Key insights
- Josh D'Amaro becomes Disney's CEO, inheriting challenges like declining TV business, box office fatigue, and competition from YouTube and TikTok. His success in the theme park business is a positive sign, but he needs to address investor concerns about streaming losses and navigate the AI era. The partnership with Dana Walden is crucial. Iger's continued presence on the board until year-end provides stability.
By Dawn Chmielewski
LOS ANGELES, March 18 (Reuters) - Josh D'Amaro officially assumes his new role as Disney's chief executive officer at Wednesday's annual shareholder meeting, taking the helm of the entertainment colossus at a time of profound change.
The executive's stewardship of the company's lucrative theme parks business, which represents 57% of last year's profit of $17.5 billion, helped elevate D'Amaro to the corner office.
Investors are eager for D'Amaro to lay out his strategy for guiding Disney through the artificial intelligence era, when tech giants threaten to rewrite the economics of media, and for managing possible disruptions to the company's tourism business caused by conflict in the Middle East and surging oil prices.
D'Amaro also inherits a television business in decline, box office fatigue for major entertainment brands like Marvel and Star Wars, and a fractured entertainment landscape where Disney must compete with YouTube and TikTok for viewers' time and attention. He also will have to dispel memories of another former parks chief promoted to Disney CEO, Bob Chapek, whose brief, failed tenure resulted in the return of the company's longtime leader, Bob Iger, in November 2022.
Although both D'Amaro and Chapek rose from the parks division, Disney's board paired D'Amaro with veteran television executive Dana Walden, who was elevated to president and chief content officer. TD Cowen analyst Doug Creutz wrote that Walden's proven creative expertise will enhance D'Amaro's operational strengths.
"It will however be critical for the two executives to be able to forge a strong partnership," Creutz wrote in an analyst note.
Iger will remain on Disney's board until the end of the year, when he is scheduled to retire for a second time.
When Iger returned to the company, the stock had dropped more than 40% in a single year, amid investor concerns about the mounting losses of Disney's streaming media unit. One activist investor, Third Point, had been agitating for Disney to spin off its ESPN sports television network, before ultimately conceding its value to the company. Meanwhile another activist, Trian Fund Management, co-founded by Nelson Peltz, was buying up shares.
Iger stabilized the company, reorganizing Disney to return power to creative executives and lifting the streaming service to profitability. He defeated a campaign by Peltz and other activists, who argued the storied entertainment company had underperformed in the streaming era.
Disney, under his leadership, also delivered five films topping $1 billion in worldwide box office over the past two years, initiated a $60 billion plan to invest in Disney's theme parks and cruise ships, launched ESPN's streaming service, and struck a deal with OpenAI.
However, during his tenure, Disney's total return on invested capital was 11%, a performance that lags the 77% return for the S&P 500 Index. The Magic Kingdom's enterprise value is trading at 10 times the next 12 months of EBITDA, below its 2-year median average of 12 times EBITDA, per LSEG.
Bank of America analyst Jessica Reif Ehrlich said she is eager to hear D'Amaro's vision for the company.
When Iger was named chief executive officer in 2005, he moved quickly to put his mark on the company, smoothing relations with activist investor, Roy Disney, and making peace with the former Pixar CEO, Steve Jobs, a détente that cleared the way for Disney to acquire the pioneering digital animation studio, said Ehrlich.
"Josh is coming from parks. Will he do things quickly? Does he have a plan?" asked Ehrlich. "If he could at least articulate a growth strategy, that would be super helpful."
(Reporting by Dawn Chmielewski in Los Angeles; Editing by Aurora Ellis)