Disney chief questioned over ESPN at shareholders meeting

Reporting from Chicago —  The Walt Disney Co. offered up a sanguine presentation to shareholders at its annual meeting Thursday, with Chief Executive and Chairman Robert Iger emceeing a polished affair in which he touted record-breaking box-office results and unveiled plans to build new cruise ships and theme park attractions.

But Iger also was forced to confront pointed questions from investors about the health of Disney’s key television business, ESPN in particular. The nation’s most prominent sports network remains a cash cow for the Burbank entertainment giant but lost an unspecified number of subscribers in the most recent quarter that ended Jan. 2.

Shares of Disney have been in a slump since August, when investors’ jitters about the state of the company’s TV business bubbled over. Analysts and investors have expressed worries over expensive sports rights fees at ESPN and the growing number of consumers who are slashing or abandoning their cable service.

Concerns over so-called cord-cutting — and Wall Street’s perception of it — were on display at Thursday’s gathering, which was held at Roosevelt University’s Auditorium Theatre and attended by nearly 700 shareholders.

“There’s this perception of ESPN dragging us down,” one shareholder said as part of comments directed at Iger. “How do we change the market’s view of the company?”

Iger forcefully defended the sports network’s business, saying that “ESPN is a healthy business and a large business … and a growth business.”

Disney shares climbed 2% to close at $98.82 on Thursday. The stock has fallen 6% this year.

During the meeting, Iger also revealed details about the April home entertainment release of “Star Wars: The Force Awakens.” Investors reelected all 11 members of the company’s board of directors and voted down two proposals brought by shareholders.

But shareholders mainly focused on ESPN during a question-and-answer session with Iger. During the most recent fiscal quarter, the company’s media networks unit, which includes ESPN and other television assets, posted a 6% decline in operating income.

Iger noted that ESPN is the most-watched sports network in the country, viewed by more than 200 million people across various platforms each month. Still, he added it was unlikely that ESPN would continue to grow at the rate it has over the last two decades and said the company has been working to ensure that journalists and investors understand ESPN’s strong position in the media marketplace.

“We’re not in any way taking matters lightly in terms of what’s been said about ESPN,” he said.

One shareholder took Wall Street pundits to task for suggesting “the apparent demise of the ESPN network.” But she did press Iger on what Disney was doing to make the network available to consumers who don’t have cable or satellite television, or are considering cutting the cord.

Iger said Disney is exploring different ways by which it could distribute ESPN content to new platforms. This week Disney networks, including ESPN and ABC, launched on the Sony PlayStation Vue service, which offers a way to reach younger viewers who are less inclined to subscribe to a traditional pay-TV package. ESPN already is featured on Dish Network’s Sling TV streaming service.

“We feel very confident about the ESPN business long-term,” said Iger, who also presented a reel of footage from the network that paid tribute to local professional sports teams including the Chicago Bulls and the Chicago Cubs.

Disney had plenty to boast about at the company’s meeting.

Iger touted Disney’s recent record profit, huge ticket sales from “Star Wars: The Force Awakens” and for the animated movie “Zootopia,” which debuts this weekend. He also showed footage from Marvel Studios’ forthcoming superhero film “Captain America: Civil War,” which comes out May 6. At its conclusion, the clip was met with generous applause.

And Iger announced that Disney would donate $250,000 to the restoration of the Chicago residence where Walt Disney was born. The plan would turn the property into a children’s center and mini-museum honoring the company founder.

The meeting also covered Disney’s mainstay parks and resorts business. Iger announced that Disney would begin construction next month on “Star Wars” lands at Disneyland and Disney’s Hollywood Studios park in Orlando, Fla. He gave no completion date for either expansion but touted the projects, saying “What we are building will be great.”

Iger also addressed the company’s recent decision to adopt a new pricing policy that raises daily ticket prices at its theme parks on peak-demand days and lowers the charge for low-demand days. He said the pricing change is meant to “spread out our visitation” and reduce crowds during peak days, such as holidays.

“We actually feel pretty good about what we’ve just announced because it provides so many different variables for the guests, and it may end up providing a slightly better guest experience during the most popular days,” Iger said of the price change, which took effect Sunday.

Iger, dressed in a dark suit, also handled matters of corporate governance. Investors followed the board’s recommendations to reject the two proposals brought by shareholders.

The first asked shareholders to consider a policy that would have eliminated from Disney’s charter and bylaws any voting requirement that calls for a greater than simple majority vote. Under the proposal, a simple majority voting rule would have become standard at the company.

In the second shareholder measure, investors voted on whether the firm should produce an annual report on its lobbying activities.

The meeting was not without its lighter moments, especially when Iger fielded questions from self-professed “fans” of the company who traveled across the country to attend the gathering.

One child stockholder who has attended eight Disney shareholder meetings asked Iger why the company’s Pixar Animation Studios does not offer tours. (Iger promised her a tour but said this was a special dispensation owing to her streak of appearances at the annual meetings.)

And investor Martin Glotzer — who earlier in the Q&A had criticized Disney in several discursive speeches — drew laughter when he asked Iger if the motorcycle in the “Captain America” clip was a Harley-Davidson. (It was, Disney later confirmed.)

Before the meeting began, shareholder Brian Martin, 24, stood in a line waiting to have his picture taken with a “Star Wars” Stormtrooper. The lifelong Disney fan from Glenview, Ill., was attending his first shareholder meeting and tried to explain the important role the company has played in his life.

“Oh God,” he said, becoming emotional. “It has been such a huge part of me. ... It’s hard to explain.”

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Twitter: @DanielNMiller

Staff writers Ryan Faughnder and Hugo Martin contributed to this report.