Disney (DIS) CEO Bob Iger has faced many challenges since stepping back into the CEO position nearly one year ago — but he’s well equipped to handle them, according to his former head of streaming Kevin Mayer.
“Bob has his hands full,” Mayer, who now runs Blackstone-backed entertainment startup Candle Media, said at the Yahoo Finance Invest conference on Tuesday.
Disney’s stock has hit multiyear lows, and activist investor Nelson Peltz is pushing for multiple board seats at the company. The company’s parks business is slowing, its linear TV division is declining, and its streaming business is not yet profitable.
“Someone like Bob, he’s very capable, he’s multifaceted,” Mayer continued. “He has a lot of range so he can handle it. Not everyone can handle a situation like that. But I think you have to be disciplined, and Bob’s always been very strategic.”
Mayer, who is currently serving as a strategic adviser to Iger, added his former boss at Disney will “look at all his options” and ultimately make the decision that best benefits shareholders.
“When you do the right things strategically for the long term that don’t hurt you too much for the short term, I think you can work through these multiple issues,” he said.
Disney has seen shares slide about 3% since the start of the year — massively underperforming the S&P’s (^GSPC) 14% gain over that same time period.
Mayer said the stock is reacting to multiple uncertainties — from the future of Hulu and ESPN to the ultimate fate of linear networks — but that Disney is beginning to address some of those challenges.
“When the stock price goes up and [Iger] articulates a great strategic vision — that will take care of most most of the problems,” he said.
The company also raised streaming prices for the second time this year, upping the monthly price of its ad-free Disney+ and Hulu plans by more than 20%. Mayer said he believes streaming will reach profitability “very, very soon” while gaming is an untapped area that the company will be able to leverage in the future.
“No matter what happens to those linear networks, you have a really great growth company sitting there — [it’s] a really bright future,” he said
Who would buy a linear TV business?
Iger said earlier this summer the company would take an “expansive” look at the entertainment giant’s traditional TV assets, signaling they could potentially be sold.
Analysts have questioned who would want to buy them given secular declines in linear television as more consumers cut the cord, or drop their cable packages.
Mayer said he’s not sure who ultimately would buy a network like ABC but said one upside to linear businesses are their profit margins, which are often in the range of 30% to 40%, sometimes more.
“Streaming will really never get to that profitability level,” he said, noting even a profitable streaming company like Netflix (NFLX) will likely tap out at margins in the 25% to 30% range.
Looking ahead, the executive said digital, more Hollywood-centric players might make the most sense as buyers for such assets — especially given the competitive environment and likelihood of consolidation.
“You can see consolidation among these big media companies happening,” he said, “You can see a Warner Bros. (WBD) combining with an NBCUniversal or with a Paramount — there are some combinations to be had there. Starz is still sitting out there owned by Lionsgate. That needs to be consolidated with someone, maybe a big digital player or by a Hollywood player.”
Even Mayer’s own Candle Media could be acquired. Mayer laid out three visions for the entertainment company: an acquisition by a strategic buyer like Disney or Warner Bros. Discovery, a public offering, or sale to another private equity firm.
“Who knows, maybe KKR owns us in three years or four years,” he said. “But we’re set up for any of them.”
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