Disney's Situation Gets Much Worse

The pressure on the board of Walt Disney Company to oust CEO Bob Chapek has just worsened. The news that the subscriber growth of Netflix has ended shows that Disney’s own streaming efforts may have peaked, or will soon. Also, the special status Disney has in the area around Orlando is under siege by the state’s Republicans. They are upset about Disney’s stance on education about sexual orientation and gender in public schools. Chapek is at the center of this story, and his streaming strategy may no longer work.

Disney’s shares have hit a 52-week low of $124.11. That is down a breathtaking 31% in a year. Susan Arnold, Disney’s board chair, has to decide whether to bet her own legacy on Chapek or to replace him, preferably with an outsider who has not been part of the company’s recent problems.

Disney’s streaming business is made up of Disney+ with 130 million subscribers, ESPN+ with 21 million and Hulu at 45 million. The streaming industry becomes more crowded by the year, with Discovery and Paramount now ramping up their offerings. Two of the most customer-heavy, cash-rich companies in the world, Amazon and Apple, continue their assault on old media companies. Among the questions investors have to ask are whether Disney’s streaming products are correctly priced and will it be forced to take advertising to offer lower-priced streaming alternatives.

Disney has not been on the ropes like this since CEO Michael Eisner was chased out the door in 2005. Perhaps the effect of COVID-19 on Disney’s theme parks should be considered, but that can hardly be considered a management bungling.

Disney’s shares will be stuck at current levels, or they may drop more.

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