Why is Disney facing criticism, here’s the reason

Key Takeaways:

• Unusual in the business world, a prominent investor has criticised Disney for allegedly taking advantage of guests at its theme parks.
• Trian Partners seeks backing from the company’s shareholders to join the board of directors after Disney rejected their request.
• The company, whose stock price has fallen over the past year, has come under fire from 3rd Point Capital, another activist investor.

Unusual in the business world, Disney is being criticised by a prominent investor for allegedly exploiting visitors to its theme parks.

Nelson Peltz, CEO of Trian Partners, claims that the company’s reliance on increasing ticket prices and other fees to spur growth is “unsustainable.”

He made the assertion in a speech advocating for change at the media behemoth.

He also brought up the company’s streaming business losses and complaints from the general public about low staff wages.

According to him, Disney “might think raising prices and ‘nickel-and-diming’ cast members, as well as other costs, is good for the bottom line. “However, we suspect that the value of the brand and the company’s long-term viability are at risk because of short-term thinking.”

In the US, “nickel-and-diming” means hurting someone’s finances by imposing numerous small charges or payment reductions.

Disney was contacted for a response.

According to Trian Partners, which has amassed a 0.5% stake in Disney worth $900m, spending per person at the company’s theme parks has increased by nearly 40% since 2019. The company recently announced it would roll back some of the prices increases there.

The increases have happened when the economy is experiencing widespread price inflation. Additionally, in recent years, Disney park employees have staged numerous pay-related protests.

Mr Peltz is an activist investor famous for his conflicts with powerful corporations like Wendy’s, a fast food chain, and Procter & Gamble, which produces brands like Pampers and Vicks.

He claims that Disney is in “crisis” and that many of its problems are self-inflicted in the presentation.

He claims the company paid too much to acquire the majority of Rupert Murdoch’s Fox empire and gave recently reinstalled CEO Bob Iger “over-the-top” compensation packages.

He also doubts Disney’s streaming strategy, which has posted significant losses.

Following Disney’s denial of the request, Trian Partners is looking for support from the company’s shareholders to gain a seat on the board. The business claims it is not attempting to remove Mr Iger, who is very well-liked.

After an initial growth phase, Disney has previously stated that it is concentrating on the bottom line of its streaming business.

It anticipates that the company will become profitable in the 2024 fiscal year.

Another activist investor, 3rd Point Capital, has also attacked the company, which has seen its share price plummet over the past year. Third Point Capital has pushed the company to spin off ESPN, its cable sports channel.