Hollywood Reporter: Disney Now in “Building” Phase, Bob Iger Says, Outlining New Areas of Focus

Story from Hollywood Reporter:

The Walt Disney Co., having restructured its operations, is now moving on to its next phase under CEO Bob Iger‘s second turn leading the entertainment giant.

Iger, of course, rejoined the company a year ago with a mandate to “set a new strategic direction.” In commentary tied to Disney’s latest quarterly earnings report (its fiscal fourth-quarter), Iger suggested that the company’s future effectively begins now.

“While we still have work to do, these efforts have allowed us to move beyond this period of fixing and begin building our businesses again,” Iger said in a statement. “We have a solid foundation of creative excellence and innovation built over the past century, which has only been reinforced by the important restructuring and cost efficiency work we’ve done this year, and we’re on track to achieve roughly $7.5 billion in cost reductions. Combined with our portfolio of valuable businesses, brands and assets — and the way we manage them together — Disney has a strong hand that differentiates us from others in our industry.”

The $7.5 billion figure is a $2 billion increase from the previously planned $5.5 billion.

“As I reflect on our achievement this past year, I’m mindful of the fact that a lot of time and effort was spent on fixing, both contending with certain decisions made in the recent past, and addressing the numerous challenges brought on by disruption and the pandemic,” Iger added on the earnings call. “And while we still have work to do to continue improving results, our progress has allowed us to move beyond this period of fixing and begin building our businesses again.”

To that end, Iger unveiled four strategic priorities for the company going forward: making streaming a profitable business, building ESPN for a digital future, expanding its live experiences business and “improving the output and economics of our film studios.”

Iger added on the call that he is spending more of his time on that priority.

“To achieve this, we are focusing heavily on the core brands and franchises that fuel all of our businesses and reducing output overall, to enable us to concentrate on fewer projects and improve quality while continuing our efforts around the creation of fresh and compelling original IP,” Iger said. “I’m devoting considerably more of my time to this with the goal of improving returns, always seeking to exceed the level of creative excellence audiences expect from Disney.”

Disney reported revenue of $21.2 billion in the quarter, narrowly missing the street estimates but up slightly from last year. Operating income was $2.9 billion with diluted earnings per share of $0.82, beating the street estimates.

In streaming, the company added 7 million core Disney+ subscribers (excluding Star), with the direct-to-consumer streaming businesses continuing to lose money. In its last quarter, Disney’s streaming businesses lost a combined $387 million across entertainment and sports, but the company now has more than 150 million Disney+ subscribers.

Hulu subscribers were essentially flat from last year. ARPU at Disney+ was up slightly thanks to increased ad revenue, while ARPU at Hulu declined slightly due to lower advertising revenue.

The company’s new financial reporting structure is built around three operating areas — entertainment, sports and experiences — with the biggest change that ESPN’s finances are being broken out from the rest of the company’s linear and streaming offerings.

In entertainment, revenues were $9.5 billion, with direct-to-consumer making up more than $5 billion of that number. Income was $236 million, with all the profits from linear offsetting the losses in streaming.

In sports, ESPN saw its revenue rise slightly to $3.8 billion, with operating income rising 16 percent to $987 million.

In parks and experiences, revenue rose by 13 percent to $8.2 billion, with operating income rising by 31 percent to $1.8 billion.

The company also reported more than $1 billion in restructuring and impairment charges, including $721 million in a goodwill impairment related to its linear networks and $137 million in licensed content.