In a candid moment during Disney's fiscal first-quarter earnings call on Wednesday, outgoing CEO Bob Iger shared pointed advice for his successor, emphasizing the perils of complacency in a rapidly evolving entertainment landscape. As the veteran executive prepares to step down after nearly two decades at the helm of the company across two stints, Iger warned that "trying to preserve the status quo is a mistake." The remarks came amid reports that Josh D'Amaro, chairman of Walt Disney Parks and Resorts, is the frontrunner to replace him, according to Bloomberg.
Iger, who returned to lead Disney in late 2022 after a brief retirement, struck a forward-looking tone during the call, steering clear of overt nostalgia for his tenure. "The good news is that the company is in much better shape today than it was three years ago," he said, referencing the challenging period when he reclaimed the CEO role from Bob Chapek. Under Iger's guidance since then, Disney has undertaken significant restructuring, including the creation of a unified entertainment unit led by co-chairs Dana Walden and Alan Bergman. This move, Iger noted, was designed to align content spending more closely with financial outcomes, particularly in the streaming sector.
The streaming business, once a major pain point for Disney, has shown marked improvement under Iger's watch. Three years ago, the division posted a quarterly loss of about $1.5 billion in the period just before his return, Iger recounted. Fast forward to the latest quarter, and Disney's streaming operations are generating more than $1 billion in profits annually, with the company on track to further bolster the unit. "We are on a path to turning into a far better business," Iger stated. "That reorganization worked." He credited the studio and television arms, which pour the most resources into streaming content, for needing greater accountability in their investments—a philosophy that drove the 2021 overhaul.
Disney's broader first-quarter results, released on Wednesday, reflected this progress with solid financial performance across key segments. Revenue climbed to $23.1 billion, surpassing analyst expectations, driven by strong contributions from parks, experiences, and streaming. However, the company disclosed a $110 million financial hit stemming from its high-profile carriage dispute with YouTube TV last fall. The feud, which temporarily blacked out Disney channels on the platform, highlighted ongoing tensions in the pay-TV market as cord-cutting accelerates.
Iger's advice to his successor underscores the dynamic pressures facing Disney, from technological shifts to competitive rivalries. The executive, who first took the CEO reins in 2005 and steered major acquisitions like Pixar, Marvel, Lucasfilm, and 21st Century Fox, has long championed adaptability. In a separate comment during the call, he described the $71.3 billion Fox deal in 2019 as "ahead of its time," suggesting its strategic value continues to unfold in an era of consolidated media power.
Speculation about Iger's replacement has intensified in recent weeks, with the Disney board scheduled to convene later this week to discuss the transition. Bloomberg's report positioned D'Amaro as the likely choice, citing his success in revitalizing the parks division post-pandemic. D'Amaro, who joined Disney in 2019 after a stint at Nike, has overseen expansions like new attractions at Disneyland and Walt Disney World, as well as international projects in places like Shanghai and Paris. His operational expertise in the experiential side of the business could signal a shift toward emphasizing Disney's theme park empire, which generated $8.9 billion in the quarter.
Dana Walden, co-chairman of Disney Entertainment, remains another prominent internal candidate. Walden, a television powerhouse with credits including hits like "Grey's Anatomy" and "Modern Family," has been instrumental in the streaming pivot. Sources close to the matter, speaking to Deadline, have highlighted her as a strong contender, particularly given her role in content strategy. Iger himself avoided delving into transition specifics, saying he did not want to spend "too much time on possible transition or probable transition."
The context of Iger's second act at Disney adds layers to his reflections. When he returned in November 2022, the company grappled with streaming losses exceeding $4 billion annually, activist investor pressures from figures like Nelson Peltz, and creative controversies surrounding films like "The Marvels." Iger's team has addressed these by cutting costs, streamlining operations, and focusing on high-return franchises. The parks segment, for instance, rebounded robustly, with domestic attendance surging due to pent-up demand and new offerings like the Tiana's Bayou Adventure ride at Magic Kingdom.
Yet challenges persist. The YouTube TV dispute, resolved in December after months of negotiations, exemplifies the fragmentation in distribution deals. Disney channels, including ESPN and ABC, were unavailable to millions of subscribers for over a month, prompting user backlash and temporary subscriber losses. Officials at Disney described the $110 million impact as a one-time charge, but it underscores the volatility in linear TV revenue, which fell 7% in the quarter.
Looking beyond the immediate earnings, Iger touched on other strategic moves, including a recent agreement between the NFL and ESPN. The deal, finalized this week, transfers NFL Network and related assets to ESPN in exchange for Disney's $3 billion investment for a 10% stake in the league's media ventures. Iger framed this as a bolstering of ESPN's sports portfolio, crucial as Disney eyes profitability in its direct-to-consumer businesses.
Analysts have praised Iger's turnaround efforts but caution that his successor will inherit a company at a crossroads. Streaming, while profitable, faces stiff competition from Netflix, Amazon Prime, and Warner Bros. Discovery's Max. Parks revenue, though robust, is sensitive to economic downturns and travel trends. According to Disney's filing with the Securities and Exchange Commission, the company aims for $7.5 billion in cost savings by fiscal 2024's end, a goal Iger reiterated as foundational to future growth.
The board's upcoming meeting in Burbank, California, where Disney is headquartered, could clarify the leadership path. Insiders report a deliberate process, with the search committee weighing candidates' abilities to navigate AI integration in content creation, global expansion, and potential mergers. Iger, at 73, has extended his tenure multiple times, but he signaled readiness to hand over the reins, telling investors, "I'm certain my successor will not do that" regarding status quo preservation.
As Disney charts its next chapter, Iger's words serve as both a capstone to his legacy and a blueprint for what's ahead. The company's improved financial health—evidenced by earnings per share of $1.22, beating estimates of $1.04—positions it well, but the entertainment industry's pace demands constant evolution. Stakeholders, from Wall Street to theme park enthusiasts, await the board's decision, which could shape the Mouse House for years to come.
In the broader media ecosystem, Iger's emphasis on innovation resonates amid consolidations like the NFL-ESPN pact. This arrangement not only secures Disney's sports rights but also aligns with Iger's vision of integrated ecosystems where streaming, linear TV, and live events converge. For a successor like D'Amaro or Walden, the challenge will be balancing creative storytelling with fiscal discipline in an age of cord-cutting and digital disruption.
Disney's Q1 performance, detailed in the earnings call from its Burbank offices, also spotlighted international growth. Experiences revenue outside the U.S. rose 5%, buoyed by the opening of new lands at Disneyland Paris and Tokyo Disney Resort. These developments, overseen by D'Amaro, illustrate the parks division's global footprint, spanning 12 resorts worldwide and serving over 250 million guests annually pre-pandemic.