WHEN: Today, Monday, November 21, 2022
WHERE: CNBC’s “Squawk Box”
Following is the unofficial transcript of breaking news from CNBC’s David Faber on CNBC’s “Squawk Box” (M-F, 6AM-9AM ET) today, Monday, November 21st. Following is a link to the video on CNBC.com:
All references must be sourced to CNBC.
JOE KERNEN: Major management shakeup at Disney. Bob Chapek is out as CEO after taking the job in February of 2020. Bob Iger returns to the Magic Kingdom. Interested to what CNBC’s David Faber what his thoughts are on this because he told you no way. Did you always think that there was a way, a way back for I don’t know why he’s not necessarily your friend, but you know him. Well, did you think there was a way back David?
DAVID FABER: No, it seemed highly unlikely. Certainly, you’d have to imagine of course, a scenario like the one that has played out and we can talk a bit more about that. But even with the idea that his successor, Mr. Chapek would not succeed so to speak, the idea that that Iger would then come back I think, even as as little as a few weeks ago, Joe, I think would have been hard to imagine. I really do. I mean, that’s, that’s part of the stunning part of this, that that he has come back into that job. He was by all accounts quite happy being, you know, retired but obviously making investments in private equity, giving speeches, spending more time with his grandkids. I mean you go through any number of things, and I think Mr. Iger has indicated to many people over this last year or so, not even quite a year that he was quite pleased with with the world as it was for him. So, the idea that he would be willing to step back in I think, was unexpected. But this was a board Joe that felt like it didn’t have a lot of choices at this point is my understanding. You know, after speaking to a number of people close to the situation, this came together pretty quickly, but the board did have concerns for some period of time. Those concerns were heightened of course after this most recent earnings report. It was not a well-received report. The conference call was not well thought of, the losses associated with direct-to-consumer obviously having grown even though the promise to be profitable by fiscal year ’24 remains, the board got more and more concerned, that board led by Ms. Arnold made it clear to Mr. Chapek last night that he was out. My understanding is they only approached Iger on Friday, Friday night, and sealed a deal to bring him back as of last night and that they did not really even though they had been aware of growing concern, there was growing concern and aware of problems including a lot of dysfunction perhaps to a certain extent in upper management. The board did not really consider or have a lot of other candidates that they truly were seriously considering and I’m also told as well that while they may have identified some internal candidates who they believe over time could take the job, they did not want to put anybody in that position right now given all the different pressures Joe that they’re dealing with right now at Disney.
KERNEN: I can see what you’re saying, David, you know grandkids. I don’t have any but I look forward to that and that’d be fun and speeches and hobbies and stuff like that. I’ll bet you it’s pretty cool to be the CEO of Disney if you live out in Hollywood though. And I bet you he remembers how cool that is. He takes, he used to take big swings David, is that, is that, would he do that or is he just back to stabilize things?
FABER: You know, that’s a great question, Joe. I think, I think initially it’s stabilize. I think it’s give some hope and optimism to the organization which has been a bit beaten down at least there are those who would have told me that. I’m sure Mr. Chapek would disagree with that characterization, but give some hope, give some optimism, stabilize things but then it’s two years. Now, you know, Iger may be looking at that two years is that’s another reason why maybe he took the job right? He’s like, okay, I know I’ve got just a finite amount of time here. I’ve got to help the board identify my successor, train my successor, but there’s tough decisions they have to make. By the way, not just Disney but across the board. We know this all these companies that saw the Netflix multiple, what three, four or five years ago and decided to pivot very strongly into direct-to-consumer are now faced with the sudden realization that you know what? Getting a profitable, getting profitable in this business is not that easy. And so there are going to be tough decisions here for Iger, no doubt about it. But he won’t shy away from them is my sense. He didn’t in the past.
ANDREW ROSS SORKIN: Hey, David, let’s talk M&A for a second because he obviously was a prolific and very successful deal maker over the years. You know, we were talking the last hour does he ultimately try to buy a Netflix, could he if he wanted to? What happens to the chess piece that is Hulu, something that Bob Chapek said was not for sale but something that Brian Roberts, the CEO of Comcast parent company of our network, has said he would love to buy. You know, do you ultimately even try to sell to an Apple could you if you wanted to? Do you try to bring back Kevin Mayer and do an aqui-hire effectively buy the production company that he started. How do you see the the new chessboard, if you will, and also recognizing you got Viacom and Warner Brothers Discovery around the hoop and a couple of other assets that might be interesting.
