Bob Iger, Disney, at Apple program
Source: Apple
It’s rare for Disney Chief Executive Bob Iger to acknowledge his company has had creative missteps. So when he does, it’s probably sensible to concentrate.
“As I’ve checked out our overall output, meaning the studio, it’s clear that the pandemic created a whole lot of challenges creatively for everyone, including for us,” Iger said last week during Disney’s earnings conference call. “I’ve all the time felt that quantity might be actually a negative relating to quality, and I believe that is exactly what happened, we lost some focus.”
Iger followed his comments with a latest mandate: Disney might be making fewer movies. It’s an identical strategy to 1 Iger took when he first became Disney CEO in 2005. On the time, Disney’s animation and live-action studio divisions had struggled with a string of failed movies, including including “The Alamo,” and “Home on the Range” and “Pooh’s Heffalump Movie.”
Iger’s solution then was to chop 650 studio jobs and slash its annual movie production output in half, releasing only a couple of dozen movies every year. He also acquired Pixar, giving Disney a right away infusion of quality movies and a brand of storytelling that rubbed off on Disney’s traditional animation studio.
Iger appears to be re-running the playbook for 2024. After flooding Disney+ with movies and other latest content for several years, Iger is strategically cutting back to speed up free money flow generation and profitability. Disney eliminated animation jobs in June — the primary significant cuts in a couple of decade — as part of a bigger round of job reductions. After releasing 4 Marvel Cinematic Universe movies in 2021 and three in 2022 and 2023, Disney can have only one in 2024 — “Deadpool 3.” There hasn’t been a Star Wars movie since 2019’s “The Rise of Skywalker.”
In 2006, acquiring Pixar quickly improved Disney’s film quality and box office results. The animators’ mix of technology and storytelling rubbed off on Disney’s traditional animation unit, eventually resulting in hits including “Frozen” and “Zooptopia.” This time, Disney might want to improve organically, putting pressure on Iger and studio head Alan Bergman to indicate results as activist shareholders Trian Partners and ValueAct threaten to pressure management and the board.
“I feel good concerning the direction we’re headed, but I’m mindful of the undeniable fact that our performance from a top quality perspective wasn’t really as much as the standards that we set for ourselves,” Iger said last week. “And so working with the talented team on the studio, we’re trying to and dealing to consolidate, meaning make less, focus more on quality. We’re all rolling up our sleeves, including myself, to do exactly that.”
Iger noted the Disney animation studio’s next release, “Wish,” which stars Ariana DeBose and debuts in theaters on Wednesday, could begin a run of sustainable hits for Disney. Early ticket sales suggest “Wish” is tracking at $55 million for the Wednesday to Sunday period including Thanksgiving. That trails previous Thanksgiving openers from Disney movies including “Ralph Breaks the Web,” “Coco,” “The Good Dinosaur” and “Tangled” but is higher than the $18.9 million brought in from “Strange World” last yr and the $40.6 million from “Encanto” in 2021, in accordance with data from Comscore.
Disney’s box office blunders
![Disney CEO Bob Iger on Marvel and Star Wars: Pulling back to find focus and contain costs](https://image.cnbcfm.com/api/v1/image/107271055-16892543151689254312-30284174020-1080pnbcnews.jpg?v=1689254610&w=750&h=422&vtcrop=y)
In 2024, Disney will release Marvel’s “Deadpool 3,” Pixar’s “Inside Out 2,” and “Mufasa: The Lion King,” the prequel to 2019 remake of “The Lion King.” All three have blockbuster pedigree, based on the box office performances of their earlier movies. “Deadpool 2” earned $785 million in global box office. “Inside Out” earned $859 million. “The Lion King” took in $1.6 billion in 2019, overtaking Disney’s “Frozen” to turn out to be the highest-grossing animated film ever – if you happen to consider the computer-generated animals as animation.
Still, there is no denying the studio has struggled lately. Apart from last yr’s “Avatar: The Way of Water,” acquired as a part of Disney’s $71 billion deal for nearly all of twenty first Century Fox, Disney hasn’t had a movie gross $1 billion for the reason that last Star Wars movie in 2019. Sony produced and distributed “Spider-Man: No Way Home,” which made $1.9 billion, although Disney’s Marvel Studios did function a co-producer.
For context, amongst 2019 releases, Disney had seven of the nine movies that grossed greater than $1 billion globally.
