Iger firms up Disney strategy ahead of shareholder meeting as ESPN, Hulu futures loom

·5 min read

Disney (DIS) CEO Bob Iger has enacted the first steps of his long-awaited turnaround strategy ahead of the media giant's annual shareholder meeting on April 3.

Iger, who stepped back into the CEO position in November, will likely face questions over the future of core assets like ESPN and Hulu, in addition to the company's restructuring efforts after the media giant began mass layoffs earlier this week.

The company reportedly eliminated its metaverse division, shrank the size of its ABC News executive team, and let go of Isaac Perlmutter, the chairman of Marvel Entertainment, as part of this first round of layoffs.

More job cuts will come in April and right before the summer to reach the company's previously announced 7,000-job target, Iger said in an internal memo obtained by Yahoo Finance.

In addition to the layoffs announced in February, Disney also disclosed plans to restructure the organization into three core business segments: Disney Entertainment, ESPN, and Disney Parks, Experiences and Products.

Walt Disney CEO Bob Iger attends the European premiere of
Walt Disney CEO Bob Iger attends the European premiere of "The Lion King" in London, Britain July 14, 2019. REUTERS/Henry Nicholls

In his prepared remarks during the company's first quarter earnings report on Feb. 8, Iger said the new strategic organization "will result in a more cost-effective coordinated and streamlined approach to our operations, and we are committed to running our businesses more efficiently, especially in a challenging economic environment."

Amid that challenging environment, Iger has stressed a direct link between content decisions and financial performance — stressing his preference of differentiated content over general entertainment.

"Disney is facing some big decisions on its streaming services, and we wonder if the fates of ESPN and Hulu could be intertwined," Macquarie analyst Tim Nollen wrote in a note published on Wednesday.

Nollen suggested Disney might sell its majority stake in Hulu in order to fund ESPN's over-the-top network initiatives as Iger remains bullish on the sports behemoth.

Iger, who described ESPN as "a differentiator" for Disney, said the biggest challenge centered around monetization but that the ESPN brand was "very healthy."

Iger's ESPN comments very much differ what he told CNBC about Hulu in February, revealing "everything was on the table" in regards to Hulu’s future.

"I’ve talked about general entertainment being undifferentiated. I'm not going to speculate if we're a buyer or a seller of it," Iger said. "But I'm concerned about undifferentiated general entertainment. We're going to look at it very objectively."

Disney currently owns two-thirds of Hulu with Comcast’s Universal (CMCSA) controlling the rest.

Under the terms of the joint ownership agreement, Comcast could require Disney to buy out its stake in Hulu as early as January 2024 at a guaranteed minimum equity value of $27.5 billion (or about $9.2 billion for the 33% stake.)

Some analysts have suggested Disney could sell its majority stake to help offset streaming losses in an ultra-competitive landscape.

Citi analyst Jason Bazinet previously estimated Hulu's price tag could be valued anywhere from $19.8 billion to $27.5 billion.

"Selling Hulu for >$18bn could go a long way for the rest of Disney," Macquarie's Nollen wrote. "CEO Bob Iger has indicated ESPN remains a core business but needs to figure out a streaming future. Iger has sounded less sure on Hulu."

"Selling 2/3 of Hulu for a minimum of $18 billion equates to nearly 40% of Disney’s current debt, or it could be reinvested into the core Disney and ESPN," the analyst suggested.

Disney vs. DeSantis

Iger may also face questions from shareholders regarding Disney's long-standing special tax district after the new oversight board, appointed by Florida Governor Ron DeSantis, accused the previous board (controlled by Disney) of passing a last minute agreement to essentially render them powerless.

According to the agreement, published by the Orlando Sentinel, Disney can veto any major changes to the parks to "ensure consistency with the overall design and theming." It also prohibits the board from using Disney's name or characters like Mickey Mouse without the corporation's approval first.

The agreement also invokes something called a "royal lives" clause, which says the declaration is valid until "21 years after the death of the last survivor of the descendants of King Charles III, king of England living as of the date of this declaration," if it is deemed to violate rules against perpetuity, according to the document.

A Walt Disney World photographer holds a Pride rainbow-coloured Mickey Mouse cutout before the
A Walt Disney World photographer holds a Pride rainbow-coloured Mickey Mouse cutout before the "Festival of Fantasy" parade at the Walt Disney World Magic Kingdom theme park in Orlando, Florida, U.S. July 30, 2022. REUTERS/Octavio Jones

"We’re going to have to deal with it and correct it,” board member Brian Aungst Jr. said. "It’s a subversion of the will of the voters and the Legislature and the governor. It completely circumvents the authority of this board to govern," according to the Orlando Sentinel.

The board has hired conservative D.C. law firm Cooper & Kirk to challenge the agreement. In a statement, Disney told the Associated Press "all agreements signed between Disney and the District were appropriate, and were discussed and approved in open, noticed public forums."

Disney and DeSantis did not immediately respond to Yahoo Finance's requests for comment.

Alexandra is a Senior Reporter at Yahoo Finance. Follow her on Twitter @alliecanal8193 and email her at alexandra.canal@yahoofinance.com

Click here for the latest stock market news and in-depth analysis, including events that move stocks

Read the latest financial and business news from Yahoo Finance