a business of hits. And they had, you know, the two biggest this year in Inside out too, and Deadpool and Wolverine. Alien was another big hit for them. So last year was a disaster with the Haunted Mansion and Anna Jones. Theme parks are doing, you know, okay, the kind of flat is at this point and ESPN is a real big question in terms of, you know, transitioning that business off of the cable TV bundle into a direct to consumer world, which will be happen and you know, but about a year from now in August, September of 2025. Not a lot of details yet, but that is a big endeavor for Iger to have to, you know, to pull off here. So there's a lot of good signs that there's stability. The stock price is back to almost where it was where Nelson Peltz sold at after his campaign failed for a board seat. So there's some stock growth going on, not to the heights that it once had, but it's no longer in the basement. In the 80s. It's probably more, you know, up toward about 1, 110, 115.
- [33:14]
David Brown
Well, but the profitability that Disney's happy to talk about, there have been lots of layoffs in the entertainment industry. A few months back we had your anchor colleague Elaine Lowe on the show to talk about the ones impacting TV. And Disney wasn't spared here. And in 2023, they pledged to cut nearly 8,000 jobs. And they seem to be following through with it. Is that part of what's contributing to the bottom line profits here that they're just basically cutting down on expense and that's, that's making them look better to Wall Street?
- [33:43]
Sean McNulty
It's definitely been part of the success. Again, a lot of the growth here. You're talking year over year, right? So even the cuts were last year. You're seeing the effects of it this year. So your comps are a lot better this year on an appearance level. So they just again consolidated their TV studio business further this summer. So this is again summer of 2024 here, still figuring out the TV studio business. When they bought Fox, they inherited massive, massive TV assets and kept a lot of them in organizationally, you know, intact. Where you had a lot of divisions doing kind of the same thing of developing and producing and pitching TV shows around town. And they've, you know, they never really integrated that. So they, they finally did that this summer, which again resulted in some more layoffs. They had layoffs at Pixar back at the top of the summer. So yeah, this is still ongoing here. This isn't over. Even though the massive part of those, those numbers you mentioned of 7,500, 8,000 people were, you know, during last year, 2023, this is still in effect this year and that's, it's not great for morale really. So this will be an ongoing narrative going on at the company for sure.
- [34:50]
David Brown
So let's step back then from Disney for just a moment. If you look at the pyramid right now in Hollywood, how does Disney compare with its rival studios? Who's at the top of the pyramid, that sort of thing.
- [35:03]
Sean McNulty
If we're including the streaming only companies, Netflix is certainly arguably at the top in that sense of the entertainment business. Disney is a much more sprawling company in terms of its assets and its brands trends. But Netflix is making great strides, throwing up immense amount of profit at this point. From a market cap point of view, their stock is, you know, you're through the roof at this point. So that probably gives them an advantage in that sense. But Disney has succeeded in becoming a global player in streaming. And that's really the question of Hollywood right now is who's going to kind of make the leap is a big, you know, a big term of all these companies. You got Paramount, you have Warner Brothers Discovery, you know, of course, Amazon, Apple, Disney, Netflix. The thinking is there's about three or four of these brands and businesses that make it. You know, at this point Disney is amongst those brands that are in 150 countries with Disney Plus. So it's very large scale there. Netflix of course, is the bigger one. Amazon has also succeeded in becoming a global company in that route. So those are probably your top three right there. And I'd say Disney, you know, is probably one or two in that. In that list.
- [36:04]
David Brown
Yeah. And below those two or three at the top, you know, we've, we've seen the merger of Paramount Global and Skydance this year. A few years back we had the Warner Discovery merger and still we have some legacy studios that are continuing to struggle. I guess it makes you wonder how media consolidation affects the health of these companies and, and I wonder what the consolidation of studios that we've seen already, how that's going to affect the industry long term.
- [36:30]
Sean McNulty
What do you think the general consensus among most people and my, including myself is, you know, the next 18 to 24 months we'll have a pretty large scale rate of change still ahead. And this is coming off of a, of a very busy time. As you said, Warner Brothers Discovery only about two and a half years ago that that happened. As you mentioned, Paramount had a very large and public auction this year essentially and that's going to close probably somewhere in the spring of next year. And they've already pledged to cut, you know, or to Find cost savings of $1.5 billion, you know, from Paramount. So there's going to be some major changes there. The main questions at this point, I mean, WorldBar's discovery is probably your biggest X factor at this point that everybody's looking at.
- [37:09]
David Brown
When you say the biggest X factor.
