Disney CEO says streaming can be a 'growth business'

Disney believes its streaming business will soon turn the corner and achieve profitability, but CEO Bob Iger stresses that it can also be much more than that.

"We aim … for this business to be a growth business for the company with margins that our shareholders will feel good about," Iger said Thursday on CNBC's "Squawk Box" in the wake of a shareholder vote that effectively rejected a bid by activist investor Nelson Peltz to secure board seats at the company.

Disney's streaming business has improved since Iger returned as CEO in late 2022 as the company slashed costs amid a greater focus on profitability over subscriber growth. In its fiscal Q1 2024, Disney's direct-to-consumer (DTC) streaming business posted an operating loss of $138 million, but that was an 86% improvement from an operating loss of $984 million in the year-ago quarter.

Iger reiterated that Disney's streaming business will be profitable in its fiscal Q4 of 2024, noting that the segment is on a path to reach double-digit margins.

He also outlined Disney's plans to help its DTC segment become profitable and later evolve into a growth business. A top priority is driving more engagement and boosting the amount of time subs spend on the platform.

One way the company is pursuing that is via its recent integration of Hulu's subscription VoD service on the Disney+ platform. Disney will pursue a similar approach when it launches a DTC version of its flagship ESPN service in the fall of 2025.

"It is doing extremely well," Iger said of the Hulu/Disney+ integration. He said Disney will have more specifics to share on its next earnings call but noted that the move has raised engagement and usage early on.

Iger said Disney will also look to improve the overall performance of its DTC business by focusing on new tools, such as recommendation engines, to help lower churn and reduce marketing and customer acquisition costs.

Password sharing on the horizon

Disney is also preparing to crack down on password sharing, a policy that Netflix already has put into play and that Warner Bros. Discovery plans to add to its Max streaming service later this year.

"In June we'll be launching our first real foray into password sharing," Iger said. The rollout will start in a "few countries" and then expand to a full rollout in September, he said.

"We have the goods. Now we just have to execute," Iger said.

Iger said Disney is starting off with a "very strong hand" in streaming. But it's clear that Disney and others in the media business are envious of Netflix's success.

"Netflix is the gold standard in streaming," Iger said. "I actually have very, very high regard for what they've accomplished. If we can only accomplish what they've accomplished, that would be great."

Proxy battle a 'distraction'

Iger also addressed the proxy battle with Peltz, calling it a "distraction" for the company. But Disney is now ready to push that aside and move forward, he added.

"One of the things that I feel great about right now is, put the victory aside, that I can spend all of my time with the management team and the board on executing against those priorities," Iger said.

He said picking his successor is the Disney board's top priority. Iger's prior replacement, Bob Chapek, was ousted in November 2022.

Rumored potential replacements for Iger include Dana Walden, co-chair of Disney Entertainment; ESPN Chairman Jimmy Pitaro; Josh D'Amaro, head of Disney's parks division; and Alan Bergman, co-chair of Disney Entertainment.

Peltz told CNBC that his big issue with Disney was its succession plan.

"I hope Bob can keep his promises," Peltz told the network. "I hope they can do all the things they assured us they were going to do. I'll watch and wait. If they do it, they won't hear from me again."