FABER: Yeah, listen, as you point out, Andrew, Mr. Iger is not one who shied away from M&A. In fact, much of his tenure was defined by the big deals, starting with Pixar and moving right on from there and ending with Fox. But, you know, my sense right now is is his main concern is going to be making some tough decisions as it is dealing with costs and dealing with direct-o-consumer, not to mention also some other issues on sports and ESPN and not necessarily focused on as you point out M&A. Does that mean that nothing will happen? Who can say at this point. Kevin Mayer’s production company that sounds unlikely to me, bringing Kevin Mayer back. That sounds unlikely to me, although again, who would have thought that Iger would be coming back. But you’re right, there is a belief overall that there is there still needs to be consolidation amongst many of these streamers to create at least the possibility of real profitability in the business. Although Disney is one of the companies Andrew that does have the scale at this point many believe to succeed, I would point out as well, Hulu’s an interesting question you bring it up because they’re gonna have to spend a lot of money to acquire what they don’t already own. It’s roughly 33% I believe that our parent company owns of Hulu, and that’s going to actually lever them up even more, you know, that’ll get them closer to three times which is not the five times that Warner Brothers Discovery trades at, but it’s not an insignificant amount of leverage as well. So there’s no doubt there’s this is not the easiest company to come in and just deal with right now which is why again, the board turned to Iger and no one else.
KERNEN: Even though it was the first time they said it, when Chapek copped to the, we don’t know what the economy is going to look like that could make a difference of whether we hit any of our numbers. Bob Iger’s facing the same economy. That I mean, Disney is still looking at what could be tough advertising. I mean there’s a lot of macro issues that just because Bob Iger is back they don’t solve themselves either and I, that’s why I think, I don’t know I’m looking at the way Zaslav is doing things instead of being a time to, you know, just start blowing more money that seems less likely than being a time to retrench and say, wow, we just got out of our skis on this whole streaming business.
FABER: I think I think that’s true, Joe. You know, Disney is spending, Chapek more or less admitted this during our last interview because they haven’t given a specific number, but I think it’s close to around 16 billion just on direct-to-consumer, roughly 30 billion overall on content. Obviously, that includes ESPN programming and the like, but that’s a huge number, right 16. And the question for all of these direct-to-consumer companies and obviously you mentioned Zaslav at Warner Brothers Discovery who’s dealing with these same kinds of pressures as can you maintain that or do you have to cut it and will it happen? Netflix at this point hasn’t really backed off but there’s no doubt that’s got to be a part of a part of the tough decisions that are probably coming for him.
KERNEN: We gotta go. Andrew, you got something fast.
SORKIN: I just have, I just had one question, which is, you know, we’re talking about Dan Loeb, earlier, we’re talking about Wall Street’s interest in all of this. You know, Carolyn Everson, who’s joined the board, by the way joins the board today. I don’t think we have her on the graphic because she’s not on the board officially today. But how do you think Wall Street is going to be able to influence or not Bob Iger maybe in ways that they could or couldn’t under Chapek?
FABER: Listen, he’s a, he’s just a better communicator overall. And I, you know, I think that that skill at the top of this company is vitally important and it’s and it’s one that Mr. Chapek did not seem to have an abundance. And so I would expect that there will be a level of some communication perhaps that will be beneficial. That said, you know, by the way Loeb and also Trian’s in there as well Andrew, but they had nothing to do with this. Yeah, they were not involved at all in this. I think it was news to them as it was to many others. So, but they’ll be there to pressure potentially, you know, and I think Trian’s entrance here is interesting. Apparently, they were somewhat aware that these guys are hanging around the hoop for a while but they’re there now. The Journal reports they may want to go up in size, so not not insignificant in terms of continued pressure, but he’s got enough pressure on him from the board. And right now, as I said, the main issue that he’s going to face is just trying to reestablish sort of stability and a sense of hope and optimism at the company.
