Disney’s struggle with streaming

Hi, it’s Ed in San Francisco. The end of Disney’s proxy fight on Wednesday probably won’t solve the company’s streaming problem. But first.. [View in browser]( [Bloomberg]( Hi, it’s Ed in San Francisco. The end of Disney’s proxy fight on Wednesday probably won’t solve the company’s streaming problem. But first... Three things you need to know today: • AI stocks are a dividend play [for Jupiter’s Asia fund]( • Chipmaker SK Hynix tops [$100 billion in market value]( • AT&T says data from 73 million accounts were [leaked on the dark web]( No happy ending Who’s the hero and who’s the villain in this tale of [Walt Disney Co.](bbg://securities/DIS%20US%20Equity)’s battle with activist investors? We’ll find out Wednesday when the company hosts its annual shareholder meeting and investors vote on an effort by activists to reshuffle the board. At the center of the dispute is Disney’s streaming business. It grew incredibly quickly from launch in 2019 — we’re talking now about Disney+, ESPN+ and Hulu — but even with strong sales, it reported an operating loss of $216 million in the quarter that ended in December. Chief Executive Officer Bob Iger [promises that profit is coming in 2024.]( Consumers for years have been leaving cable television and traditional networks for streaming platforms, where they can watch movies, shows and video online at their convenience. But Disney’s streaming performance is one of the chief concerns of activist Trian Partners, run by [Nelson Peltz](bbg://people/profile/1700474). Peltz is pushing to win a board slot with [Jay Rasulo](bbg://people/profile/1842001), Disney’s former chief financial officer. They want Disney to stem the financial losses in the streaming unit and revive subscriber growth. Still, it’s not immediately obvious how Peltz gaining a seat on Disney’s board will fix that and reach the goals Iger has already promised to hit. Peltz is unhappy, as [outlined in a 133-page manifesto]( published March 4, about Disney’s streaming business for a number of reasons. He argues that Disney “belatedly” entered the streaming game and has a “poorly planned" strategy to catch up with the likes of Netflix Inc. He takes issue with Disney trying to achieve scale in streaming by buying Fox’s entertainment assets for $71 billion in 2019 because he thinks it exposed the company more to the [dying linear TV business](. He also can’t believe that a company reporting more than [$22 billion of run-rate streaming revenue annually is still losing money](. And he’s pretty miffed that Disney’s strategy, as he sees it, has been to raise prices and cut the costs of making the content powering the platform to generate a profit at the expense of a loss of subscribers. But what would Peltz do if he actually succeeds in joining the board? The manifesto’s proposals largely focus on de-risking Disney’s exposure to a shrinking legacy TV biz by finding partners. A digital strategy for the ESPN sports assets is also high up the list — but so is change at the top. Peltz wants [a succession plan put in place for Iger](, who extended his contract with Disney last year after a coming-out-of-retirement return to the company in 2022. It’s still not clear who comes out on top in this battle, but in recent weeks the force has been strong with Iger: He has [booked the support](of Star Wars creator George Lucas and Wall Street behemoth Jamie Dimon is in his corner too. Peltz has the [backing of some influential advisory firms](. Iger’s already made moves to address some concerns that the investor base, more broadly, has had with Disney. A long-running dispute and ensuing legal proceedings against Florida and its governor seemed to end last week. In February, Disney teamed up with Fox Corp. and Warner Bros. Discovery Inc. to create a streaming service for college and pro sports that you can currently only find on TV. That seems like what Peltz was asking for? Disney also invested $1.5 billion in Epic Games and gave access to the Fortnite maker for gaming portrayals of Star Wars, Marvel and Avatar. Doesn't that further leverage what Peltz sees as Disney’s biggest competitive advantage: the ability to monetize intellectual property through the proverbial flywheel? Well, none of that has been enough to placate Peltz. Maybe that’s because it doesn’t answer his question: How do you make a streaming business profitable without cutting to the bottom?—[Ed Ludlow](mailto:eludlow2@bloomberg.net) The big story OpenAI is sharing early results from a test for a feature [that can read words aloud in a convincing human voice]( — highlighting a new frontier for artificial intelligence and raising the specter of deepfake risks. Get fully charged Bets on artificial intelligence drove the largest quarterly [foreign investment into South Korean’s stocks](. Fidelity cut the value of its position in [Elon Musk’s X social network by 5.7% in February](. Huawei’s profit surged in the December quarter on the strength of its [new smartphone and cloud computing unit](. More from Bloomberg Bloomberg Technology Summit: Led by Bloomberg Businessweek Editor Brad Stone and Bloomberg TV Host and Executive Producer Emily Chang, this full-day experience in downtown San Francisco on May 9 will bring together leading CEOs, tech visionaries and industry icons to focus on what's next in artificial intelligence, the chip wars, antitrust outcomes and life after the smartphone. [Learn more](. 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