For decades, the Walt Disney Co. has displayed business powers so bewitching that the fabled storyteller could have been sporting the spell-spouting hat worn by the Sorcerer in its 1940 hit film Fantasia. In the musical masterpiece, Mickey Mouse dons the chapeau to essay his own tricks, but can’t control them, unleashing a nightmarish flood in the castle basement where he labors. Recently, Disney’s performance has been about as bumbling as its mascot’s phantasmagoric misadventure. The Mouse House admits that it pulled a Mickey—it got too cocky, lost its touch, and flooded the place. But just as its Mickey later rode to animated glory by mastering the pointed blue headgear to douse blazes and hurl fireballs, Mickey’s creator badly needs to follow its own mythology and regain its heroic might. To restore the magic, a returned Bob Iger is recasting the kingdom’s strategy for conquest in a shift just as radical as his charge to galvanize the flagging giant via daring acquisitions after first taking the reins in 2005.
Reviewing all the great companies renowned for providing strong, reliable shareholder returns in recent decades, it’s hard to think of any that have gone from prince to frog as fast as Disney. Indeed the stock now sells at 35% below its level of four years ago, showing that the markets take a dim view of its prospects. The entertainment colossus turned 100 this year, and it’s striving to accomplish what few enterprises save Coca-Cola have achieved: remain a powerhouse into a second century. But make no mistake, though Bob Iger was only gone from the CEO perch for under three years, he’s returned to a new world. Tom Rogers, former president of what’s today NBCUniversal Cable and ex-CEO of TiVo, and now executive chairman of GameSquare, believes that streaming’s low profitability versus cable will restrain Disney’s earnings for a long time to come, and the company’s being less than frank about the true picture. “They’re not putting forward a transparent enough analysis,” Rogers told Fortune. Rogers says that he wouldn’t buy any Big Media stock today, because “nobody’s proved” they make anywhere near the money on streaming that they’ve made on cable.
Still, Disney enjoys innate advantages over its streaming rivals from Old Media. A big one is its highly profitable and consistently growing collection of 12 theme parks, including overseas outposts in Tokyo, Hong Kong, Shanghai, and Paris. Another is Disney’s skill at sustaining powerful movie franchises from Star Wars to Avatar to Pirates of the Caribbean to Indiana Jones, and deploying the names across multiple platforms by creating superhero-themed attractions at the parks and selling branded merchandise. David Trainer, founder and CEO of investment research firm New Constructs, thinks Disney can stage a big comeback. “Disney has more ways to monetize content than any other media company,” he says. “If you’re convinced they can execute, the stock now looks cheap.” Adds Tim Nollen, an analyst at Macquarie Research, “I’ve said many times, the one company in traditional media most likely to succeed in direct-to-consumer is Disney. That’s because of the depth and breadth of the brand. Their numbers are moving in the right direction, and investors will reward the stock when they start to see earnings from streaming.”
