The last time Dan Loeb went to war with Disney over the company’s streaming strategy, he painted a picture of victory.
In October 2020, Loeb asked Disney to “all-in” on streaming and suspend its dividend and “double” its content budget.
In a letter to Disney CEO Bob Chapek just weeks after revealing his 2020 stake, Lobb told investors at his hedge fund Third Point that the investment had been “constructive.” Just a few months later, he backed off, telling Third Point investors that Disney’s response to his investment had been “commendable” and that his proposals had “proved so far.”
“Disney has taken several important steps to accelerate the transition to transmission since we started our position”, added Lobb, and indicated that I have conversations with Chapek and the financial director Christine McCarthy and said “impressed with his incessant search for value creation at long term”. ”
Disney, as Loeb told investors in a letter a year ago, has become “one of our biggest profit generators” since the company increased its stake.
This time, Loeb is taking a different path. Rather than investing in streaming, Loeb urges Disney to cut costs, citing the company’s high costs. and selling or spinning off “bankrupt” assets, including ESPN, which it thinks will benefit from divesting itself of the larger Disney universe (sports betting, anyone?).
He also argued that Disney’s board needed to be “updated” with new members.
But if Loeb’s activism at Disney in 2020 is a success, his activism in 2022 is likely to face tougher opposition from the company.
Consider the statement Disney issued in response to Loeb’s letter, which began with a tepid, albeit general, “We welcome the views of all our investors” before touting the company’s strong comeback from the pandemic and adding “Our independent and experienced board has a significant mark.” experience. , technology and consumer-facing companies as well as talent companies. The board has also benefited from ongoing renewal with an average term of four years.”
In 2020, Disney responded to Loeb’s letter with many of its proposals (how many of these ideas were already in the works before his letter was a separate topic) and outlined its direct-to-consumer plans on Investor Day.
The company never issued a public statement, opting to let its own executives explain its plans.
This time, the quick public response backing Chapek and his leadership team suggests that this time it won’t be an easy road.
While some of your ideas may have company backing (obviously figuring out what to do with Hulu), others are becoming hard to sell.
With a relatively new board of directors (younger than similar companies), why exactly would Disney want to add more people?
And while Disney considered a spin-off or sale of ESPN last year, executives decided to stick with the sports media giant and take advantage of its massive cash flow as long as the pay-TV package can support it.
And while sports betting didn’t take off until a few years ago, Chapek expressed a willingness to head there recently, telling analysts it could be a “very important opportunity for the company.” (The Magic Kingdom at Disneyland and Disney World now offer alcoholic beverages, something else that would have been banned in the past.)
Loeb is no stranger to the entertainment business, having forced Sony to divest some assets (does it sound familiar?) and cash in on its entertainment and gaming stakes.
Sony didn’t exactly do what Loeb wanted, but his January 2020 investor letter said management was open to discussing with him and his team, announcing Sony as one of Third Point’s “top five winners” that year.
Disney’s stock price has dropped nearly 30 percent since Loeb’s three-point profit bet a year ago. And many analysts see it as a prime candidate for recovery, thanks to its strong position in streaming, its legacy cash-generating businesses and its theme parks, where demand appears to far outstrip supply.
By the way, in Loeb’s last letter to the Third Point shareholders, published in the minority, I say that the firm bought its new participation in Disney “in the minimums of 2022, a place to exit by the end of the fourth quarter of 2021 and the beginnings of this year”.
So while the Loebs publicly campaign for change, it’s also possible that the legendary activist is playing the value investing game.
Source: Hollywood Reporter
Camila Luna is a writer at Gossipify, where she covers the latest movies and television series. With a passion for all things entertainment, Camila brings her unique perspective to her writing and offers readers an inside look at the industry. Camila is a graduate from the University of California, Los Angeles (UCLA) with a degree in English and is also a avid movie watcher.
