Disney scraps office plans amid DeSantis legal battle, reorganizes streaming library

Yahoo Finance entertainment reporter Allie Canal joins the Live Show to discuss the performance of Disney stock, streaming services, and its plans to cancel the new office project in Florida amid legal issues with Governor DeSantis.

Video Transcript

JULIE HYMAN: Let's turn to another corporate story we're watching. Disney scrapping plans to build its nearly $1 billion office complex in Florida. It announced the news of its canceled plans on Thursday, citing, quote, "new leadership and changing business conditions." I wonder what that could mean. This comes as the company is also opening few-- openly feuding with the state's Governor Ron DeSantis. Joining us now is Allie Canal to discuss this more. So this is really kind of heating up, right? I sort of-- like, it sort of felt it had gotten quiet, but this is not going away.

ALLIE CANAL: It's not going away. Now, Disney didn't specifically say that Governor DeSantis was the reason for these plans, but you can surmise that the ongoing feud had something to do with it. In an internal memo obtained by Yahoo Finance Josh D'Amaro, who chairs the parks experience and product division, told employees that the company would be stopping the construction of this employee campus in the Lake Nona region of Florida. Now, along with that construction stoppage, that also means plans to relocate 2000 California-based Disney employees are no longer.

Now, it's a shame because a lot of those employees did end up leaving the company because they didn't want to relocate. Now these plans are just going all over the place. The relocation plans, they were first announced in July 2021 under the leadership of then CEO Bob Chapek. The campus was supposed to open between 2022 to 2023, that was then delayed to 2026, and now we got the news that it's just not happening. Now, the Office of the governor did eventually respond to me for comment on this.

They said that Disney announced the possibility of a Lake Nona campus nearly two years ago. Nothing ever came of the project. And the state was unsure whether it would come to fruition given the company's financial straits, failing market cap, and declining stock price. It is unsurprising that they would restructure their business operations and cancel unsuccessful ventures. So fighting words there from the Office of the governor as they are in the midst of feuding complaints and lawsuits. And the drama continues.

BRAD SMITH: Yeah, absolutely. So for investors trying to make sense of multiple headlines that surround Disney on a daily basis, there's this, there's also the ESPN announcement too. What is the way to look at how Disney is kind of moving these parts around, whether it be in where the employees are going to be at or where certain assets that they've already said are going to be kind of their own standalone internal entity are now looking at being offered to the public as well?

ALLIE CANAL: Well, I think from an investor perspective, these fights with the governor, that's not really moving the stock too much. We took a look at the stock yesterday. It was relatively flat. Now, today, it's down on the day, down about 2% right now. And, you know, we've heard from analysts, Macquarie out with a new note this morning, downgrading Disney's shares from outperform to neutral, seeing those near-term uncertainties as a risk for Disney's future. Now that includes those linear networks deteriorating, you know, you mentioned ESPN.

There was a Wall Street Journal report that there are talks about moving ESPN fully over the top. That's something we've heard from Bob Iger. We don't know what the timeline could be on that. But that's another question mark for investors. So I think it's more of these fundamental issues of the company. If we were to see this fight with the governor materially impact the parks business or Walt Disney World specifically in their earnings, I think that's something that could move the stock.

But in terms of this fight in particular, that's one element here that I think shareholders are shrugging off at least for now. That's not to say down the line it couldn't be, you know, more impactful to Disney's bottom line.

JULIE HYMAN: Yeah. I'm just seeing now actually Macquarie has downgraded the stock this morning. So maybe that is also helping push things down that has to do with all of these uncertainties that are ongoing. It doesn't seem to have to do with what's going on in Florida--

ALLIE CANAL: Right.

JULIE HYMAN: --to your point. But even still, you know, some other stuff. There's plenty of it for it to contend with, I guess is what I'm saying, even if you exempt all of the Florida stuff here.

ALLIE CANAL: Exactly. And Disney, look, they're in the midst of restructuring their business. They're in the midst of trying to pare down on their content as well. They're going to take a content impairment charge of $1.5 to $1.8 billion as they look to scrap certain series and specials from both Disney Plus and Hulu. That's something they announced on their latest earnings call. And again, this is something that we're seeing across the board as a lot of these media giants are really trying to grapple with profitability and be number one in the streaming wars, while also making money. So it's that push and pull how do we create value for both our shareholders as well as our customers.

BRAD SMITH: Let's be real. Can we talk about the real reason that Disney is struggling right now? It's because the investors are thinking about the fact that the Sixers are no longer in the playoffs right now that's going to impact the NBA's viewership clearly advertising dollars. That's the real reason, right?

JULIE HYMAN: Minus 2 at least.

BRAD SMITH: Minus 2.

ALLIE CANAL: I know. That was--

JULIE HYMAN: Minus 2 viewers.

ALLIE CANAL: That was a dagger. That was a dagger. And like Josh Shafer, our business reporter, he's a Celtics fan. So--

BRAD SMITH: Oh, Josh has got to go home.

ALLIE CANAL: I know. So I think there's a lot of internal competition within Yahoo Finance as well as Disney.

JULIE HYMAN: You keep bringing this up, man.

BRAD SMITH: I'm hurt.

JULIE HYMAN: I think you want the sympathy of the people. I think that's--

ALLIE CANAL: Listen, we got the Eagles.

BRAD SMITH: Here's the thing. We're going to have Kenny Smith on later on today, of course, NBA-- former NBA player and now analyst for NBA on TNT. I'm going to ask him why the Sixers lost because I want some-- I do want some sympathy.

JULIE HYMAN: You want some sympathy, you want some answers, accountability.

BRAD SMITH: Yeah.

JULIE HYMAN: OK.

ALLIE CANAL: I want answers.

JULIE HYMAN: OK.

ALLIE CANAL: This is the serious stuff we got to talk about, you know?

JULIE HYMAN: OK. Well--

BRAD SMITH: I'm just hurt.

JULIE HYMAN: You guys can talk about that. I'm going to tell people what we're going to talk about on air now.