Analyst: Disney CFO Departure Could Extend Bob Iger’s Reign Past 2024

Following the sudden departure of CFO Christine McCarthy due to a family medical leave, the employment term for CEO Bob Iger could be extended, according to a Wall Street analyst.

In a June 16 note to clients, Alan Gould with investment firm Loop Capital, wrote that McCarthy’s scheduled June 30 exit, and Kevin Lansberry’s planned July 1 takeover as interim CFO, could mean that Iger remains at the top executive position at Disney beyond his current two-year contract drawn up following the abrupt firing of previous CEO Bob Chapek last December.

Disney has said it would initiate a search for a permanent CFO.

“The [Disney] board is now in a position where it will be performing both CFO and CEO searches almost simultaneously,” Gould wrote, adding that the searches come as Disney faces increasing fiscal pressure to cut overhead costs in relation to its all-in streaming video strategy, while also dealing with political challenges in Florida, among other issues.

“Given … one of the most disruptive periods [in the company’s history], we speculate whether the board might ask Iger to remain CEO for an additional year,” Gould wrote.

Since reassuming the CEO position, Iger has given greater authority and accountability to business unit leaders, including Dana Walden and Alan Bergman at Disney Entertainment, Jimmy Pitaro at ESPN, and Josh D’Amaro at Disney Parks, Experiences and Products.

Disney CFO Christine McCarthy Stepping Down

Christine McCarthy, the Walt Disney Co.’s longtime CFO, is stepping down, citing a family medical leave. She will be replaced in the interim, beginning July 1, by Kevin Lansberry, CFO at Disney Parks and Resorts, until a permanent successor is found.

“I am immensely grateful for the opportunity [CEO] Bob [Iger] provided me to serve as CFO of this iconic company and am proud of the work my talented team has done to position Disney to capitalize on the business possibilities that lie ahead,” McCarthy said in a statement.

McCarthy, who joined Disney in 2000, became CFO in 2015 under Iger. She was reportedly instrumental in the termination of previous CEO Bob Chapek, which ushered in the return of Iger as CEO.

Her exit comes as Iger has initiated a 7,000-person employee downsizing in an effort to reduce costs as the company grapples with escalating overhead expenses related to its streaming services, which include Disney+, Disney + Hotstar in India, Star +, Hulu, Hulu + Live TV and ESPN+.

In 2021, Disney extended McCarthy’s employment contract through 2024.

“Among her many contributions to the company, one of the things I admire most about Christine is the generous mentorship she has provided to so many of her colleagues over the years, including countless women,” Iger said in a statement. “She has opened doors, created opportunities, and served as a role model for women at every level of business — not just at Disney, but around the world.”

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Disney CFO McCarthy: Disney+ Eyeing Additional Streaming Price Changes Among Subscriber Groups

Despite losing subscribers over the past two fiscal quarters, the Walt Disney Co. remains bullish on its direct-to-consumer business segment, said CFO Christine McCarthy, speaking May 17 at the MoffettNathanson’s Inaugural Technology, Media, and Telecom Conference in New York.

The DTC segment includes Disney+, Hulu and ESPN+ and ended the first quarter (March 31) with more than 231 million global subscribers.

McCarthy said the DTC segment remains on track to become profitable at the end of fiscal 2024, with renewed focus on content spending and analyzing subscriber growth among different platforms rather than overall.

McCarthy said that the prior focus on a singular subscriber number neglected the average revenue per subscriber, or ARPU, between core Disney+ subs and India’s Disney+ Hotstar subs. The Indian segment lost 4.6 million subs in Q1, while Disney+ overall (Disney+ core plus Hotstar) lost just 4 million subs.

“That means that Disney+ core subscribers were actually up, less than a million, and we wish it was a larger number,” McCarthy said, adding that the recent price increase in the United States caused some subscriber attrition.

With Disney launching a lower-priced ad-supported subscription tier late last year, McCarthy said the company is still eyeing potential pricing changes to the ad-free subscription tier, now characterized as a premium option. She said the ad-free core Disney+ subscriber would have access to increased levels of original content in the second half of the year, including Disney theatrical movies released in the Pay-1 window.

