What’s next for Disney in a tumultuous time?
Santosh Rao, Head of Research and Partner, Manhattan Venture Partners spoke to CGTN Europe about Disney vote.
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00:00 Let's talk to Santosh Rao, who's partner and head of research at Manhattan Venture Partners.
00:05 Good to see you, Santosh. Welcome back to the program.
00:08 So talk us through how we got here. How did Disney's management end up in this fight?
00:15 Well, this is a typical fight. I mean, it's not unusual.
00:21 There are some issues with Disney. Thank you for having me, first of all.
00:25 There are some issues with Disney and it required an intervention, you can say.
00:30 There are issues of succession. They did not do a smooth job the last time.
00:36 There are some issues with the content plate, just the full slate of content that they have.
00:43 And they just need to--the profitability is an issue.
00:47 So these are the three main things, profitability, content slate, and succession plan.
00:51 They needed that thing in place. I think that's what's happening right now.
00:55 I think Nelson Peltz is really pushing the company to get it there.
00:59 He has a stake in the company. And he's helping the shareholders, I would say, in the end,
01:03 because that's what the company needed.
01:05 They needed to be pushed in the right direction to get their act together, which they are.
01:09 And the stock price is showing that.
01:11 So there are two men at the heart of this. We've got the investor, Nelson Peltz.
01:15 We've got the CEO, Bob Iger. How different are their visions for Disney?
01:21 Yeah, I think Bob Iger is an experienced operator. He's done a great job.
01:26 And he will continue to do well. There are issues.
01:29 I mean, you can't disregard COVID and you can't disregard all the disruptions that we've had.
01:35 So I think overall the market is just stabilizing. It's getting normalized.
01:39 And he's there to execute it very well.
01:42 There were some issues. The streaming was a big disruptor.
01:45 And he needed to get the company to that side of the market as well.
01:49 So there were a lot of changes, structural changes going on.
01:52 And I think he's been doing a good job. He will continue to do well.
01:55 He's the best man for this job at this point.
01:57 He said he's going to be there for another couple of years, which is great.
02:01 We needed that. This is not really an operation, a profitability play.
02:05 It's a content company. You need real execution, real thoughtful execution,
02:11 not just blanket changes. So I think that's what he's doing.
02:15 He's well-entrenched. He knows how it works. He's done it in the past, done it for so long.
02:19 So I think that's what you're going to see. He's much better.
02:22 Nelson Peltz is there just to prod, just like any activist investor is there.
02:26 We're not sure whether he's there for profitability or just to really make a change.
02:30 Is he a disruptor or is he really meaning well?
02:34 But I think at the end of the day, we don't know how the dust will settle in terms of the voting.
02:40 But the shareholders are going to come out much happier at the end of it.
02:44 The stock market is, the stock is going to reflect an earnest desire by the management.
02:51 So this AGM happening at the moment, we're not expecting a result now, but perhaps within the next hour.
02:58 But what will happen next for Disney? It's been a really difficult few years altogether.
03:03 We think from what we can ascertain that Bob Iger is likely to stay in the driving seat.
03:08 Can the company and he put this behind them?
03:12 Absolutely. I think he will. He can do it.
03:15 All bets are that he's going to win the Disney board. Their slate is just going to win.
03:20 So at best, he might get a seat, but we're not sure about that as well.
03:26 But we had a similar incident in Procter & Gamble.
03:29 He really pushed the company to get the management changes and he got that kind of get the structure right.
03:35 So he's going to get some changes, good changes on the edges.
03:38 But I think essentially everything is going to stay the same.
03:41 He's going to have I think he's what this thing has done is the company has defined its strategy, laid out its strategy, what it wants to do.
03:49 So there's some cash flow at the end of it.
03:51 He's going to hit his targets in terms of free cash flow, in terms of streaming business, it's going to stray on the parks and all that.
03:58 So all the other things that he Nelson tells once, I think Bob Iger is going to execute on that.
04:03 So there's no question of replacing him or disrupting anything.
04:06 It's just a question of executing at this point.
04:09 And what about investors? Will they be happy to put this behind them and will they be happy with the potential results?
04:16 Absolutely. I think he will get the benefit of doubt.
04:19 He has a good history behind him. The investors will be happy.
04:23 I mean, you saw already this stock market was stock price was languishing in the 80s and 90s.
04:28 Now it's up to one hundred and twenty, one hundred twenty five and on the path to move ahead as profitability picture seems to be improving.
04:36 And things are he's raised the prices. He's done everything right.
04:40 So he's put the right things in place. So I think now it's just a question of executing.
04:44 And for the shareholders, it's just a question of waiting and seeing and let it rip right now.
04:49 So not just be impatient and sell off because things are in place.
04:53 So there's no question that he will execute. And this hasn't been the only drama for Disney, has it?
04:59 The CEO left, then came back. There's been criticism by Peltz that Disney has been slow to adapt to industry changes,
05:06 including, as you mentioned, streaming. Is this something that the company can deal with?
05:12 Yes. And that's a challenge. Netflix is the big challenger there.
05:15 But you have to get into that's the new transmission. That's the new mode of consuming content.
05:22 So you absolutely have to be there. And I think behind Netflix, Disney is the only competitor.
05:28 Others are still languishing way behind. So I think he's doing the right thing.
05:32 It's expensive. I think he's right now. It's in place. He has the library.
05:36 He has the content. Just has to get it all together in terms of Hulu and all those changes going on there.
05:43 Just integrate all the assets and get it together. So I think there is some work to be done.
05:47 I'm not saying it's a done deal, but I think they have a plan at this point and they have someone watching them very closely.
05:54 So Peltz has put them on the line and they have to execute at this point.
05:59 So if they don't, I think I know that his days are numbered and then the company is going to get hit badly because at this point,
06:09 they've said they're going to execute on certain things that Peltz will be happy about.
06:13 He's addressing every issue that he wants. And so now let's just wait and see.
06:18 Santosh, good to talk to you. Thank you for joining us today.