The REAL Reason Why Bob Iger Made His Biggest “Mistake”

Since Bob Iger returned as CEO of Disney, we’ve seen quite a few changes follow.

©Alberto E. Rodriguez / Getty Images

He was likely brought in for a number of reasons, one of which is that he is widely viewed as one of the best CEOs Disney has ever seen. Under Iger, Disney became the entertainment powerhouse it is today — though some believe Disney’s acquisition of Fox was a mistake. But, was it really?

Bob Iger is no stranger to acquiring companies — not only is he responsible for Disney’s ownership of Pixar, Marvel, and Lucasfilm, but he was integral to the company’s 2019 acquisition of a portion of 21st Century Fox. This purchase didn’t come cheap, and some have shared that they don’t necessarily believe it was the right call.

©21st Century Fox

According to Matthew Belloni with Puck News, Iger sent an email to employees as the Fox deal was closing and Disney+ was being launched, saying that the Fox assets would help the company “reach farther and aim higher — especially when it comes to building direct connections with consumers.”

©Disney

Activist investor Nelson Peltz (who at one point entered a proxy battle with Disney for a seat on its board) said in an interview with CNBC that Disney’s $71 billion acquisition of Fox (which included $14 in debt) had eroded shareholder value in recent years.

“Fox hurt this company. Fox took the dividend away. Fox turned what once was a pristine balance sheet into a mess,” said Peltz.

©New York Times Nelson Peltz of Trian Partners

But, would Disney+ still have been successful subscriber-wise if it weren’t for the Fox deal? Belloni doesn’t seem to think so. When Disney+ launched, it gained over 100 million subscribers in six months with just one original show on the service — plus a ton of Fox content. Netflix, on the other hand, took 10 years to attain 100 million subscribers.

©Disney

Disney+ aside, Belloni says that the Fox deal didn’t actually cost Disney $71 billion after all — because of the company’s ownership of ESPN, it was forced by the government to sell Fox’s regional sports networks to Sinclair, the local television station owner. Sinclair agreed to pay $10.6 billion for the networks.

Shortly after, Comcast paid Disney $15 billion for the stake Fox held in Europe’s Sky broadcasting service — bringing the total paid for Fox down to $57 billion, which includes $25 billion in debt.

©Disney

Of course, this was all complicated by the pandemic, and Disney’s debt reached $45 billion. Keeping in mind that the company’s 2019 market cap was more than $250 billion, this doesn’t necessarily mean it was overleveraged (per Belloni).

But, the debt still exists, and Disney has announced it plans to cut spending by $5.5 billion — including reducing its workforce by 7,000 jobs. We’ve already started seeing the first wave of these layoffs happen.

Disney World

While Disney is still going through waves of change, keep in mind where the company was before the Fox deal. Belloni says that Disney had “a good TV business with ESPN, ABC, Disney Channel, and a few other networks in the U.S. and abroad, plus a studio that largely supplied its own outlets. But Disney had nothing like FX in terms of quality, and the 20th Television studio was far more prolific than, say, ABC’s studio, producing different types of shows and selling to multiple buyers.”

Bob Iger ©New York Post

Not only that, but with the Fox acquisition, Disney gained executives like Dana Walden, John Landgraf, and Peter Rice (before Chapek fired him).

It wasn’t just primetime Fox shows Disney acquired as part of the deal — the assets included  Avatar, Searchlight Pictures, and the FX Network. With franchises like Avatar, Disney isn’t just making money on the films themselves — owning the franchise allows them to expand attractions in the parks plus sell merchandise, and more.

©Disney

Having The Simpsons in its lineup means Disney owns the 15th most streamed show for the entire year of 2022, and having other titles like Modern Family, Bob’s Burgers, Home Alone, Ice Age, and more on Disney+ and Hulu makes them “more compelling” says Belloni.

©Disney

Not all assets have been as successful, though, as 20th Century still hasn’t delivered a huge box office hit since Disney took over (with the exception of Avatar: The Way of Water and Free Guy.) Still, it’s just the beginning for Disney and Fox, and Belloni thinks it’s possible that executives are only starting to leverage the newly acquired assets to their advantage.

Regardless of what the future holds for Disney and the part of Fox it now owns, we’ll be keeping an eye out for updates. Be sure to stay tuned to DFB for the latest.

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