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“We want to focus on the core Disney+ subscriber … with content that we really think is going to drive subscriber growth, value and also be favorable to [lower] churn,” she said.

At the same time, the executive said that together with with CEO Bob Iger, the consensus is that Disney+ has not optimized the different pricing structures available between the ad-supported and ad-free subscription tiers.

Disney late last year upped the ad-free subscription tier price from $7.99 per month to $10.99 per month. The ad-supported option debuted at $7.99. With a reported 94% of Disney+ subs remaining with the service post price hike, the company is looking to mine additional incremental revenue growth opportunities on the platform.

“We’re looking at the consumer proposition [between ad-free and ad-supported] and where you want to lean into the differential [pricing] there,” McCarthy said. “There are some things we want to refine.”

Disney Sued Over Company’s Streaming Initiatives, Spiraling Costs

An investor group has filed a class action lawsuit against the Walt Disney Co. alleging previous CEO Bob Chapek, his former “right-hand man” Kareem Daniel, chairman of the erstwhile Disney Media and Entertainment Distribution segment, and current CFO Christine McCarthy misled investors about the true financial costs of the media giant’s growing direct-to-consumer business segment, which includes Disney+, Hulu and ESPN+.

Former CEO Bob Chapek

The suit, filed May 12 in U.S. District Court in Los Angeles, contends that despite senior management’s claim the DTC business segment would be profitable by 2024, from 2020 to 2022 Chapek and the other defendants attempted to hide the mushrooming costs of the company’s singular focus on streaming by distributing original Disney+ content such as “The Mysterious Benedict Society” and “Doogie Kameāloha, M.D.” series across legacy distribution channels, including the Disney Channel, among other “cost-shifting scheme” initiatives.

“By doing so, a significant portion of the marketing and production costs of the shows were shifted away from Disney+ and on to the legacy platform,” read the complaint.

CFO Christine McCarthy

While distributing content costs across multiple distribution channels is not a new financial accounting trick or unique to Disney, Chapek and his team had few options other than streaming after the pandemic shuttered the company’s legacy theme parks, cruise ships, retail outlets and content production literally overnight.

In fact, the suit acknowledges that despite former CEO Bob Iger and McCarthy setting an initial target of 60 million to 90 million subscribers by the end of fiscal 2024, after Chapek became CEO following the departure of Iger in early 2020, the service experienced higher growth than originally anticipated, gaining more than 50 million subscribers in its first five months, and nearly 74 million subs in its first year (by November 2020).

Kareem Daniel

In fact, the success of Disney+ became virtually the only bright spot in an otherwise bleak start to Chapek’s tenure as CEO.

“We believe that we’ve got the opportunity to build upon the success of Disney+, which by almost any measure has been far and above anybody’s expectations, and really use this to catalyze our growth and increase shareholder wealth,” Chapek said on a fiscal call. 

The suit alleges, however, that the business reorganization represented a dramatic departure from Disney’s historical reporting structure and was hugely controversial within the company because it took power away from creative-content-focused executives and centralized it in a new reporting group led by Daniel, who reported directly to Chapek.  

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Then in November 2022, the DTC business segment reported an operating loss of almost $1.5 billion compared to an operating loss of $630 million in the previous-year period. Wall Street reacted with shock, sending Disney shares down, and angering investors. Chapek was fired a month later, replaced by the returning Iger, who then parted ways with Daniel. CFO McCarthy remains in her position.

Disney+ has now lost subscribers for two consecutive financial quarters, which in part triggered the lawsuit that claims the 2024 Disney+ positive fiscal targets “had never been achievable.”

Disney, in response, said it is aware of the complaint and intends “to defend vigorously against it in court.”

CFO: Disney’s Direct-to-Consumer Business to Up Q1 FY 2023 Revenue by $200 Million Despite Disney+ Hotstar Sub Decline

On the heels of a record operating loss in its direct-to-consumer business segment, Disney believes the worst is behind it as it readies the Dec. 8 launch of a less-expensive ($7.99) monthly ad-supported subscription plan, in addition to enacting price hikes on existing services.

