Analysts Cheer Bob Iger’s Contract Extension, Hand Him a To-Do List

Focus areas for Disney include streaming, sports and animated content, according to analysts.

Bob Iger walks holding a notebook.
Bob Iger has work to do. Getty Images

Board members of The Walt Disney Company (DIS) voted to extend CEO Bob Iger’s contract by two years, the company said in a press release yesterday (July 12) after the stock market closed. Iger served as chief executive for 15 years and stepped down in 2020, but returned to the role in November 2022, replacing the successor he hand-selected. One of the boomerang CEO’s key responsibilities is to help the board find a new successor, and he will now have until December 31, 2026 to do so. Analysts cheered the news.

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Given Bob Iger’s track record and stature in the media industry, we view this announcement as a positive as it provides (Disney) steady leadership as the company and industry manages through a turbulent transition period,” said Jessica Reif Ehrlich, a Bank of America (BAC) analyst, in a research note published today.

The news wasn’t a surprise, analysts agree. Last month, the company’s chief financial officer of eight years, Christine McCarthy, announced her resignation. The move leaves Disney’s board searching for a new CEO and chief financial officer simultaneously. “Disney needs a great new CFO,” MoffettNathanson analysts said in a research note. “With the extension, Disney can hire someone knowing that Iger will be there for an extended time.”

The entertainment industry is also undergoing seismic shifts, which Iger is busy navigating. Streaming platforms are facing increased competition as they inch towards profitability, linear television is “hanging by a thread” and content is becoming more personal, gamified and user-generated. Disney is facing additional challenges, including navigating its political entanglement with Florida Governor Ron DeSantis and determining the future of Hulu. Disney’s stock fell by 1.5 percent following the announcement but quickly rebounded, trading today at $90.29 per share.

“While we view Mr. Iger as the best person to lead the company at the current juncture, this extension does beg a few questions as to what this means for the Walt Disney Company,” said Guggenheim analysts. While analysts responded positively, they also prompted Iger to focus on a few key areas of the business.

What do analysts want from Bob Iger?

Iger has work to do on Hulu, according to Ehrlich. Disney has a two-thirds stake in the streaming platform, while Comcast owns one-third. Early next year, both companies have the option to sell their portions to each other, or Disney could sell Hulu altogether. In May, Iger announced Disney is releasing a combined Disney+ and Hulu offering. While the move makes it look like Disney will buy Comcast’s share of the streaming service, Iger wouldn’t confirm it. There is still a price the company is willing to sell for as Iger negotiates the future of the platform, experts suggest.

If Disney does end up buying the whole of Hulu, the company must decide how to package the product alongside its other streaming services, Disney+ and ESPN+, said MoffettNathanson analysts. The result could either slow or make headway on Disney’s streaming business profitability. The company has promised it will make money in streaming by the end of fiscal 2024, and it is slowly narrowing its losses, according to earnings statements.

Disney’s sports business should be a focus area as well, analysts agree. Iger has advocated that the future of sports is on streaming platforms, but not all analysts see a stand-alone ESPN+ option as scalable, MoffettNathanson researchers noted. In the coming years, it must renegotiate a contract for its NBA rights, which will expire in 2025.

The company also has issues with its content business, according to MoffettNathanson. “Iger needs to once again fix the creative engines of the company starting with Pixar and then moving over to Marvel and Lucasfilm,” the analysts said. Iger served as CEO for the acquisitions of all three properties.

“We would have liked some of our more recent releases to perform better,” Iger said at the Sun Valley Conference. Recent Pixar films Lightyear and Elemental flopped at the box office. The division has lost a host of talent, and its strategic choices aren’t clear, according to MoffettNathanson. Marvel content is also over-saturated on Disney+, and more selective content choices could help drive profits, analysts said. Iger agrees. The high output “diluted focus and attention” of viewers, he said at the conference.

Disney must “neutralize the attacks” from Gov. DeSantis before they have a long-term effect, according to MoffettNathanson. The parties are feuding over Disney’s status as special purpose district, which has allowed the company to function as an independent government within the state of Florida for more than half a century. Underscoring the clash is Disney’s pro-LGBTQ stance. ” The company has to be seen as inclusive and broad vs. simply ‘woke,'” analysts at MoffettNathanson said. “Iger has taken on battles like this before and obviously is skilled at communication.”

Analysts Cheer Bob Iger’s Contract Extension, Hand Him a To-Do List