What Disney Can Learn From ValueAct’s Microsoft Experience

What’s past is prologue, as the saying goes. That’s one way to think about what’s likely to emerge from the scrum of activists surrounding Walt Disney, agitating both for and against CEO Bob Iger. Today’s news that Disney has struck an “information-sharing” agreement with ValueAct Capital, seen by many as the most sensible activist out there, is likely to cheer investors. An optimist may hope that ValueAct can spark the kind of recovery at Disney that occurred at Microsoft in the decade after ValueAct appeared on that company’s scene in 2013. (Or they may even hope for the profit and stock recovery Salesforce experienced after ValueAct co-CEO Mason Morfit joined the enterprise software firm’s board last March, helping to drive an efficiency push.)

Now, let’s not pretend ValueAct deserves all or even most of the credit for these turnarounds. But the activist surely made a positive contribution in both situations. And there are striking parallels between the challenges facing Disney and those Microsoft faced a decade ago. Back in 2013, Microsoft was grappling with the transition to the cloud from the older, much more profitable model of selling software to companies for use on their own computers. Disney today is similarly dealing with the transition to streaming from the older, much more profitable cable TV–based business. In both cases, the companies have faced rivals that jumped into a newer sector without the baggage of older businesses—Amazon launched Amazon Web Services, unconstrained by the legacy of an enterprise software business, while Netflix plays a parallel role in streaming.