Movies that topped $1 billion at the worldwide box office (2020-23)
1. Avatar: The Way of Water: $2.3 billion (Disney, 2022)
2. Spider-Man: No Way Home: $1.9 billion (Sony, 2021)
3. Top Gun: Maverick: $1.5 billion (Paramount, 2022)
4. Barbie: $1.4 billion (Warner Bros., 2023)
5. The Super Mario Bros. Movie: $1.3 billion (Universal, 2023)
6. Jurassic World: Dominion: $1 billion (Universal, 2022)
Source: The Numbers
While “Elemental” and “Guardians of the Galaxy Vol. 3” were successful theatrically, Disney’s recent track box office record has stuffed with misses. “Lightyear” and “Strange World” were duds in 2022. This yr, “The Haunted Mansion” and “Indiana Jones and the Dial of Destiny” have bombed for Disney. “The Marvels,” after the worst opening weekend for a Marvel Cinematic Universe movie, is on its technique to being a serious disappointment. “The Little Mermaid” and “Ant-Man and the Wasp: Quantumania” failed to satisfy analyst expectations for ticket sales.
“We’re happy with the box office successes we have had over the past couple of years, but there have been certain titles that have not lived as much as our own high expectations,” Bergman told CNBC. “We have reduced the amount of our output and are incredibly focused on the standard of our upcoming slate and it’s incumbent upon us to execute as we move forward. I think we’re in a robust position for the long run given our world-class brands, filmmakers, talent and artistic teams.”
Disney houses its studio business in a division it calls “Content Sales/Licensing and Other.” This incudes Disney’s theatrical business together with home entertainment and selling film and TV content to other third-party TV and subscription streaming services.
In its most up-to-date fiscal fourth quarter, Disney reported an operating income loss in that division of $149 million, which it attributed to “the performance of ‘The Haunted Mansion.'” In its fiscal third quarter, Disney claimed a “Content Sales/Licensing and Other” operating lack of $243 million. 1 / 4 before that, Disney lost $50 million, and $98 million within the quarter prior.
The last time Disney reported an operating income gain in “Content Sales/Licensing and Other” was its second fiscal quarter of 2022 — an earnings report delivered in May of that yr, when Iger wasn’t at the corporate and Bob Chapek was CEO. In that quarter, Disney reported operating income of $16 million, down 95% from a yr earlier.
“On the time the pandemic hit, we were leaning right into a huge increase in how much we were making,” Iger said. “Returning the studio to mainly the extent of success that we became used to before the pandemic [is] one among the the constructing blocks of the corporate.”
Alan Bergman’s future
Alan Bergman, chairman of Walt Disney Studios, on the D23 Expo, Sept. 10, 2022. Bergman lost some decision-making power under Chapek.
The Walt Disney Company via Getty Images
Disney is holding a town hall on Nov. 28 with Iger and his 4 division heads — Co-Chairs of Disney entertainment Bergman and Dana Walden, Parks and Experiences head Josh D’Amaro, and ESPN boss Jimmy Pitaro. The quartet under Iger are the 4 most definitely people to ultimately succeed him as CEO. Disney has targeted early 2025 as a probable time to call someone as Iger’s heir apparent, CNBC reported earlier this yr.
With Iger shifting Disney’s focus from quantity to quality, the pressure might be on Bergman to make sure Disney pumps out movies worthy of the corporate’s esteemed brand. Bergman has served in senior leadership roles within the studios division since 2001 but is not a creative executive by background, having began because the unit’s chief financial officer. He incessantly clashed with Chapek and then-head of Disney’s media and entertainment division, Kareem Daniel, over the corporate’s decision to strip budget power from studio executives – a call Iger reversed earlier this yr.
Bergman built a solid track record of hits through his years because the division’s president, including “Avengers: Endgame,” “Star Wars: The Force Awakens,” “Frozen,” “Frozen 2” and “Toy Story 4.” He’ll proceed to rely on lots of the same creative leaders which have produced those hits, including Marvel’s Kevin Feige, LucasFilm’s Kathleen Kennedy, Walt Disney Animation Studios creative chief Jennifer Lee and Pixar’s Pete Docter.
Still, Alan Horn, formerly chairman of Walt Disney Studios, departed in 2020 — coinciding with Disney’s slump.
If Disney’s shift away from quantity toward quality doesn’t deliver stronger box office numbers, Iger may start facing investor and collaborator pressure to make leadership changes.
That would put Bergman on the new seat.
–CNBC’s Sarah Whitten contributed to this text.
Disclosure: NBCUniversal is the parent company of Universal Pictures and CNBC.