- [37:11]
Sean McNulty
Factor, what do you mean biggest X factor for deal making? Something's going to happen with this company in that sense. That is the general consensus. They have a business that is shrinking. They don't have a broadcast TV network, which hurts them significantly. Their profits from the cable business continually shrink it to a large degree, quarter over quarter and year over year. And there's no real solve here for that. They essentially combined one company which had a core cable business with another company that was a core cable business, and that business is in secular decline. So they need to find an answer. They have not grown revenue since this deal happened in 2022. So it's becoming a smaller company. The revenues are going down. Something has to give here. They've been trying to get back to that global stage. They are the slowest to get there. They still have a ways to go. They have another two years before they're really going to be anywhere near consistent a global streaming service. So there's just a lot of things that play there that a lot of people just think that something has to happen here. And we're waiting to see what that may be.
- [38:14]
David Brown
You know, it seems like streaming has been the focus for a lot of these media companies. I mean, so much of the focus right now, so much of the talk. And I'm curious how much longer that's going to be the thing or whether we're going to see another shift, another investment focus for some of these media companies. What do you think?
- [38:33]
Sean McNulty
Again, you got to follow the consumer and the technology. And this is, you know, yes, it is moving to streaming. It's increasingly moving to streaming. The cord cutting has gotten this bad. You know, everybody knows this, but nobody has any answers. So streaming, they have to make work. The cable TV bundle was the greatest business model ever created in entertainment. And it's not going to be repeated. I mean, as good as streaming is going to get, it's never going to be that model where you had over 100 million people in America paying you a monthly fee for things they did not want watch. So that streaming is a la carte. They're trying to rebundle this. And that's kind of what you're. To answer your question, what the plan is here is to rebundle but you're never going to have that. The reason the cable bundle worked because that was the only way to get it. Now it's streaming. It's like you're not going to put that back in the bottle. So that is a bit of a problem. But the math is starting to work on streaming and that's what we're seeing right now here is 2024 is ending out is that you are finally seeing again the profit at Disney. WBD had a profit in Q3 as well. Even Paramount turned a little bit of a profit. I mean the profits at the business throws off these companies. You're talking, you know, 2 billion, $3 billion a quarter. So streaming is not doing anywhere near that. And that's what it has to get to. Will it get there? That's a, you know, the million. The billion dollar question in Hollywood at.
- [39:44]
David Brown
This point, you know, we've come a long way from where we started here. You know, we were talking about a proxy war.
- [39:49]
Sean McNulty
It seems old fashioned, right?
- [39:51]
David Brown
Yeah, it does, doesn't it?
- [39:52]
Sean McNulty
But at this point though, what does Nelson Peltz know about anything we just talked about? He has zero experience in any of these things I'm talking about. So again, value added. Why would you want this person on? You know, there's nothing going to happen here that he's going to affect, be able to give you any, any leg up in any of this kind of thing. So again, I am with Bob Iger when he's like, I saw no, we saw no value in this and I have to agree with him.
- [40:15]
David Brown
Well, then again, Nelson Peltz might have given a few other billionaires some ideas. I wonder if we're not going to see if we've seen the end of the proxy wars when it comes to Disney. What do you think?
- [40:25]
Sean McNulty
It's a good question. I think no one looked at Nelson Peltz of that set and said, yeah, I want my image to be like that. I don't think anybody really sat. Ellison loves that spotlight. Some people in this world do not want to have anything to do with it. You know, he's talked about Paramount and Larry Ellison. You still haven't seen him talking about this Paramount deal, even though he bought the company like he is. You know, it's David Ellison, he's the face of this. His son, you know, so they're varying points of view on that. So I don't think at this point. And Disney stock price has also rebounded. So if Disney comes back down, there's a quote from Nelson Peltz just this month here in November, he said, if the stock goes back to the 80s, you guys, I'll be back. I promise. So maybe we have not heard the last of Nelson Peltz at Disney.
- [41:04]
David Brown
Sean McNulty is the host of the Ankler Podcast and author of the Wake up, an online newsletter covering the business of Hollywood. You can subscribe and check out the podcast@theankler.com Sean thanks so much for joining us on Business Wars. It's been great to talk with you, really enjoyed it. Coming up on Business wars, the holidays are in full swing, so we're finding out how consumers are shopping this season and the impact social media sites like TikTok have had on holiday gifted habits. Don't miss it. If you like Business wars, you can binge all episodes early and ad free right now by joining Wondery plus in the Wondery app or on Apple Podcasts. Prime members can listen ad free on Amazon Music. Before you go, tell us about yourself by filling out a short survey@wondery.com survey. I'm your host David Brown. Kelly Kyle produced this episode. Peter A.R. cooney is our senior senior interview producer. Our producers are Emily Frost and Grant Rutter. Our audio engineer is Sergio Enriquez. Our Managing producer is Desi Blaylock. Our senior Managing producer is Callum Plews. Our senior producers are Karen Lowe and Dave Schilling. Our executive producers are Jenny Lauer, Beckman and Marshall Louie. For wondering.
- [42:29]
Nelson Peltz
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