Media

Tara Lachapelle is a Bloomberg Gadfly columnist covering deals. She previously wrote an M&A column for Bloomberg News.

Bob Iger said Tuesday that he may or may not stay at Walt Disney Co. past his previously scheduled 2018 retirement. It's neither good news nor bad news. It's really not news at all, which is the problem.

"While I'm confident that my successor is going to be chosen on a timely basis and chosen well, if it's in the best interest of the company for me to extend my term, I'm open to that. But there's nothing specific to announce at this point."

Ever since ESPN began to fumble and media and entertainment companies started a new wave of consolidation, there's been speculation that Iger, 65, and Disney's board may wish to extend his term again. But still no official word from the company.

You Win Some...
Disney has soared during most of Bob Iger's tenure, as he made fruitful movie-studio acquisitions, but investors have grown concerned about ESPN's weakness:
Source: Bloomberg

Some are quick to caution that Iger -- under whom Disney's market value has grown by some $120 billion -- may be outstaying his welcome. There's always the risk that shareholders turn on the beloved CEO if Disney shares were to trend back downward, as they did last year when they were dragged down by ESPN's performance.

But this isn't the ugly Michael Eisner situation.  Keeping Iger longer may also buy him time to try to make ESPN more relevant to viewers again and carefully consider his succession -- perhaps by way of a breakup or other deal, as I've written before. Back when he originally planned to retire in 2018, no one foresaw that ESPN, the most valuable television network, would become Disney's problem child. Times have changed and the whole industry is in flux right now, so the company has to reassess.

...You Lose Some
While ESPN's losses moderated in January amid the NFL playoffs, the network continues to struggle
Source: Nielsen data compiled by Bloomberg Intelligence

To avoid a corporate governance blunder, though, Disney needs to communicate to shareholders a specific plan -- and soon. Trickling out information as it's done over the past year won't work any longer. Is Iger definitely staying? Fine, he's been great for the company. But for how much longer is he staying and what's his grand plan for the company and ESPN? (Is there one?) Or if he's going to retire on schedule, then start to detail the succession plan so that investors don't get nervous and drop Disney for other more intriguing peers. 

Horse Race
Disney, the leader of the pack, is losing its luster some, while CBS and Fox ride its coattails. Time Warner shares are benefiting from AT&T's takeover offer, while Viacom remains weak:
Source: Bloomberg

On that note, if the Magic Kingdom has lost some of its luster, who is more interesting? How about:

  • 21st Century Fox Inc.: While sports programs such as Monday Night Football have been a drag on Disney lately, it's just the opposite at Fox. Sunday's Super Bowl ads helped the company achieve its first half-a-billion-dollar revenue day. It may be curious that some of those attention-grabbing ads run counter to political viewpoints espoused by its Fox News division, which highlights the $56 billion company's increasingly split personality. But somehow it all works. And for better or worse, Donald Trump's presidency is good for business. The network's ratings soared 36 percent in January, following a 51 percent increase in 2016.  Investors aren't totally in love with Fox's deal to take full control of Sky Plc. And this past strong quarter just means tougher comparisons for next year. Fox also will need to focus on its next generation of on-air talent. Still, analysts see the company posting one of the industry's best revenue and profit growth rates this year and have raised their target prices.

  • CBS Corp.: CBS, the better half of Sumner Redstone's empire, offers a combination of appealing retransmission fee growth (what pay-TV providers pay broadcasters) and a stock that's cheaper than both Disney and Fox. The company forecasts a whopping $2.5 billion of total retransmission fees by 2020, which CEO Les Moonves says will "basically drop 100 percent to the bottom line." It also makes CBS less reliant on ad revenue. The company will have a more favorable set of assets now that it's exiting the shrinking AM/FM radio business through a merger of CBS Radio and Entercom Communications Corp. This development and the fact that the Redstones are no longer pushing for a merger between CBS and Viacom means that Moonves and his team are seemingly free of distractions. There's the possibility that CBS now gets taken over or finds another merger opportunity, but as long as Moonves is calling the shots, investors should be happy. 

  • Viacom Inc.: Just kidding! No, Viacom is still not interesting. (Thursday it's planning to unveil a new strategic plan. We'll see.)

If I had to choose one, it'd be CBS, just because there are fewer question marks. The biggest uncertainty is around whether CBS merges with someone else (not Viacom), which would be just as welcome news as it remaining a stand-alone entity.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

  1. Eisner, Iger's predecessor, was accused by Roy Disney (Walt Disney's late nephew) of "holding the company hostage" and failing to provide a succession plan at the time. His and another former dissident director's efforts led to Eisner's ouster in 2005. 

To contact the author of this story:
Tara Lachapelle in New York at tlachapelle@bloomberg.net

To contact the editor responsible for this story:
Beth Williams at bewilliams@bloomberg.net