Just ahead of Disney’s annual shareholder meeting, the company is currently in the middle of a proxy battle with Activist investor Nelson Peltz and his Trian Fund Management group, which currently owns about $3 billion dollars worth of Walt Disney Company stock.

Nelson Peltz started buying up Disney stock following the stock price drop after the pandemic, and Wall Street did a U-turn on its expectations for streaming services, dropping a focus on growth on subscribers to profitability. 

The activist investor has been battling with the board of directors for two years, criticizing the company over losses in its streaming business, poor corporate governance and its succession plan.

Last year, Disney CEO Bob Iger fought off a proxy war at the last minute by agreeing to restore the dividend and a plan to drastically reduce costs, which has resulted in over $7 billion worth of cuts and over 7000 job losses.  Disney has also been looking at selling some of its assets, including getting a strategic partner for its sports business, ESPN, and its Indian business, Disney Star.  It has also recently been revealed that ESPN is in talks with the NFL about a deal for NFL Media.

However, Peltz has once again been pushing to get two places on the Disney board of directors, one for himself and another for Jay Rasulo, who is a former chief financial officer at the company.   Disney has been actively stating it is backing another investment company, Blackwells Capital LLC, to get three places on the board instead. 

One reason for this is that part of Trian Fund Management’s stake in Disney has been obtained from Isaac Perlmutter’s Disney shares, who used to run Marvel until he was let go from the company last year and has a grudge against Iger. 

Disney has also stated it doesn’t think Nelson Peltz has the background knowledge needed to help Disney move forward and has brought forward no ideas on how he could help the company.   Nelson Peltz has previously been on the board of directors for Procter & Gamble, Unilever, H. J. Heinz, Mondelēz and Ingersoll-Rand. 

The Board does not endorse the nominations of Nelson Peltz and James Rasulo put forth by Trian Fund Management, L.P. and its affiliates, led by Nelson Peltz and supported by former Disney executive Isaac Perlmutter (collectively, the “Trian Group”). The Board recommends that shareholders do not vote for the Trian Group nominees, and that they reject a related proposal from the Trian Group to amend the Company Bylaws.

The Walt Disney Company

Bloomberg has reported that Trian Fund will publish a so-called white paper detailing its investment thesis and recommendations for Disney after next week’s Disney quarterly financial results and ahead of the annual shareholder meeting.

One of Nelson’s suggestions is that Disney should bundle ESPN+ with Netflix to help boost the streaming division to making more profit. 

Disney already has bundled ESPN+ with its own streaming services, Disney+ and Hulu.  Also, recently, Disney made a deal with Charter Communications to offer Spectrum sports subscribers access to ESPN+ and other deals with other telephone and cable providers for access to Disney+.

Over the past year, Disney has been looking at options for how to adapt ESPN to a new streaming market, with plans to launch a new direct-to-consumer version of ESPN at some point in the future, which would be the complete ESPN package.  Currently, ESPN+ only includes some sports broadcasts and content; not everything is available on its cable channels. 

Peltz’s suggestion to try to bundle ESPN+ with Netflix to recreate a cable bundle where Netflix subscribers are paying for sports content is unlikely to gain any traction.  Netflix has already begun leaning in on sports programming, with a recent deal with the WWE, in addition to running test events for Golf and making documentaries about Formula One, Soccer and American Football. 

Netflix has been very vocal about not wanting to get too invested in sports programming due to the costs, but with the addition of new weekly live WWE content shows, they are slowly coming around to the idea.  Other streaming platforms, including Paramount+, Max, and Amazon Prime Video, also offer sports within their streaming services.

Personally, Netflix doesn’t need ESPN, and the suggestion of just bundling ESPN with the most popular streaming service also highlights how he doesn’t understand the streaming business, especially as one of the major reasons streaming took off, was because people didn’t want to continue to pay for content they didn’t watch. 

Nelson has previously spoken about how he wants Disney to be more like Netflix, which makes sense since Netflix is the biggest streaming service and has proven the streaming business can make money.  But simply saying, “be like that thing that’s winning” isn’t really a plan forward, especially with streaming services, this is why all of the studios have struggled, by trying to chase Netflix, instead of coming up with their own plans, since studios like Disney have more than just a streaming business, since they make money from linear channels, theme parks, theatrical movies, cruise ships, merchandise etc,.

Since Nelson Peltz began his investments in Disney, his hedge fund has underperformed, with a return of only 10%, compared to the usual 20%, and this is why he wants to boost Disney stock to make more money.

Do you think Nelsen’s idea will work?  Let us know on social media!

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Roger Palmer

Roger has been a Disney fan since he was a kid and this interest has grown over the years. He has visited Disney Parks around the globe and has a vast collection of Disney movies and collectibles. He is the owner of What's On Disney Plus & DisKingdom. Email: Roger@WhatsOnDisneyPlus.com Twitter: Twitter.com/RogPalmerUK Facebook: Facebook.com/rogpalmeruk

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