Walt Disney releases Q1 results late Wednesday amid another board battle with activist investor Nelson Peltz and Blackwells Capital. Meanwhile, the Dow Jones entertainment giant's subsidiary ESPN is teaming up with Warner Bros. and Fox to launch a new streaming service. Disney stock traded in a buy zone ahead of earnings.
Board Battle
The Dow Jones behemoth is in the middle of another proxy battle with Nelson Peltz's Trian Fund Management and Blackwells Capital for influence over the company's board of directors. Trian owns more than $3 billion in DIS stock.
Disney on Thursday urged shareholders to only vote for its 12 nominees for the board, and reject nominees from Blackwells and Peltz's Trian Group. Trian in December nominated Peltz and former Disney CFO Jay Rasulo to the board and on Jan. 18 set a target for reaching margins of 15%-20% by 2027, using Netflix as a guide.
On Feb. 1, Trian issued a letter to Disney shareholders, recommending they vote against Disney board nominees Michael Froman and Maria Elena Lagomasino.
Separately, Blackwells Capital is angling to place three of its nominees on the board. The firm nominated Jessica Schell, former EVP and general manager at Warner Bros. Discovery; media and real estate entrepreneur Craig Hatkoff; and Leah Solivan, founder of TaskRabbit.
Blackwells argues that the trio are experts in media and content, real estate and strategic asset review, as well as physical and spatial computing and AI-driven experiences, which will be crucial for Disney's future, according to a Tuesday proxy statement. Schell can contribute to reaching "Netflix-like growth rates on subscribers and pricing for Disney+," the firm wrote.
Blackwells sees Solivan helping capitalize on artificial- and virtual-reality trends for Disney parks and experiences through her work as a general partner at Fuel Capital.
Disney Separation Proposal
In addition, Blackwells mentioned a potential separation of Disney into three separate, public entities "with a management reorganization and leadership selection for each business." One suggestion was to spin out its theme park and real estate holdings into a public real estate investment trust, which Hatkoff could oversee and implement. Those represent 44% of Disney's market capitalization, according to Blackwells.
"Disney may simply be too complex for any one successor to Mr. (Bob) Iger to manage holistically," Blackwells wrote.
The firm also urged shareholders to disregard Trian's efforts as a "distraction." It noted that Peltz requested a seat on Disney's board at least 24 times in the last year and a half.
Another Streaming Service, Coming Soon
Elsewhere, ESPN, FOX and Warner Bros. late Tuesday announced a joint venture to develop and launch a new sports streaming service in the U.S. this fall. The new product will combine content from ESPN, TNT and Fox Sports and feature the major U.S. sports leagues, many top college divisions, as well as The Masters, FIFA World Cup, Wimbledon, Formula 1 and more. NBCUniversal will still have rights to "Sunday Night Football" while Amazon will keep "Thursday Night Football" and CBS will maintain its package of Sunday NFL games outside the joint venture.
The service will have a new brand and independent management team, according to Disney's release late Tuesday. Each entity will own one-third of the joint venture and have equal board representation, while also licensing their sports content on a non-exclusive basis.
Price plans have yet to be released. Variety reported the new service will likely cost more than a standalone regional sports network, which typically ranges from $20 to $30 per month. However, it will be cheaper than larger streaming packages, such as Hulu+ and YouTube TV, that can cost $75 to $80 per month.
Subscribers will also have the ability to bundle the product with Disney+, Hulu and Max.
Disney Earnings
Meanwhile, FactSet analysts expect Disney's earnings to tick up 1% to $1 per share, its second straight increase after four straight quarters of declines. Wall Street sees revenue growth slowing for the third quarter in a row, rising about 1% to $23.75 billion.
Analysts see total streaming subscribers at 223.93 million for the quarter, down a fraction from Q4 and a 4.6% decline from last year.
Disney+ subscribership is expected to fall to 148.28 million, down from 150.2 million in Q4 and 161.8 million last year, respectively.
Analysts forecast Disney parks revenue tumbling 25% to $7.64 billion.
Disney Stock
DIS stock slid 2% early Wednesday after surging 2.7% Tuesday following the Blackwells proposal. Shares are in a buy zone for a nine-week flat base after clearing the 96.51 buy point Friday.
Disney stock has climbed 26% off a nine-year low touched in October. It remains more than 51% below its March 2021 record high.
You can follow Harrison Miller for more stock news and updates on X/Twitter @IBD_Harrison
