The Magic of a Good Comeback

Context

The Walt Disney Company has long epitomised the great American success story, serving as a beacon of inspiration for entrepreneurs and WarTime CEOs. However, the story of this entertainment behemoth is not without its share of dramatic turns.

In recent years, Disney has faced formidable challenges – with sudden leadership changes and its stock price plummeting to a 10-year low.

Despite being a legacy brand, Disney needed to pivot to newer strategies. As CEO Bob Iger once said: “You can’t allow tradition to get in the way of innovation.”

Real-Life Story

In November 2022, alarmed by substantial losses from its streaming venture Disney+ and a declining stock price, the board at Disney urgently brought Bob Iger out of retirement to reinstate him as CEO.

After peaking at US$190 in 2021, the company’s stock price had fallen more than half by the time Iger returned. This poor performance attracted the attention of activist investors demanding change and prompted drastic measures at the company from the top down.

As part of a massive restructuring agenda, Iger quickly initiated plans to cut costs by US$5bn, with the target later being raised to $7.5bn. The decision came at a turbulent time in the entertainment industry when the months-long Hollywood workers’ strike crippled numerous productions.

Iger also made the difficult choice of laying off over 8,000 employees to streamline the business.

Quality, Not Quantity

The CEO attributed part of Disney's issues to an overemphasis on quantity over quality in its content production, particularly for Disney+. Instead, he redirected the company towards producing fewer but higher-quality titles to improve profitability and audience appeal. These measures have had a significant financial impact by cutting losses by half a billion to about $512m.

Disney also delved into new strategies for its television business and potential investors for its sports network ESPN. These moves reflected broader industry trends and the need to respond to the growing demand for digital.

Beyond streaming, there was a glimmer of hope for recovery in Disney’s Parks, Experiences, and Products division. After the debilitating impact of COVID-era shutdowns, the business line began seeing a 13% rise in revenue to reach $8.33bn by August 2023.

PostScript: Under Iger’s leadership, Disney’s transformation has zoomed in on streamlining operations and enhancing cost efficiency. Today, despite the rapidly changing entertainment industry, Disney is poised to surpass its cost-saving targets and return to profitability thanks to Iger’s restructuring efforts.

Key Lessons

1) Focus on quality

Prioritising quality over quantity can lead to better customer satisfaction and profitability. Disney’s strategy to produce fewer, higher-quality titles is a testament to this principle.

2) Manage costs wisely 

Implementing cost-cutting measures, such as reducing expenses and optimising operations, can help a company recover from financial setbacks and improve overall efficiency.

3) Explore reinvestment opportunities 

Looking for new avenues and potential partnerships, like Disney’s consideration of investors for ESPN, can open up additional revenue streams and align with market trends.

4) Innovate and evolve 

Continuously innovating and evolving business models, as Disney did by enhancing its digital streaming services, is key to sustaining growth and competitiveness.

5) Respond to crisis swiftly 

Having a solid crisis management plan and the ability to act decisively in response to crises, as demonstrated by Disney’s swift leadership changes, is vital for business resilience.

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Until next week, may the force be with you.

Kevin

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