Trian Calls on Disney to Spend More on Lower-Cost Projects, Introduce ‘Streaming Margin’ Incentive for Execs in Long-Awaited White Paper

The activist investor is also calling for the entertainment giant to review the viability of Hulu + Live TV and explore more bundling opportunities

Disney CEO Bob Iger and activist investor Nelson Peltz (Credit: TheWrap/Chris Smith/Getty Images)

Trian Fund Management unveiled a long-awaited, 130-page white paper on Monday as the activist investor gears up for a showdown with The Walt Disney Company at its annual shareholder meeting in April.

Among its proposals to “restore the magic” are to introduce a new “streaming margin” incentive for executives to target a Netflix-like 15-20% margin by 2027, review the viability and potentially limit investment in Hulu + Live TV, phase out the Hulu tile in Disney+ and fully consolidate the two streaming services, explore more bundling opportunities and allocate more of its budget to lower-cost, easier-to-produce projects.

Trian expressed skepticism about ESPN’s viability as a standalone streaming service. It said that the company should either scale back its DTC plans and focus on “maximizing the value of ESPN+ and the existing linear business” or move forward with a bundle partner like Netflix or Amazon.

It also urged Disney to “right-size its legacy linear and studio cost structure,” conduct a review of the more than 150 countries it operates in and consider adopting “adopting wholesale or content licensing strategies in select markets with structurally challenged unit economics,” set a long-term free cash flow growth target beyond 2024, find strategic partners for its non-sports linear assets and better integrate streaming with other business lines to drive traffic, such as shopDisney.

Disney shares, which have climbed 12.9% in the past year, closed at $113.69 per share on Wednesday. But they are still well below the stock’s all time-high of $201.91 hit in March 2021. 

Trian, which beneficially owns $3 billion in Disney stock, has blamed the company’s “chronic underperformance” on a board that lacks focus and accountability and has “consistently failed to fulfill its essential duties.”

“We love Disney and believe it is one of the most advantaged diversified media companies with brands, assets and loyalty that enable it to delight consumers and perform for shareholders,” the firm said in a statement. “However, we believe Disney has lost its way in the past decade, making strategic and operational missteps that have resulted in deteriorating financial performance and poor absolute and relative stock returns, costing shareholders billions.”

“At this critical point for Disney, we believe shareholders need independent directors who have the dedication, shareholder mindset and track record necessary to help unlock the Company’s immense creative and financial potential,” it added. “In our view, change is desperately needed.”

The firm has nominated its cofounder Nelson Peltz and former Disney chief financial officer Jay Rasulo to stand for election at Disney’s annual meeting on April 3. The pair are seeking to oust current board members Maria Elena Lagomasino and Michael Froman, who Trian argues have overseen a total shareholder return decline of 23% and 24%, respectively, during their tenures.

Disney has previously argued that Peltz and Rasulo lack the “appropriate range of talent, skill, perspective and/or expertise to effectively support Disney’s building priorities in the face of continuing industry-wide challenges” and have slammed the pair’s “track record of value destruction.”

It also rejected nominees from Blackwells Capital, which has proposed a real estate and strategic asset review, including a potential split of the company. It also called on Disney to prioritize artificial intelligence and spatial computing.

In a letter to shareholders last week, Disney noted that it’s on track to exceed $7.5 billion in cost savings, reach streaming profitability and deliver $8 billion in free cash flow by the end of fiscal year 2024. The company has also touted the restoration of its cash dividend, increasing that payment by 50%, its $3 billion share buyback program for fiscal year 2024 and its $60 billion investment in its theme parks over the next decade.

Other Disney initiatives include a $1.5 billion stake in “Fortnite” creator Epic Games and a sports streaming venture with Fox and Warner Bros. Discovery slated to launch this fall.

Disney has recommended that shareholders vote for its 12 board nominees, which include CEO Bob Iger, Mary Barra, Safra Catz, Amy Chang, Carolyn Everson, Michael Froman, Maria Elena, Lagomasino, Calvin McDonald, Mark Parker and Derica Rice, as well as recent appointees James Gorman and Jeremy Darroch.


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