Chief Investment Strategist, The Freeport Society
Earlier this month, I took my eldest son to the bullring in Acho. This time of year, Lima celebrates its patron saint with the Feria del Señor de los Milagros, a monthlong festival with bullfights every Sunday.
This is the time of year when Andrés Roca Rey makes his triumphant homecoming. Rey, a Lima native, is the greatest bullfighter alive today, anywhere in the world. And true to form, he brought his A game, taking absurd risks in the bullring while making it look easy.
Rey’s prowess with a sword has made him a millionaire several times over. He takes risks… and regularly gets gored… but he also reaps the financial rewards. Unfortunately, I can’t make the same statement about a lot of corporate America… where taking unforced risk with absolutely no potential of return seems to be a lot more common.
Turns out, pandering to internet “activists” (can we call a troll a troll?) doesn’t translate into growing revenues and happy investors. Worse, it is greatly diminishing the quality of the entertainment being produced, as evidenced by, earlier this month, The Marvels’ spectacular flop.
So today we’ll consider the price businesses pay to appease the trolls. And we’ll explore the alternatives that we can invest in.
100 Years In Business, Distressed by Trolls
The Walt Disney Co. (DIS) has sparked imaginations, shaped dreams, and tugged on the hearts of the young and the old for a century.
After going public on November 12, 1957, it survived the Kennedy Slide of 1961-’62… the oil shock of 1973-’74… the double-dip recession of 1980-’82… Black Monday in 1987… the dot-com bubble burst of 2000-’02… the Global Financial Crisis of 2007-’09… and the COVID-19 pandemic of 2020.
Through it all, it stayed true to itself, producing the most iconic movies and theme park experiences bar none.
Yet today, it’s struggling to find direction, so much so that the board was forced to reinstate Bob Iger as CEO. They could think of no one better to right the ship… and he has his hands full.
Beyond The Marvels mess, a result of introducing a host of obscure and unknown characters rather than, you know, making a new Captain America movie with characters the average moviegoer has actually heard of, the company recently decided to postpone its live-action remake of the 1937 classic Snow White and the Seven Dwarfs. The original premier date was March 22, 2024. Now we’re looking at a release only on March 21, 2025!
Ostensibly, this was a consequence of the actors’ strike. I call B.S. on that one.
In the early promotional photos, the dwarfs weren’t actually dwarfs. They were a hodgepodge of men and women of assorted races and heights resembling a United Colors of Benetton ad.
Fans did not like what they saw. So, Disney decided to scrap the inclusive dwarfs and insert CGI versions that look a lot like those from the original animated movie.
Now, I too can get irrationally territorial about “my” characters. I was livid when Daniel Craig was cast as James Bond for the 2006 franchise reboot, Casino Royale. He was too blond and too rough around the edges. He didn’t look like James Bond, for God’s sake.
Turns out I got that one wrong. Craig killed it (pardon the pun). He brought Bond back from the abyss and made some of the best films in the 61-year history of the franchise. They were somehow simultaneously original and yet true to the spirit of the original Ian Fleming novels.
I risk accusations of heresy for saying this, but I’d argue Craig was a better Bond than Sean Connery, if such a thing were possible.
The Bond franchise took a risk with Craig. But it was a risk with an expected return… and the result was a string of wildly successful movies.
But come on. In Snow White and the Seven Dwarfs, you need dwarfs. That’s as fundamental to the story as James Bond’s alcoholism and license to kill. Replacing the dwarfs with… well, whatever we want to call the assortment of non-dwarfs, was a risk with no apparent possibility of return.
Human Motivation Remains Unchanged
And what’s the story with Victoria’s Secret & Co. (VSCO)? It’s not your traditional entertainment company, but, I guess, it’s entertainment of a different sort.
After making what may have had the single biggest marketing failure since New Coke in 1985 or Bud Light’s faux pas when it partnered with transgender influence Dylan Mulvaney on a promotion for a beer brand traditionally associated with rowdy frat parties, Victoria’s Secret is getting back to its roots and focusing on being sexy.
In an investor presentation in October, the company announced it was bringing back its runway shows.
That shouldn’t be a novel ideal for an intimate apparel brand, but two years ago the company made a major pivot by embracing “body positivity” with plus-sized and more realistic-looking models in its advertising.
To say that failed to generate sales of its undergarments would be an understatement. Revenues are expected to be about $6.2 billion this year, down about 17% from 2020 levels. And more than just sagging sales, the brand has sagging enthusiasm.
Let’s think about this.
If I’m considering joining a gym, what advertising am I likely to respond to?
An over-the-hill shell of a man like myself, straining to lift a tiny dumbbell without inflaming his shoulder and with his middle-aged beer gut hanging out the bottom of his sweat-stained shirt…
Or someone that looks like Dwayne Johnson from his wrestling days – a solid slab of muscle with a body fat percentage of zero, bench pressing an impossible 1,000 pounds.
I’d respond to the latter of course. As would any other man.
Because as ludicrous and unattainable as turning into The Rock is going to be, it’s how all we men want to imagine ourselves.
The Victoria’s Secret models of old weren’t realistic representations of women. That was literally the entire point. Victoria’s Secret sold the unattainable. That’s what aspirational brands do.
And before we write this off as sexism or ageism, it’s equally true for men’s wear. Male underwear models look like they were chiseled out of marble. You don’t see many broken-down middle-aged men like me modeling boxer shorts. No one wants to see that, and they’re certainly not more likely to buy the underwear.
It’s probably too late for Victoria’s Secret to get its mojo back. Fashion brands generally don’t get second acts.
But there might still be hope for the Mouse.
This is a company with 100 years of intellectual property ruthless enough to sue an elementary school for an unauthorized viewing of The Lion King. If there is any company capable of returning its focus to profit and giving snowflakes the finger, it would be Disney. And it’s about time.
As you can see in this chart, Disney’s share price today isn’t materially higher than it was in 2013… when it released the original Frozen.
Of course, Disney’s recent woes are due to more than questionable dwarf choices.
Its Disney+ streaming service is struggling, as is its traditional TV business. The company is now also acquiring full control of Hulu in a $8.61 billion deal with Comcast.
But with Bob back in the driving seat, and finally some common sense and financial purpose returning to Disney, I’m betting the Mouse makes a comeback.
To life, liberty, and the pursuit of wealth.