Nelson Peltz’s White Paper
Everyone knew this was coming but the forms of vendetta must be obeyed.
Nelson Peltz has finally thrown down his gauntlet at Bob Iger’s feet. The Trian Group has sent its 130-page white paper (more of a white novel if you ask me) to Disney’s institutional investors.
This is basically a list of everything that Disney is doing wrong and what Peltz says needs to be done to fix them. The letter to PepsiCo was rather searing about PepsiCo’s own stance on Disney, which is a rather nice slap at Disney’s new CFO who until recently was PepsiCo’s CFO, where he never was able to get Disney to switch to Pepsi products in Disney World.
I am now of the opinion that Bob Iger was forced to jump the gun on firing Bob Chapek. I suspect that his original plan was to let Bald Bob take all the heat for the downsizing as well as the various disasters that were going to be reigning down on Disney’s head. Then replace him. Except Chapek and Ike Perlmutter were trying to get Peltz on the board of directors of Disney.
Iger knew if that happened he’d be in the wilderness forever. His shadow regime could not survive the daylight of BOD transparency. So he pulled the trigger at least one year earlier than he wanted to.
ANYONE could look at the numbers and facts presented and see what’s wrong at Disney. THIS goes further and explains (a) why and (b) whose FAULT it is. It not only says Trian’s board candidates can do better than those on the board they’d replace and advise those remaining, it completely impeaches Bob Iger’s ability to make ANY case for his side because it shows how his experience, guidance, and management has been so completely flawed and has caused the rot.
“It isn’t personal, it is just business” may be the tone, but the FACTS presented are VERY personal indeed. Basically, the summary of this entire document is as follows:” The Emperor Has NO Clothes And He’s Costing You Money.”
And do you know another brilliant thing about this–well TWO brilliant things?
1. It is what we call in the book/fiction business a “page turner”–it draws the reader in and keeps grabbing them and never beats any dead horses or allows ennui to set in. It is a story you are compelled to follow to the end.
2. IF, as I’ve surmised, both sides realize (as evidenced by their solicitations) that the big investors have all made their bets and voted their appropriate colored cards by now, and therefore that the “audience” for any appeal at this point is the small investor–millions of moms & pops, local brokers. small fund or pension managers, etc., etc. who, in the aggregate, hold the deciding balance of votes in their hands, well, this on-the-one-hand highly technical document is still enormously readable and accessible without a finance degree or much Wall St. or corporate experience. It is clear, it is readable, and it makes its case no matter WHO you are (and along the way, it MIGHT suggest to some of the bigger players that they should swap to blue or look ridiculous/unprofessional/stupid if they do not.)
It is very clear from the strategic use of quotes from Bob Iger and the Disney statements that if this change does NOT happen, things will continue the way they have–in the red. You are left with no other conclusion to draw. In short, vote blue or sell your stock and take your losses, because in the words of the old over-used adage, doing the same thing (or letting, if not encouraging, Bob to do it) and expecting positive change is….insanity.
No rational human being who can read and comprehend English can draw any other conclusion from this. And while this is partly due to great, disciplined, comprehensive, and convincing argument and storytelling…well, it sure helps when the story is so clearly, unequivocally, and utterly TRUE.
The paper ignores Disney’s political posturing, (given how far left the investor class leans these days that was probably for the best). No, this one is strictly a “this is just business kind of thing.” Here is Trian’s breakdown of Disney’s… Well, breakdown.
Corporate Governance
Preserve as much of the status quo as possible by playing defense – evidenced by limited changes to compensation and succession processes
Meaning: Executives at Disney have been getting absurd raises as an apparent reward for complete and abject failure in every division of the company. Paying a new CFO twenty million as a sign-on bonus is ridiculous. The only reason he was hired was because he had successfully repelled a boarding action at Pepsi by Nelson Peltz. As for the succession process, there doesn’t appear to be one other than wait for Bob to die of old age and worry about it then.
Streaming Profitability
“Focused on achieving significant and sustained profitability” – no guidance or tangible targets beyond breakeven
Meaning: Disney Plus will NEVER be profitable. It’s lost too much money at this point. As the Dark Herald predicted at the start, the Streaming Wars was a conflict where all the studios (except Sony) reached for the nuclear launch keys and fired. There is nothing left but a smoldering wasteland. Which won’t stop Iger from trying to make Disney + a success… Somehow.
Future of ESPN
“Building ESPN into the preeminent digital sports platform” – lacking a tangible business plan or defined cost to shareholders
Meaning: ESPN is Disney’s goldmine. It floated the whole company during the lockdown. But it’s starting to show signs of collapse and they don’t know what to do about it because at the end of the day when the Boomers die off they will take Cable with them. It’s future is streaming and they have proven they don’t know how to do that. However, they are now selling permanent interest in their goldmine, which will reduce Disney’s long-term income in exchange for short-term cashflow.
Studio Creativity
“Improving the output and economics of our film studios”
Meaning: Trian didn’t even bother to answer this one. It is self-evident. Last summer Disney Pictures turned into Bob’s Bomb Factory. I’ve written several thousand words on this subject and am in the process of writing several thousand more.
Parks and Experiences Growth
“Strategically investing in our Experiences business to turbocharge growth”
Meaning: Trian didn’t answer this one either. Disney’s promise to invest $60 billion in the Parks over ten years means that Disney is going to invest nothing in the parks. The operating expenses are $600 million a year and given that this is a ten year plan that doe NOT take inflation into account, it is effectively a budget decrease. Universal will pull even with Disney Parks next year and pull away from them after that. Disney’s only reply to this was a flowery announcement that they have the Imgineers hard at work on… Blue. Sky. Projects. Good lord, that was astonishing to read, even the worst Pixie Dust addicts know what that means. There is nothing but rainbow unicorn farts as a plan for the parks to regain their place.
Peltz didn’t mention Iger’s $1.5 billion malinvestment in Epic Games. The virtual Disney World project is based heavily on the Apple Vision being a major success and Apple just went to war with Epic Games.
Iger will be going into battle with an experienced boardroom brawler in Nelson Peltz. I’m not guaranteeing Peltz will win simply because making profits isn’t that important to the Clown World business community, however, it matters to the smaller shareholders who are sick to death of watching their nest eggs turn rotten just prop up Bob Iger.
Bob Iger has never been closer to falling than he is now.
