Activist investor Dan Loeb wrote to Disney CEO Bob Chapek and the board of directors, suggesting a cost-cutting program to unlock the media giant's earning potential.
Per The Hollywood Reporter, Dan Loeb, the CEO of Third Point LLC, sent a letter to Disney on Aug. 15. After the investor repurchased "a significant stake” in the company, he urged Disney to "refresh" its business plan. One of Loeb's suggestions was a cost-cutting program to improve The Walt Disney Company's earnings. "Disney's costs are among the highest in the industry," Loeb wrote, "We believe Disney significantly underearns relative to its potential."
"We urge the Company to embark on a cost-cutting program that addresses both margins and the disposal of excess underperforming assets," the investor wrote. However, Loeb didn't specify what he viewed as "underperforming assets." In addition to the cost-cutting program, the activist investor also advocated for an ESPN spin-off plan and integrating Hulu directly into the Disney+ platform. Loeb also voiced that the Disney board needs a "refresh" and could use some new members. "This is not meant to single out any current board members, but we believe there are gaps in talent and experience as a group that must be addressed," Loeb wrote.
Loeb has taken several initiatives to vocalize better business models in various media. In 2020, the activist investor recommended that Disney should double its streaming budget. Third Point, the New York-based asset management firm, took an initial investment at Disney in 2020 and has held stakes in the company until early 2022, citing the company’s streaming strength. Disney stock has fallen about 20 percent since January and saw a 2% rose after Loeb’s reinvestment.
The latest Disney disclosed earning report saw a quarterly loss of $1.06 billion in its streaming division. Disney reportedly plans on trimming its spending on entertainment content from $33 billion to $32 billion this year. In a response to Loeb's letter, Disney focused on its strength and established success. "We welcome the views of all our investors. As our third quarter results demonstrate, The Walt Disney Company continues to deliver strong financial results powered by world-class storytelling and our unique and highly valuable content creation and distribution ecosystem," Disney wrote.
Disney continued, defending its board members by stating, "Our independent and experienced board has significant expertise in branded, consumer-facing and technology businesses as well as talent-driven enterprises. The board has also benefited from continuous refreshment with an average tenure of four years."
Source: Hollywood Reporter