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Inside Disney and internal corporate boardroom drama. Iger appointed Chapek as his successor but ended up decided coming back. It touches on the fight with Desantis, the prior generation deciding not to retire, internal power struggles, managing a business where no one has the skillset for all of the businesses (creative, running parks, international, finance, sports, launching a streaming business). About a 15-20 min. Iger seems more interested in the Desantis fight than Chapek who just wanted to play nice.
https://www.cnbc.com/amp/2023/09/06/disney-succession-mess-iger-chapek.html
Disney's 2023 releases have been duds
https://www.forbes.com/sites/carolinereid/2023/08/04/the-four-flops-of-2023-that-cost-disney-1-billion/?sh=4e9e00b13bed
Losses on some, profits on others. I don't see how a $100 million loss on a movie can cause a decline of market value in the tens of billion. mediocre movies cannot explain why the stock has fallen so much. Disney has always produced a lot of mediocre but expensive movies throughout its recent history [1], yet the stock has done so well , until 2022. The value is in the IP and other services, not so much box office. A movie that loses money at box office will still generate $ decades down the line through IP.
[1] https://screenrant.com/disney-biggest-box-office-bombs-disasters/#a-wrinkle-in-time-2018
Outside of some weird cases like airlines, the value of a stock is a function of expected future earnings. Shareholders may have been convinced in the past that there was potential in owning DIS. They are no longer so confident.
Disney may always have had duds, it's the cost of doing business in that industry. But I believe what the market has realized is that they have lost the ability to make the popular entertainment that makes the duds worth it. It's not a stroke of bad luck, it's skills shortage.
Marvel is winding down massively, Star Wars has been blown up for nothing, Pixar is way past it's prime, the parks aren't making much money and the political spats have tarnished the image of family friendliness that has always been a core part of Disney's strategy.
They bought so much they own all of classic pop culture and yet I'm left asking: who is going to care about Disney IP in ten years? Versus, say, Nintendo.
Wait, how do airline stocks work?
Airlines are banks. You read that right. Flying is both such a necessary service and so unprofitable that it slowly has become a subsidized activity of companies whose main business is actually controlling a currency in frequent flier miles which other, actual, banks will buy and integrate into the rest of the financial system.
Banks behave differently than other businesses because they're a peculiar kind of business that's allowed to print money and is so important to the economy there is an expectation that the State will bail them out of a crisis. And so it is with Airlines.
As Taleb point out in Black Swan such enterprises are in the business of hiding risk. The stock price then isn't properly understood as a bet on earnings (at least not for the most part), but as a bet on the solvency of the State and its willingness to enact a bailout in the next crisis. A bet on the solidity of the financial system and how much that particular part of it can act as a safe haven.
I'm not following why airlines are like banks. When I think of a bank I think of a company that makes money either by lending money or by investing and providing other financial services. Airlines sell frequent flier miles to credit card companies who use them as an incentive to get customers to sign up which doesn't seem like the same thing. For example if a bank offers a free toaster to anyone who opens a savings account that doesn't make KitchenAid a bank. That seems analogous to how credit card companies use the airline miles they buy. I assume I'm missing something here.
I also don't get how their shareholders are betting on a bailout instead of their financials. For example, American Airlines got a bailout during Covid but their stock is still down to a third of what it was before the pandemic so it's not like the investors made out like bandits.
And this is indeed what Airlines do. They sell credit services and benefits directly and administer their own mini-financial system as a main activity.
Transportation is not just a secondary activity, it's actually a loss leader. They consistentlyt lose money on operating plane trips to the tune of a few cents per seat and the disclosures we got during covid's loan season show the loyalty programs are worth more than the total market capitalization of the airlines which implies the transportation sides of the business have negative value.
But what if KitchenAid started selling free toaster vouchers to banks for more than their market price? What if financial instruments started getting valued in those vouchers? What if there was an exchange rate for different voucher types? What if this was the main way they make any money?
The real magic here is in the fact they sell miles from their loyalty programs to other companies (like AA to Hertz) so they get the incentive benefits. These are sold at a markup, and the customer pays back the balance by flying. Given these miles are printed from nothing, they look very much like loans. Actually it's not quite from nothing, it's from the future expectation of the ability to fly, which is not really that different from the future expectation to redeem your money from a fractional reserve bank.
This makes the airline a sort of central bank of their own service backed currency that can, and does, adjust the value by controlling the supply and redeem rate. And importantly, this currency isn't taxed so it's possible to create weird tax free financial instruments using these, in a way that's really not dissimilar to how cryptocurrencies work today.
I think that's a smart evolution of the business, although I wouldn't say there's any particular magic in this step either. This still falls under the universal logic of IOU issuance: anyone can issue their own IOUs (printed from nothing) and decide both what it takes to get one and what the redemption value will be.
I guess what moves it to feel more 'bank-like' is that the airlines take tracking accounts in their database very seriously, compared to less serious bearer punch-cards for free Subway sandwiches or whatever. And flights are more universally desirable, compared to more subjective businesses. Maybe I will use Hertz instead of Avis if it's giving me $X towards my next flight on my usual airline, but for some reason if they were partnered with Mcdonalds reward points, it would take a lot more than $X to move the needle.
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