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Walt Disney Co Bob Chapek Daniel Loeb

Investment Company Takes Stake in Disney, Says Disney “Significantly Underearns” and Calls for Cost Cuts

On August 10, The Walt Disney Company held its Third Quarter Earnings Call. During that call, Disney CEO Bob Chapek revealed that the company had made $21.5 billion in revenue, surpassing Wall Street expectations. Chapek also shared that the company expected to do just as well, or better, next quarter. He also shared that theme park Guests were spending 40% more while at the Parks, 50% of theme park Guests are purchasing Disney Genie+, and that Disney’s streaming service, Disney+, was expected to be profitable by 2024. However, one person doesn’t think that that is enough.

Bob Chapek

Credit: Disney

Daniel Loeb is the founder and CEO of Third Point — a hedge fund that just recently purchased a stake in The Walt Disney Company. Loeb is also working to purchase Comcast’s portion of ownership in Hulu, which is about 33%. Disney owns the other 67%. Loeb is taking the stake that he now has in Disney as an activist investor and is running with it. He believes that Disney “significantly underearns relative to its potential,” and he wants to change that. That is not the only massive change that Loeb wants to work with Disney to make.

Daniel Loeb

Credit: CNBC

First up, Loeb wants Disney to take a closer look at ESPN and potentially make it a spinoff of The Walt Disney Company. In a statement shared with The Hollywood Reporter, Loeb had the following to say regarding ESPN, which also streams as ESPN+.

“ESPN is a great business that currently generates significant free cash flow, enabling the Company to pay down debt and increase strategic options down the line,” wrote Loeb. “In addition, we realize ESPN content is part of the bundle being offered to subscribers of other products, both in Disney’s Linear and DTC businesses. Despite these advantages, we believe that a strong case can be made that the ESPN business should be spun off to shareholders with an appropriate debt load that will alleviate leverage at the parent Company.”

ESPN Plus

Credit: ESPN+

In addition to ESPN becoming its own entity, Loeb believes that Disney should combine two of its biggest pieces, Disney+ and Hulu. Chapek announced during the earnings call that Disney+ would be seeing a price increase when an ad-supported version is released on December 8. However, should Disney+ and Hulu combine, Disney+ subscribers will have to pay A LOT more if they want to keep streaming their favorite Disney movies. Some Hulu Live subscriptions already include Disney+, so it is unknown if those would increase in price.

Disney Plus

Credit: Disney

Loeb’s last request of Disney is likely to be the most controversial. Loeb thinks that Disney is “underearning” and said that the Company should find ways to cut costs. Loeb wants Disney to look at assets that are underperforming and look at its profit margins and cut costs accordingly. There are no more details on what that would mean, but Disney fans have been seeing a lot of cost-cutting happening recently, especially at the theme parks. Promised and announced projects have not happened yet, and food portions are getting smaller while the prices are getting higher.

After Loeb announced his company’s purchase of a stake in The Walt Disney Company, Disney shares jumped more than 2%.

About Krysten Swensen

A born and bred New England girl living the Disney life in Southern California. I love to read, to watch The Golden Girls, and love everything to do with Disney and Universal. I also love to share daily doses of Disney on my Disney Instagram @BrazzleDazzleDisney!