The company will raise the price of its current ad-free option 38% to $10.99 ($109.99 annually), while the Disney bundle (Disney+, ESPN+ and Hulu) with ads will cost $13.99 monthly, and $19.99 monthly without ads.

Hulu with ads will remain priced at $7.99 per month, while Hulu without ads will still cost $14.99 per month. ESPN+ will remain at $9.99 month.

Disney CFO Christine McCarthy

On the Nov. 8 fiscal call, Disney CFO Christine McCarthy said the company’s new ad-supported streaming services would bow with 100 advertisers, but contribute little to the first quarter’s operating results, ending Dec. 31. That said, McCarthy believes the DTC’s peak fiscal losses are in the rearview mirror and that fiscal results should improve going forward.

“We expect DTC operating results to improve by at least $200 million [in the first fiscal quarter] compared to Q4 2022,” McCarthy said, adding the operating improvement in Q2 would be even higher.

“The prices should begin to modestly benefit [average revenue per subscriber] and subscription revenue in Q1,” she said, adding that the Disney+ price hike revenue gains wouldn’t begin to be realized until Q2.

“We don’t expect the launch of the ad-supported tier of Disney+ to provide a more meaningful fiscal impact until later [in the fiscal 2023] year,” McCarthy said, adding that while content costs will increase between Q4 and Q1 2023, marketing costs should decline to help offset that spending.

The executive believes Hulu and ESPN+ will continue to add subscribers in Q1, while core Disney+ subs will only increase slightly in Q1, reflecting tougher comparisons against Disney+ Day performance and the timing of content releases and promotions. McCarthy expects that trend to reverse in Q2 as new content is released in international markets.

“At Disney+ Hotstar, we are currently expecting subscribers will decline in Q1 due to the absence of the [Indian Premier League] cricket rights,” she said, adding that the company expects to see some subscriber stabilization in Q2.

Earlier this year, Paramount Global, through its Indian Viacom18 subsidiary, wrested exclusive streaming rights to the IPL from Disney for $3 billion.

Disney+ Hotstar remains the streaming platform’s largest (37.3%) subscriber base with more than 61 million subs out of 164.2 million worldwide.

Disney Executives Expect Most Disney+ Subs to Choose Ad-Supported Option

With Disney planning to launch a less-expensive, ad-supported subscription option for Disney+ later this year, questions about the pending plan featured prominently May 18 for Disney CFO Christine McCarthy and Rita Ferro, president of Disney advertising sales and partnerships, at the MoffettNathanson Annual Media & Communications Summit.

With Disney expecting to operate its branded SVOD platform in 150 markets by the yearend, McCarthy reiterated management confidence that Disney+ could reach 230 million to 260 million global subscribers by the end of fiscal-year 2024. The service ended the most-recent quarter with almost 138 million subs — up from nearly 104 million subs in the previous-year period.

Christine McCarthy

“We still expect a strong second half [2022] of subscribers, because we have two things going on: We have a lot of great content coming [to the platform] … and we were also launching in several new international markets,” McCarthy said.

Ferro, who has been tasked with mining incremental revenue from pending Disney+ ad-supported subscribers, said the company internally has been strategizing about an ad-supported option since the SVOD platform launched in late 2019. To help sort through the challenges of an ad-supported plan, Ferro said the company looked no further than Hulu, which Disney owns and operates, with Comcast as a minority stake holder.

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“Hulu was the first … AVOD platform. They had 14 years’ experience in this space,” Ferro said. “Since we took operational control of Hulu, we’ve doubled the ad revenue, [and] we’ve doubled the number of advertisers.”

Rita Ferro

Hulu ended the fiscal period with 41.4 million SVOD subs, of which upwards of 66% subscribe to the ad-supported $6.99 monthly plan, with the rest opting for the $12.99 ad-free plan, according to Ferro.

Disney has not disclosed pricing for the ad-supported Disney+ option.

“We expect about the same percentage [of ad-supported subs] for both Disney+ and Hulu, just based on the experience curve that we’ve witnessed,” Ferro said. “We do expect there to be a premium from that [Disney+] advertising that will enhance the [average revenue per user]. So, we feel really feel good about this opportunity.”

