Disney (DIS) CEO Bob Iger has implemented the first steps of his long-awaited turnaround strategy ahead of the media giant’s annual shareholder meeting on April 3.
Iger, who stepped back as CEO in November, may face questions over the future of major properties such as ESPN and Hulu, in addition to the company’s restructuring efforts that the media giant launched earlier this week in a massive divestment. But the layoffs started.
The company reportedly eliminated its Metaverse division, reduced the size of its ABC News executive team, and let go of Marvel Entertainment president Isaac Perlmutter as part of this first round of layoffs.
Iger said in an internal memo obtained by Yahoo Finance that more job cuts would take place in April and just before the summer to reach the company’s previously announced 7,000-job target.
In addition to the layoffs announced in February, Disney also revealed plans to reorganize the organization into three main business segments: Disney Entertainment, ESPN, and Disney Parks, Experiences and Products.
In his prepared remarks during the company’s first-quarter earnings report on Feb. 8, Iger said the new strategic organization “will result in a more cost-effective coordinated and streamlined approach to our operations, and we will be able to run our businesses more efficiently.” committed to, especially in a challenging economic environment.”
Amid that challenging environment, Iger has emphasized a direct link between content decisions and financial performance – stressing his priority of differentiated content over general entertainment.
“Disney faces some big decisions on its streaming services, and we wonder whether the fates of ESPN and Hulu could become intertwined,” Macquarie analyst Tim Nolan wrote in a note published Wednesday.
Nolan suggested Disney could sell its majority stake in Hulu to finance ESPN’s over-the-top network initiatives as Iger remains steadfast on the sports behemoth.
Iger, who described ESPN as “a differentiator” for Disney, said the biggest challenges centered around monetization but that the ESPN brand was “very healthy”.
Iger’s comments to ESPN are a far cry from what he told CNBC about Hulu in February, revealing “everything was on the table” with regards to Hulu’s future.
Iger said, “I’ve talked about general entertainment that there’s no difference. I’m not going to speculate whether we’re a buyer or a seller.” “But I’m concerned about general general entertainment. We’re going to look at this very objectively.”
Disney currently owns two-thirds of Hulu, while Comcast’s Universal (CMCSA) controls the remainder.
Under the terms of the joint ownership agreement, Comcast may require Disney to buy its stake in Hulu as early as January 2024 at a minimum equity value of $27.5 billion (or about $9.2 billion for a 33% stake).
Some analysts have suggested that Disney may sell its majority stake to help offset streaming losses in an ultra-competitive landscape.
Citi analyst Jason Bazinet previously estimated that Hulu’s price tag could be anywhere between $19.8 billion and $27.5 billion.
Macquarie’s Nolen wrote, “Selling Hulu for more than $18 billion could prove to be very helpful for the rest of Disney.” “CEO Bob Iger has indicated that ESPN remains a core business, but needs to explore the streaming future. Iger has less confidence in Hulu.”
The analyst suggested, “Selling 2/3 of Hulu for a minimum of $18 billion equals roughly 40% of Disney’s current debt, or it could be reinvested in core Disney and ESPN.”
