Disney recently acknowledged a specific business risk it faces due to a “misalignment” between the company’s offerings and the demands of American consumers. Reportedly, the disconnect is significantly impacting Disney’s financial performance.
According to an annual SEC filing from Disney, the entertainment giant noted that it is not meeting the preferences across various areas of the business. “We face risks relating to misalignment with public and consumer tastes and preferences for entertainment, travel and consumer products, which impact demand for our entertainment offerings and products and the profitability of any of our businesses,” the filing states.
Disney stated that the “success of our businesses depends on our ability to consistently create compelling content.” The company additionally noted that “consumer tastes and preferences that change in often unpredictable ways,” the filing says.
The filing continued, noting an insufficient “consumer acceptance” negatively impacting Disney’s bottom line as consumers turn away from the company’s products, services, and entertainment. Moreover, Disney seems to understand the impact of public perception on its brand, as differing opinions from the consumer base can lead to wide-ranging reactions to company initiatives, such as ESG.
“Generally, our revenues and profitability are adversely impacted when our entertainment offerings and products, as well as our methods to make our offerings and products available to consumers, do not achieve sufficient consumer acceptance. Further, consumers’ perceptions of our position on matters of public interest, including our efforts to achieve certain of our environmental and social goals, often differ widely and present risks to our reputation and brands,” the filing added.
George Washington law professor Jonathan Turley commented on the sentiment expressed in Disney’s SEC filing, comically drawing on economic principles explaining how free markets weed out inferior consumer offerings. Turley claimed the annual filing demonstrates that “Disney appears concerned that [the] ‘invisible hand’ of Adam Smith is effectively giving the ‘House of Mouse’ the middle finger.”
Turley commented on the abysmal performance of recent Disney films at the box office, where the company is hemorrhaging money from rolling out movies continually criticized for propagating woke narratives. “Disney has reportedly lost a billion dollars just on four of its recent ‘woke’ movie flops, productions denounced by critics as pushing political agendas or storylines. Yet until now, the company has continued to roll out underperforming movies as revenue has dropped,” the professor said.
Furthermore, Turley suggested that prioritizing politics over profit is a seeming abandonment of the time-tested shareholder theory for governing corporations. In recent years, some business scholars have called upon companies to adopt “stakeholder theory,” which can often focus on business priorities in the realm of ESG. The professor claimed that while political and social agendas may contradict the supposed interests of Disney’s shareholders, there are incentives for executives to buy into these beliefs when their professional incentives are structured in such a way.
“For shareholders, it may seem counterintuitive that corporate executives would trade off profits for political or social agendas. However, it does serve as a rationale for individual corporate executives who are professionally advanced when they champion such causes,” Turley added.
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