Ferro said the Disney+ ad-supported plan would include about four minutes of commercials per hour (which is less than on Hulu) and include children’s programming, although the user data among that demo would not be collected, unlike other age groups. Targeted ads would differ between episodic content and feature-length movies.

“We know that the movies are the reasons people come to the platform and movies have a different ad load … and different ad breaks,” Ferro said. “We want to start slow, and so we’re not going to just start with 15-second and 30-second spots, but we’ll evolve to a full suite of ad products as we learn and understand how people come online and use the platform.”

Disney: Ad-Supported Disney+ Could Mirror Hulu Pricing

Disney’s pending launch of a cheaper, ad-supported option for Disney+ has no price point or launch date. But that didn’t stop Wall Street analysts from calling out Disney senior management for further details on the subscriber option SVOD rival Netflix is looking to emulate in the fourth quarter.

Speaking on the May 11 fiscal call, CFO Christine McCarthy and CEO Bob Chapek both reiterated that an ad-supported Disney+ option is coveted by marketers as well as a way to attract incremental subscribers.

Christine McCarthy

“We will continue to evaluate what makes sense for the service in terms of pricing,” McCarthy said. “And I will say that you can look to our experience with Hulu and [its] ad-supported tier. We believe that this will contribute to ARPU. And we look at it as certainly something additive that will work towards achieving our long-term profitability goals.”

Hulu charges $6.99 monthly for access with advertising, and $12.99 monthly for ad-free access. Disney+ currently costs $7.99 monthly, but Chapek hinted a price hike was in play in part to pay for upwards $32 billion in multiplatform content production across Disney properties.

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“As we increase our content investment, we believe that that’s going to give us the ability to adjust our price,” Chapek said. “We are bullish about our future content going forward, not only in terms of quality but also in terms of quantity. And that’s really what’s driving our bullishness, for what we might see as the pricing power that we would have going forward.”

The executive said the company remained in “good shape” in terms of being able to meet an internal deadline for rollout of the Disney+ ad tier.

“That’s largely because we’re already doing it,” Chapek said. “The combination of our ESPN+ streaming tech stack, and our experience in Hulu and the software, we think that our current advertising capabilities really substantially prepare us to already bring this tier into operations.”

He said Disney doesn’t need to acquire additional assets or develop anything new internally since it acquired IT backend engine BAMTech in 2017.

“We’ve been looking forward to the [Disney+ ad-tier option] for a while,” Chapek said. “So, this is something that’s well-greased, if you will. And our teams are hard at work at making that become a reality.”

CFO McCarthy: Disney+ Doesn’t Need Advertising to Reach Profitability

On the heels of Disney’s decision to incorporate a less-expensive ad-supported subscription plan for Disney+, CFO Christine McCarthy said the move was not a Hail Mary attempt by management to ensure that the SVOD reaches a previously stated goal of 230 million to 260 million subscribers, as well as profitability for the media giant’s direct-to-consumer business by 2024.

Speaking March 7 at the Morgan Stanley Technology, Media & Telecom confab, McCarthy said the ad-supported option is designed to incorporate consumers who couldn’t afford the standard ad-free $7.99 plan, in addition to advertisers eager to access the platform.

“This was not a Hail Mary,” McCarty said of the ad-supported plan. “This is something we don’t need to make … to make our guidance.”

The executive said the new pricing injects the right kind of company “tension” to help manage the business as it attempts to reach subscriber and financial goals.

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“[Disney+ is] barely 2-and-a-half years old,” McCarthy said. “We’re learning a lot about this business.”

That knowledge includes subscriber data, McCarthy says helps Disney navigate content decisions regarding who is watching, how often and how long.

“Those are the kind of data we never had before,” she said. “We were always going through intermediaries. Once we had that, we really incorporate that into our planning, our content — why something works, and if it doesn’t, why it doesn’t work.”

With upwards of 38% (45.9 million) of Disney’s 130 million Disney+ subs originating out of India, Disney and its local Hotstar streaming brand are dependent upon exclusive streaming rights to professional cricket and other sports. With distribution rights to that sport coming up for renewal, McCarthy stressed that while live sports programming is important, general Disney content is drawing Indian subs as well.

