Disney's struggling streaming business is likely Iger's top priority

Disney’s announcement on Sunday that Bob Iger has returned as CEO likely means that Disney wants Iger to address the company’s growing but unprofitable streaming business.

The CEO change, however, likely won’t mean price drops in Disney parks, where Disney implemented paid line-skipping services Genie Plus and Lightning Lanes under the leadership of Bob Chapek, Disney’s ousted CEO. Those products have padded the bottom line of Disney’s theme parks, but they have been a sore subject for many Disney guests.

Addressing the streaming business, J.P. Morgan analyst Christian Crosby said in a note to investors, “Remember that Iger has always been a content and broadcast guy.” Iger’s tenure at Disney was highlighted by acquisitions of big-name franchises Pixar, Marvel and Lucasfilm. “We imagine that Iger’s first order of business will be to address [streaming].”

In August, Disney lowered its forecast for Disney Plus streaming subscribers, pointed out Barclays analyst Kannan Venkat in a note to investors. Streaming’s unprofitability has hurt Disney’s stock price, and earlier this month Chapek announced that Disney would implement cost-cutting measures that would likely include layoffs and a hiring freeze.

Disney’s primary streaming product is Disney Plus, which features original programming plus a library of Disney, Star Wars, Marvel and Pixar films. It is not Disney’s only streaming product, as the company operates Hulu and ESPN Plus.

Despite streaming’s struggles, Chapek’s ouster was surprising because Disney gave Chapek a three-year extension in June, Venkat said.

Will perturbed Disney fans be heard?

While Iger will likely initially focus on Disney’s streaming strategy, many are wondering what the change means for the theme parks. 

Crosby said that a “common investor gripe” about Chapek was “squeezing parks customers.” 

“We have to admit that many of the issues currently facing the firm — specifically the soft ad market, parks inflation and the bloodbath that is the  [streaming] space — were in some ways unavoidable for Chapek,” he said. “Those are all largely industry/macro driven, and it will be interesting to see what Iger can and does do to address these items.”

J.P. Morgan analyst Philip Cusick said the pace of increases in theme park prices “could slow.” But he said the theme park price increase that will go into effect on Dec. 8 is likely to stick. He didn’t specifically address Genie Plus and Lightning Lanes, but those products likely aren’t going away because they’ve been big revenue generators despite their unpopularity with many guests.

“The fact is that Disney still has too much demand for its limited supply, and driving prices higher may be the best way to manage that,” Cusick said.

Disney stock was up more than 5% on Monday.

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