The return of Bob Iger to Walt Disney’s (DIS) CEO job in November promised a reversal of the company’s recent fortunes – and some potentially big changes to the company’s structure. That will include cutting 7,000 workers and $5.5B in costs, Iger confirmed on the company’s earnings call, following a quarterly beat that pushed the stock higher in after-hours trading. Shares even rose as much as 9% after he mentioned an effort to reinstate Disney’s dividend that was suspended during the pandemic (it may also help address the demands of activist investor Nelson Peltz).
Quote: “I’ve always believed that the best way to spur great creativity is to make sure the people who are managing the creative processes feel empowered,” Iger declared. “Therefore, our new structure is aimed at returning greater authority to our creative leaders and making them accountable for how their content performs, financially. Our former structure severed that link and it must be restored.”
That means reorganizing the company into three business units: Disney Entertainment, ESPN, and Disney Parks, Experiences and Products. Iger said he knew breaking out ESPN into its own unit would lead to persistent questions about a potential spinoff, but confirmed that the “brand was ‘very healthy,’ we just have to figure out how to monetize it in a disrupting world.” With regards to turning a profit at Disney+, Iger emphasized that reestablishing the connection between content decisions and their financial performance is “one of the most important steps we can take to improve the economics of our streaming business” and was his “No. 1 priority.” See subscriber totals and quarterly figures here.
Linear vs. Streaming: “It’s at least conceivable, if not likely, that ESPN+ is in turn propping up linear ESPN, which could mean streaming is subsidizing linear,” SA contributor Max Greve writes in a new article that crunches the numbers. “Even if not, the existence of such hidden subsidies shows that the separation of linear and streaming profit is largely arbitrary. If Disney does try to split off ESPN, it will have to come to grips with this issue and outline for investors and the buyer what it has been doing.” (137 comments)
Looking for additional sources of revenue in the current macro environment, Netflix (NFLX) is adding more members to the roster of countries where it has cracked down on password-sharing. Canada, Portugal, Spain and New Zealand have been added to a list that already includes Chile, Costa Rica and Peru, and makes account holders choose a primary address, verify that location once a month, and gives the ability to buy access for two additional users. It’s only a matter of time before the password crackdown comes to the U.S., which could be a “core problem,” according to Marketplace author The Value Portfolio, as Netflix is no longer the only game in town. A recent Jefferies survey on “password borrowers” indicated that 62% of respondents would stop using Netflix, but then again, they weren’t paying for the service in the first place. (7 comments)
Shares of Robinhood (NASDAQ:HOOD) rose nearly 5% in after-hours trading on Wednesday despite missing estimates on the top and bottom lines. Traders instead focused on an increase in average revenue per user and a second straight quarter of positive adjusted EBITDA as the retail broker’s expenses slid from a year ago. With over $6B on its balance sheet, Robinhood also revealed that it’s in talks with the DOJ to buy a 7.6% stake of the company from disgraced crypto tycoon Sam Bankman-Fried (see the full transcript here). The plan is a little complicated, however, as SBF’s ownership has been disputed since his crypto empire imploded in November. (29 comments)
Last June, JPMorgan Chase (NYSE:JPM) CEO Jamie Dimon warned of an economic “hurricane” down the road, but yesterday, he told Reuters that the U.S. economy was in good shape. Still, “sticky” inflation could compel the FOMC to hike interest rates above 5% (from the 4.50%-4.75% level it’s at now), echoing the recent views of many Fed officials. Earlier in the day, Minneapolis Fed President Neel Kashkari said he expects the federal funds rate to break above 5% at some point this year, and Fed Governor Christopher Waller expressed a similar outlook, but no one suggested that January’s blowout jobs report would make them more aggressive in setting monetary policy. (23 comments)
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