“In 2021, of the Top 15 viewed series on direct-to-consumer [platforms in India], nine of those came from Disney+ Hotstar,” McCarthy said. “Sports is a very popular content to consume, but [subs] also consume other types of content, including Disney+ Hotstar originals.”

Disney Extends CFO Christine McCarthy’s Employment Contract Into 2024

The Walt Disney Co. Dec. 21 announced it has extended CFO Christine McCarthy’s contract through June 30, 2024. McCarthy is a 22-year veteran of the company and has served as CFO since 2015.

“Christine’s leadership has been indispensable during this time of disruption and transformation, and her impact reaches well beyond our balance sheet,” CEO Bob Chapek said in a statement. “She has been instrumental to Disney’s growth and helped us navigate the most difficult days of the pandemic.”

As CFO, McCarthy oversees Disney’s worldwide finance organization, which includes brand and franchise management, corporate alliances and partnerships, corporate real estate, corporate strategy and business development, enterprise controllership, enterprise technology, financial planning and analysis, global product and labor standards, investor relations, risk management, tax and treasury.

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McCarthy joined Disney in 2000, and prior to becoming CFO she was EVP of corporate real estate, alliances and treasurer. She currently serves on the board of directors of The Procter & Gamble Company and FM Global, and is a trustee of Carnegie Institution for Science. She has received numerous awards and has been named multiple times to Treasury & Risk’s “100 Most Influential People in Finance,” the Top 100 Irish American Business Leaders, and Business Insider’s “The 15 Most Influential Women in Finance.” In 2015, she was the recipient of Treasury Today’s Adam Smith “Woman of the Year” award. In 2016, she received Los Angeles Business Journal’s “Executive of the Year” award and was honored as one of the Entertainment Diversity Council’s “Top 50 Most Powerful Women in Entertainment.”

CFO McCarthy: Disney Bullish on SVOD Despite Headwinds

When Disney announced that its branded SVOD platform Disney+ had topped 103 million subscribers through the second fiscal quarter ended April 3, the tally fell below company and Wall Street projections of 108 million to 110 million, respectively.

Speaking on the May 13 fiscal call, CFO Christine McCarthy put a positive spin on the setback, saying Disney+ added subs at a faster pace in the last month of the second quarter than it did in the first two months.

“And that was despite no major market launches, a price increase in [Europe and the Middle East] and a domestic price increase towards the end of the quarter,” McCarthy said.

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She said Disney’s combined direct-to-consumer portfolio of Disney+, Hulu, Hulu with Live TV, ESPN+, Disney+ Hotstar and pending general entertainment site Star+, remains on track to achieve company guidance of 230 million to 260 million subscribers by the end of fiscal 2024.

That said, Disney is facing increased OTT headwinds going forward, including the fact that its market-leading online TV service, Hulu with Live TV, lost 200,000 subs in the quarter — a decline McCarthy attributed to seasonality of content and a $10 monthly price hike.

While Disney+ has added 30 million subs in the first half of the fiscal year, sub growth is expected to cool in the second half, due in part to ongoing COVID-19 issues in India — which accounts for a third of all Disney+ subscribers. The platform has exclusive streaming rights to Indian Premier League cricket, a sport now sidelined in the world’s second most-populous country due to the pandemic.

McCarthy said about half of the 60 IPL matches that were expected to be played this season have already taken place. The remaining 30 matches on schedule have been canceled, but negotiations are underway to relocate the fields of play outside India.

“If they were able to successfully relocate the tournament, we would hopefully see an impact, especially on advertising,” McCarthy said. “It would be better than if there were no rescheduled matches. So let’s hope they are able to relocate [the tournament].”

In addition, Disney pushed back to Aug. 31  the launch of the Star+ Latin America launch. At the same time, rollouts of Disney+ in Malaysia and Thailand remain on track for June 1 and June 30, respectively. The company expects the pending launch of “Loki” on June 9, starring Tom Hiddleston, to be a strong streaming driver.

“We remain very optimistic about our [streaming] future,” McCarthy said.