Walt Disney Co.’s returning chief executive officer, took his first steps toward reorganizing the entertainment giant, asking his deputies to rethink the corporate structure and announcing the departure of a top manager.

“Over the coming weeks, we will begin implementing organizational and operating changes within the company,” Iger said Monday in a memo. “It is my intention to restructure things in a way that honors and respects creativity as the heart and soul of who we are.”

Top Disney officers overseeing finance, film, TV and sports will come up with a new framework for the company in the coming weeks. That suggests Iger will unwind a reorganization by predecessor Bob Chapek that took decision-making away from division heads. As part of his memo, Iger said the company’s head of media distribution, Kareem Daniel, will leave the company.

Iger, 71, who led Disney from 2005 to 2020, was brought back to lead the company late Sunday. He returns with Disney shares headed toward their biggest yearly decline since the 1970s, the result of growing losses in streaming and fraying cable-TV viewership. Profit in the just-ended fiscal year was less than half the $10.6 billion reported in 2018. In a filing Monday, Disney said it will pay him $27 million a year for two years.

Streaming Losses

Iger will need to articulate a clear path to profitability in streaming, according to Citigroup Inc. analyst Jason Bazinet.

Chapek had promised profit at Disney+ by late 2024, something investors now doubt. In the latest quarter, the streaming business — led by the three-year-old flagship service that Iger launched — more than doubled its losses to $1.47 billion. While subscribers have grown to 164.2 million, the company will have to reassure investors.

“Iger has enough stature that he can recast the goals without causing investors to lose confidence,” Bazinet wrote.

The streaming business also offers opportunities in M&A. Disney owns two-thirds of the Hulu service and has a contract to buy out minority owner Comcast Corp.

Cable Bundle

Revenue at Disney’s traditional TV networks — led by the ESPN cable sports network — fell 5% in the latest three months. The decline was the result of falling advertising rates and a drop in viewership, two trends sure to continue as audiences quit traditional pay-television services.

“Disney faces the risk of a long decline in its linear TV cash-cow at a time when the direct-to-consumer ventures are at peak losses, which is quite uncomfortable,” said Francois Godard, a media analyst at Enders Analysis. “But I struggle to imagine a different approach than the one currently implemented.”

The problems for linear TV aren’t going away. Comcast, the largest US cable distributor, DirecTV and other providers — all of which carry Disney channels — lost 1.9 million customers in the second quarter alone, a 6.1% decline that was the worst on record, according to MoffettNathanson research.

ESPN has been the biggest profit contributor among Disney’s traditional channels, and Iger has an opportunity to expand the sports network directly to consumers, according to Citigroup’s Bazinet.

“Now that Disney is selling video subscriptions directly to consumers across the globe, there is a broader role ESPN can play pursuing global sports rights (via ESPN+) outside the US,” he wrote. “This is one area of potential upside at Disney that does not receive sufficient interest by investors.”

Inside Disney

Chapek made decisions that grated the Burbank, California-based company’s creative workforce, his own executives and Florida officials where Disney operates four parks and numerous hotels. Iger now has an opportunity to repair those relations.

In one move, Chapek reorganized management of the film and TV businesses, taking authority away from executives in traditional studio roles and putting the “Go/No Go” authority for projects in the hands of a new group of leaders.

Bazinet suggests Iger may return responsibility for profit and loss decisions to those divisional executives who were partly sidelined by Chapek’s reorganization.

Disney’s CEO also got into trouble this year in Florida when the legislature debated a law barring school instruction about gender identity and sexual orientation. It was the type of bill Iger would have clearly opposed, and used as an opportunity to support LGBTQ+ members of Disney’s workforce.

Chapek instead sent a letter to employees in March telling them the company wouldn’t take a position. That drew immediate fury. He had to make an about-face two days later, pledging to confront Florida Governor Ron DeSantis directly. The company then found itself in the middle of a much broader political fight and legislators voted to dissolve a special Disney tax district.

The details of that decision haven’t been worked out, giving Iger a chance to smooth things over with state officials state.

Talent Relations

In September 2021, Disney was sued by Marvel film star Scarlett Johansson, who had helped generate billions of dollars at the box office. She alleged that during the Covid pandemic she’d lost out on a payday tied to ticket sales because the company opted to release her movie, Black Widow, on the Disney+ streaming service.

The company suggested she had made enough money and was apathetic toward the health risks then associated with cinematic release. The case was ultimately settled, but not without the company getting called out as “sexist” and angering key constituents, like Hollywood agents.

“Iger is considered popular among the creative ranks within Disney and Hollywood — an area where Chapek was not embraced,” said Well Fargo analyst Steven Cahall, who recommends buying the stock.

Activists

Iger faces pressure from two prominent activist investors who swept in following his departure.

Dan Loeb’s Third Point LLC built a stake in August and called for sweeping changes, including a spinoff of ESPN.

That idea was shelved after Loeb reached an accord with the company. saying he has a “better understanding” of the sports network’s potential for the media giant’s global growth. As part of the agreement, Disney also added a former executive from Instacart and Facebook to its board.

So a more immediate challenge may be Nelson Peltz’s Trian Fund Management, which has built a stake of $800 million, is pursuing a board seat and opposes Iger’s return, the Wall Street Journal reported, citing unidentified sources.

Succession

Iger has a poor record of managing succession. For example, Tom Staggs was Disney’s chief financial officer before taking on operational roles at the company’s theme parks. When he became chief operating officer in early 2015, he was widely seen in line to succeed Iger. But about a little more than a year later he was gone.

Notwithstanding challenges, the jump in Disney shares show investors believe the company is back in proven hands.

“Investors are big fans of Bob Iger in our experience given his history of leading Disney through major content acquisitions and the pivot to streaming,” Cahall said.