If he can successfully mitigate the execution risk, he will be laying the foundation for Disney to catapult to the apex of the US Media industry - perhaps with global ambitions in store for his successor after he steps down in end-2026. Iger’s recent contract extension to end-2026 reflects the board’s confidence in his ability to see Disney through the necessary internal revolution that Disney+ will need to implement in order to transition to DTC. In this Part 2 report, we’ll see how Iger can apply this “Outsider’s” approach to ROIC in each of its respective business segments - Entertainment, Sports and Experiences. Much of the Pricing Power generated under Disney’s DTC and Experiences segments are a function of management’s ability to implement Optimal Capital Allocation in order to maximize value at each respective business. The implication here is that there’s a good chance the US Media industry will eventually consolidate around a duopoly, with the two sharing over 50% market share together.Īs we shall explore further in this report, Disney’s Streaming business (DTC) is likely to experience Pricing Power going forward following its Rebundling destiny. ![]() With Disney+ already engaging in Rebundling and the rest of the industry following suit, there is overwhelming evidence that the natural trajectory of the modern-day Streaming sector will likely climax in the same impenetrable “ Aggregator ” moats for the two sector incumbents - Netflix and Disney+. He pioneered both the use of EBITDA and the incredible “ Aggregator Moat ” of the Cable industry, which served as the bottleneck of the entire industry and made Cable companies one of the best businesses to own during his generation (prior to its disruption by Streaming). Readers of Malone’s bestselling biography Cable Cowboy will also recall how Malone employed the structural benefits of economies of scale in the Cable industry to its full extent in order to drive down unit costs - culminating in TCI gaining quasi-monopoly bargaining power over its customers and suppliers. ![]() John Malone’s 25-year track record of 30% CAGR (source: The Outsider CEOs ) We also noted similarities between some of the things which he implemented at TCI (that led to its success) to the things that Disney CEO Bob Iger is currently institutionalizing at Disney+ today. Malone was the subject of our Disney Part 1 report, where he explored how his cable company TCI rewarded its shareholders with 30% CAGR over his 25-year tenure as CEO - beating even Buffett’s record at Berkshire. Most people would have recognized Warren Buffett and John Malone in the list above diehard value investors will also recognize Henry Singleton of Teledyne, Tom Murphy of Capital Cities and Katherine Graham of the Washington Post - all dear friends of Buffett. They were all frugal and mindful of costs. They were all decentralizers who empowered their employees to make decisions. They were all value-conscious and disciplined in their capital allocation. They were all long-term thinkers who focused on creating enduring value. Tom Murphy: CEO of Capital Cities Broadcasting Corporationīill Anders: CEO of General Dynamics Corporationĭick Smith: Founder and CEO of General Cinema Corporationīill Stiritz: CEO of Ralston Purina Company Katharine Graham: CEO of The Washington Post Company John Malone: CEO of Tele-Communications Inc. Warren Buffett: CEO of Berkshire Hathaway Inc. ![]() Despite that, all 8 Outsider CEOs were some of the best-performing CEOs in the entire history of modern corporate America. These leadership traits stood in stark contrast to the status quo of corporate America, which celebrated more traditional leadership traits such as charisma, vision, risk-taking and hustle culture. These traits included an undying focus on maximizing ROIC over growth, a willingness to shrink for efficiency, adopting a measured, logical approach to operations - and most importantly, making Optimal Capital Allocation the first priority in corporate strategy. However, the results of his study were utterly surprising - each of the 8 CEOs he profiled shared very “Outsider” leadership traits which challenged the premise of corporate America’s status quo. ![]() The starting point of his study begins with two extremely high criteria: 1) the share prices of the companies run by qualifying CEOs had to outperform GE’s during the tenure of its legendary CEO Jack Welch and 2) outperform the share prices of their own industry peers during each candidate’s respective long-term tenures as CEOs. In William Thorndike’s seminal value investing manual The Outsider CEOs, the author does the equivalent of a PhD study which seeks to identify what CEO leadership traits deliver the greatest LT share price outperformance.
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