Disney: Will the Magic Return?

„If you can dream it, you can do it“

– Walt Disney

Magical.

The best way to describe this company.

It owns Star Wars, Marvel, Frozen, Avatar, Toy Story, The Simpsons, Indiana Jones and many more. It manages the largest theme parks in the world, which are visited by millions of people every year. It operates the largest sports channel, offering the NBA or NFL on the mainland. An armada of cruise ships floats on the high seas. To tap new territories, the company is now in a streaming war with Netflix, Apple TV+, Amazon Prime and many others.

Yes, it is our beloved “The Walt Disney Company”.

It is the most magical company with an incredible history of storytelling that has woven its way into the hearts and minds of us all. Whether adults or children.

And yet, personally, my heart bleeds. Because the magic has faded.

But there is a savior in need with a lot of "Skin in the Game".

I have a new (old) hope.

Bob Iger.

Chart 1: Bob Iger’s Legacy of a Lifetime

The Entertainment Powerhouse

Iger took the company to places it had never been before.

It all started in 1995. The merger of his former employer ABC with Disney combined the nationwide television networks and, most notably ESPN, with Disney's movie studios and theme parks.

As CEO from 2005, his finesse, evident in his memoir "The Ride of a Lifetime" (arvy's Book Club), fueled a decade and a half of growth. A thrilling page-turner.

Under his guidance, Disney evolved into a global entertainment powerhouse, adapting to changing media landscapes. With an eye on digital streaming, Iger's strategic brilliance shone.

His pivotal acquisitions led to the launch of Disney+:

• Pixar (2006): The company of Steve Jobs led to the collaboration on animated films like "Toy Story," "Finding Nemo," and "The Incredibles”.
• Marvel (2009): "Iron Man," "The Avengers," and "Guardians of the Galaxy" - Superheroes, here we come!
• Lucasfilm (2012): "Star Wars" – May the force be with you!
• 21st Century Fox (2019): "Avatar," "X-Men," and "The Simpsons" among others.
• Launch of Disney+ (2019): All their magic on one streaming platform.

During Iger’s tenure, Disney’s market cap grew from $48 bn to $257 bn.

A return of 550%. The return of the S&P 500 in comparison? 160%.

What a success story.

But although it is usually the case in fairy tales, this time there was no Happy End.

Chart 2: The Walt Disney Company’s most Notable Acquisitions since 1990

Magic Kingdom Caught in the Perfect Storm

February 2020.

Bob retired the very month Covid appeared. Only to find that it was heading full steam ahead toward the greatest storm of our age.

In the pandemic, virtually every segment was brutally affected. ESPN halted, theme parks and cruises stalled, movies paused.

The only silver lining?

Iger's 2019 Disney+ launch.

Subscribers skyrocketed to 164 million by 2022. Yet, the division is not profitable - balancing growth, costs, and peers proves challenging.

The magic seemed lost at sea.

Chart 3: How Disney Makes Money, as per End of June 2023

Saving Mickey Mouse

Nietzsche's words echo, “He who has a why to live for can bear almost any how”. And Bob Iger's why is a powerful one: He wants to protect his legacy and save Mickey Mouse, as painful as that will be.

When he asked his wife for advice, she encouraged him to go back to Disney because the other option was to run for president.

In November 2022 he came back, and the board has just extended his latest contract. He will be 75 when it ends in 2026.

With CEO Iger poised to make some tough decisions to return the House of Mouse to its former glory, a path up is emerging for the battered stock.

But this Wednesday’s quarterly earnings highlight that as Rome was not built in a day, Disney's problems will not be solved in the same period.

A catalyst is needed: could it be the sale of the broadcasting business, the new sports betting announced this week, Disney+ profitability, or an acquisition by Apple as they crave valuable content?

I keep a close eye on Disney because I would love to see them become magical again.

And there is no better manager than Bob Iger to turn the wheel.

After all, if you can dream it, you can do it!

Great success, Bob!

Chart 4: Disney ($DIS) vs. the S&P 500 ($SPX) since 2005

arvy's takeaway: Amidst the stormy seas, Bob Iger stands as Disney's guardian, determined to save its fading magic. His visionary acquisitions and strategic prowess set the stage for the golden age of Disney, marked by franchises like Star Wars and Marvel. But as challenges surged, even the magic kingdom faced turbulence. Now, Iger returns to steer the ship - a captain with a legacy at stake. Will his leadership rekindle the enchantment, proving that dreams, no matter how faded, can still come true? Maybe it turns out to be a fairy tale with a happy ending after all.