What Will Iger Do with ESPN and Hulu?

What will Bob do next?

On Robert Iger’s first day back as C.E.O. of Disney, the stock popped, adding billions to the entertainment giant’s shrinking market valuation. Now comes the hard part: finding a path to growth, and resolving a Space Mountain-sized heap of concerns from the future of flashy properties like Hulu and ESPN to finding a successor.

Mr. Iger doesn’t have a lot of time to get things done. Weighed down by losses at the streaming service Disney+, the stock had been on its worst run in decades. Top executives — including Christine McCarthy, the company’s C.F.O. — had lost confidence in Bob Chapek, leading to his weekend ouster as C.E.O. just months after the board had extended his contract. Mr. Chapek had been Mr. Iger’s handpicked successor and the 71-year-old now has a two-year contract to find another lieutenant who can take the reins in 2025.

Who does he bring in? Mr. Iger is already reshaping Disney back in his image, announcinga big restructuring yesterday to give studio executives more control. A top Chapek content executive, Kareem Daniel, is out. Some are speculating Mr. Iger might try to bring back Peter Rice, the former TV content chief at Disney who clashed with Mr. Chapek and was fired in June. Mr. Rice had been seen as a possible successor to Mr. Chapek. Another well-regarded Disney executive is Dana Walden, who oversees content production and news programming. A plus: her strong ties to Iger.

Will Mr. Iger spin off ESPN? Finding new ways to profit from the popularity of Disney’s sports broadcaster has long been discussed. The activist investor Dan Loeb pushed Mr. Chapek to spin off ESPN this summer, but then relented. Equity analysts at Bank of America say everything is under review, including ESPN, now that Mr. Iger is back. “Iger has made public comments recently on the secular challenges in the linear TV ecosystem, which coupled with accelerating linear subscriber declines, could signal a potential openness to re-evaluate strategic alternatives,” the bank said in an investor note yesterday.

How does he turn the streaming businesses around? Let’s start with Disney+: Does he raise prices? (Bank of America sees this as a possibility). Does he put Hulu, in which Disney holds a majority stake, on the market to pay debt elsewhere? Could he even get a good price for it given how depressed valuations look? And what about its chief competitor, Netflix? Merger speculation about Disney and Netflix was rife five years ago. Or how about a deal with Apple? Mr. Iger made a number of big acquisitions in his first go-round as C.E.O., mostly around big franchises like Pixar and Marvel. Watch this space.

Why did he come back? That’s the big question everyone in media circles is asking. Mr. Iger left Disney (as chairman) last December beloved, and on top. There was talk of a presidential bid, or maybe an ambassador role. Now, he’s returning to a Disney that’s been bruised by the Covid pandemic and the streaming wars. Not to mention skyrocketing inflation and a battered global economy. Maybe, like his late friend Steve Jobs, the Apple co-founder who found success in a second act, Mr. Iger (who was previously on the board of the iPhone maker) sees this new adventure as one worth taking.

HERE’S WHAT’S HAPPENING

Penguin Random House’s bid to buy Simon Schuster falls apart. The companies officially gave up on the $2.2 billion deal yesterday, in a victory for the Justice Department, which had sued to stop it on the grounds that it would harm competition and be bad for authors. The scuppering came as a surprise to many in the publishing industry, which has consolidated in recent years.

Oil prices rebound after Monday’s plunge. Brent crude rose to $88 per barrel after falling precipitously in yesterday’s trading session when The Wall Street Journal reported that Saudi Arabia might raise output. Prices rallied after the kingdom denied the report.

America’s defense secretary presses China’s over Taiwan. Lloyd Austin told his Chinese counterpart, Wei Fenghe, to avoid “destablizing actions” over the self-governing island. Their talks, in Cambodia, came days after a meeting between President Biden and the Chinese leader Xi Jinping kindled faint hopes of an easing in tensions. They were also the first since Nancy Pelosi visited Taiwan this summer, infuriating Beijing.

A nationwide railway strike moves a step closer. A union that primarily represents freight rail conductors narrowly voted down a White House-brokered contract deal, increasing the risk of industrial action next month that could cost the economy more than $2 billion a day.

Investigations and bankruptcy fears roil crypto

Crypto’s monthlong slide continued this morning with Bitcoin dipping to a two-year low as investors brace for more bankruptcies following the collapse of the crypto exchange FTX. Adding further tension to the markets: Federal prosecutors reportedly began investigating FTX, which was founded by the crypto wunderkind Sam Bankman-Fried, months before its demise.

The crypto brokerage Genesis is also said to be teetering. According to Bloomberg, the company is in a make-or-break dash to secure $1 billion in emergency funding. Genesis, which was among the first to reveal its close ties to the fallen FTX, reportedly reached out to Binance, the world’s largest crypto exchange, and the private equity firm Apollo Global for funding. With $175 million of its funds tied up in the collapse, Genesis says it’s looking to plug the hole in its balance sheet and avoid bankruptcy.

Is Genesis’s parent Digital Currency Group at risk? Valued at about $10 billion last year, the crypto conglomerate includes the asset manager Grayscale and the news site CoinDesk, and was backed by blue-chip investors like Alphabet and SoftBank’s Vision Fund 2. Grayscale’s Bitcoin Trust — the world’s biggest bitcoin fund, pitched as a handy way for retail investors to access the market — hit a new low yesterday after falling to about half the value of Bitcoin on fears about the parent group. Grayscale denies it’s in trouble, but its refusal to give any evidence about its reserves is weighing heavily on the value of the assets it sells.

