‘More shots on goal’ with content | Trending Viral hub

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Nelson Peltz’s Trian Partners, which is agitating to get two seats on Disney’s board of directorsreleased a lengthy white paper Monday that analyzes the Mouse House’s financial performance and suggests strategic solutions.

The recommendations, according to Trian, are aimed at turning around disneyThe performance of shares of, which has been behind most of its peers (except Warner Bros. Discovery and Paramount Global), according to the white paper. Trian is urging Disney shareholders to vote for its two board candidates, Peltz and former Disney CFO Jay Rasulo, at the company’s April 3 shareholder meeting. disney opposes candidates put forward by Trian and another activist company, Blackwellsfor lacking “the appropriate range of talent, skill, perspective and/or experience.”

“For more than a year, Trian has outlined his ideas about strategies and goals, some of which Disney has now implemented, such as reducing cost overruns, restoring a dividend and making the Parks business a bigger part of the company. Disney’s growth strategy,” said the company led by Peltz. “We are now making public our 100+ page presentation with our comprehensive opinions.”

Among the proposals in the 133-page white paper (available at this link), the hedge fund says that to achieve a better return on its streaming content, Disney should take more “target shots” and increase creative risks outside of its core franchises, similar to Netflix. The company, Trian says, should “explore allocating more budget dollars to lower-cost, easier-to-produce projects to further balance Disney’s higher-cost franchise content; Prioritizing spending on ‘retention’ content should diversify and eliminate the risk of costly streaming failures.”

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Trian also recommends that Disney make fewer movie sequels. “Disney’s ‘steering wheel’ turns faster when the company creates or acquires new intellectual property to monetize,” the whitepaper says. “Sequels are less risky film projects to produce, but they don’t generate long-term benefits in the same way that new IPs do.”

The firm continues: “The percentage of Disney films that are sequels, prequels, spin-offs or remakes has increased dramatically, suggesting a creative engine that is failing.” Trian is asking the board of directors for “a comprehensive review of the studio’s operations and culture,” including the state of leadership, processes and workflow.

In the meantime, Trian recommends two potential paths to ESPN: One, ESPN’s independent streaming service, which Disney is targeting will debut in fall 2025, will launch “ideally with a ‘bundle’ partner like Netflix or Amazon”; or two, that ESPN should “raise cash from its linear business to selectively reinvest in ESPN+ and higher-growth parts of Disney’s business (like Disney+).”

On the other hand, Trian suggests merging Disney+ and Hulu product and content organizations to reduce costs, a move it claims would create cost efficiencies approaching $1 billion. Disney is in the process of purchasing NBCUniversal’s 33% stake in Hulu. In November, Disney said it would pay at least $8.61 billion to Comcast for Hulu’s stake, and the final price, which could be higher, will be based on an assessment of Hulu’s market value by each party’s bankers.

When it comes to integrating Hulu content into Disney+, Trian believes the service should “phase out the Hulu patchwork.” “We are skeptical that keeping Disney’s best general entertainment content behind a Hulu tile will optimize user engagement,” the white paper opines.

Additionally, Trian says he believes Hulu + Live TV “is a loss-making product that has struggled to scale and adds limited strategic value.” According to the whitepaper, “In our view, Live is not in a competitive position compared to YouTube TV following its deal to secure NFL Sunday Ticket and is no longer positioned as a ‘low-cost alternative to cable.'”

Other suggestions in the white paper are not new. For example, Peltz wants Disney will achieve “Netflix-like” streaming margins of 15% to 20% by 2027. something the hedge fund has previously described. Trian also wants Disney’s board to “fix” its “chronic succession issues” with CEO Bob Iger, whose contract expires at the end of 2026.

Much of Trian’s whitepaper focuses on making the case for change to Disney’s board of directors. For example, the hedge fund maintains that Disney’s $71 billion deal for 21st Century Fox, which closed in 2019was “strategically flawed”: “We are skeptical that Disney has delivered on its targeted synergies and EPS growth, given the deterioration of Disney’s media earnings power following the acquisition.”

The deal between Disney and Fox was “possibly the result of misaligned incentives,” Trian’s white paper says. “On the same day Disney agreed to acquire Fox, the board extended Mr. Iger’s employment agreement by four years and gave him an ‘outsized’ compensation package, reasoning that doing so was ‘critical’ to driving the business long-term. value of the acquisition,” says the newspaper. “In our view, the prospect of a much larger compensation package (more than double his previous package) created a strong financial incentive for Mr. Iger to pursue the Fox deal regardless of his prospects, creating a significant conflict.” of interest”.

Here are Trian’s agenda items for Disney’s board of directors from the white paper, divided into four categories:

Improve corporate governance and accountability

  • Update the board by adding Nelson Peltz and Jay Rasulo as independent, aligned and focused directors.
  • Arrange the succession process and conduct a thorough and successful search for a CEO in time for Mr. Iger’s retirement in 2026.
  • Align compensation with performance by linking the compensation program to results that drive long-term shareholder value
  • Form a board-level strategy and finance committee to evaluate progress on recommended initiatives and improve board monitoring of Disney’s long-term strategy.

Accelerate media profitability

  • Insist that management develop and articulate a clear DTC strategy with tangible goals that will achieve Netflix-like margins of 15-20% by 2027.
  • Explore opportunities to improve DTC share and cost structure, including changes to product and marketing strategies and reducing redundant overhead costs.
  • Right-Sizing Legacy Media Business Cost Structure in Light of Industry Dynamics
  • Evaluate Disney’s organizational structure to improve accountability and efficiency.

Creative Engine Review

  • Initiate a comprehensive Board-led review of the studio’s operations and culture, including leadership, processes and workflow.
  • Prioritize new intellectual property to reignite the “flywheel” and drive Disney’s long-term growth
  • Explore additional opportunities to improve the “flywheel” with digital cross-promotion

Clarify the strategic focus

  • Issue a long-term free cash flow growth target beyond fiscal 2024 to anchor investors in a clear strategic vision and improve accountability.
  • Explore strategic partnerships for non-core linear assets: Benefits include increased focus on linear assets, preserved strategic alignment with Disney’s DTC business, and an improved growth profile for Disney.
  • Insist on a digital strategy for ESPN that has a clear path to attractive financial returns
  • Refine the parks’ strategy to include tangible return objectives on the parks’ $60 billion of capital investment, plans to address new competitive threats to Walt Disney World, and a commitment to improving the guest experience at the national parks.
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