Digital Currency Group’s connections extend far across crypto. It has invested in about 165 companies, including Coinbase, the largest U.S. crypto exchange, whose share price has plummeted by nearly 90 percent since last year. That hasn’t stopped Cathie Wood. Her Ark Investments has gone on a crypto buying spree that has included Coinbase and Grayscale, but few on Wall Street share her enthusiasm.

The collapse of FTX and its trading arm, Alameda Researchm has created a liquidity crisis dubbed the “Alameda Gap.” That means further investor uncertainty. Here’s what the markets are watching:

• FTX has now found $1.24 billion in cash holdings, according to a bankruptcy filing. The problem: Its liabilities may exceed $10 billion.

• Texas regulators are investigating celebrities who promoted FTX, including the quarterback Tom Brady and the basketball star Steph Curry, over potential violations of securities law.

• Where did the funds go? Mr. Bankman-Fried, his parents and senior executives of FTX reportedly bought property in the Bahamas worth $121 million.

• A senior official at the Bank of England says crypto exchanges that bundle services, as FTX did, need to be more closely regulated. The practice is banned in mainstream finance.

Who’s left at Twitter?

Elon Musk says he’s done laying off people at Twitter after the latest round of cuts yesterday, but worries persist about everything from data security to the platform’s ability to moderate content after he scythed through the work force.

Is there anyone left? Mr. Musk laid off sales staff but told an all-hands meeting that he wasn’t planning any more job cuts. Even so, worries persist about Twitter’s ability to function since he has got rid of about half of the 7,500 employees and 1,200 more resigned. Advertisers continue to pause their use of the service, despite Musk’s attempts to assuage their concerns since his takeover. And rival tech firms are looking to poach disgruntled staff.

Mr. Musk’s taking a rain check on blue checks. A plan to give users a verified check mark for $8 a month, which the new owner launched this month, was put on pause after parody accounts impersonated companies and politicians. The problem: still too many parody accounts. The next version of the service, Musk tweeted yesterday, “Will probably use different color check for organizations than individuals.”

At least one top Apple executive doesn’t seem to want one. Phil Schiller, who runs the App Store and Apple events, deactivated his Twitter account. The move attracted attention because Twitter relies heavily on the App Store to reach users; removal would be catastrophic for the company. Musk has already laid off most of Twitter’s content moderation team, as well as the executives who oversaw it, which could make abiding by Apple’s requirement to create “a safe experience for users” a lot harder.

The O.E.C.D. is less gloomy about the global economy

The Organization for Economic and Cooperation and Development released its outlook for the global economy for 2023 on Tuesday, and the Paris-based club of rich nations is a little bit more optimistic about next year than other observers.

The organization expects 2.2 percent growth next year, and says the world won’t fall into recession. That’s a fair bit better than Goldman Sachs, which forecast last week thatglobal output would rise 1.8 percent next year.

The O.E.C.D. predicts there will be no recession for every major region in the world, despite facing the biggest energy shock since the 1970s.

The consensus forecast for the U.S. is that there is a 65 percent chance of recession but the O.E.C.D. puts the chance at close to zero and says the economy will grow — though more slowly than it did this year.

The inflation outlook is steady, but still high. The O.E.C.D. doesn’t believe rising prices will go away anytime soon. Energy prices are pushing inflation higher, especially in Europe. But it says many of the pressures appear to be easing, pointing specifically to shipping costs. All in, the organization predicts prices globally will rise 6.5 percent next year, down from over 9 percent this year. “Europe has gone a long way to replenish its natural gas reserves, and curb demand,” the O.E.C.D. said. “But this winter in the Northern Hemisphere will certainly be challenging.” It added that winter next year may be even more complicated as it becomes harder to replenish gas reserves.

And the organization is bullish about China. Large parts of the world’s second-largest economy remain the subject to strict Covid controls, and a recent spike in cases has renewed worries that Beijing will be slow to open up. But the O.E.C.D. expects lower Covid restrictions by the end of the year, and more spending on infrastructure. In all, it expects China’s G.D.P. to rise 4.6 percent, up from 3.3 percent this year. Other Asian countries are also predicted to grow, including Japan, which hasn’t had the same problems with inflation as the rest of the world.

THE SPEED READ

Deals

• Carl Icahn has reportedly built up a sizable short position against GameStop, beginning at the height of the meme-stock frenzy in 2021. (Bloomberg)

• Franck Petitgas, who once led Morgan Stanley’s investment banking and international units, plans to step down. (Bloomberg)

• The French bank Société Générale is forming a joint venture with AllianceBernstein to combine their equities research and cash equities businesses. (FT)

Policy

• Two Estonian men have been indicted over their role in a $575 million cryptocurrency fraud and money-laundering scheme, U.S. prosecutors announced. (D.O.J.)

• A federal appeals court will hear arguments today about whether a special master can review the materials that the F.B.I. seized from Donald Trump’s Mar-a-Lago resort. (CNN)

Best of the rest

• The Texas bank GloriFi, which espoused conservative values, is reportedly shuttering after failing to secure funding. (WSJ)

• “Beyond Meat’s Very Real Problems: Slumping Sausages, Mounting Losses.” (WSJ)

• Elon Musk has lost $100 billion this year, but he’s still the world’s richest person. (Bloomberg)

Thanks for reading! We’ll see you tomorrow.

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