By Dawn Chmielewski and Svea Herbst-Bayliss
(Reuters) -Walt Disney shareholder Blackwells Capital is calling for it to come up with an artificial intelligence (AI) strategy, saying that this could lift the U.S. media and entertainment conglomerate's stock price by as much as 129%.
Blackwells is one of two activist investors pushing for board seats at Disney. While it has largely backed CEO Bob Iger's leadership of one of the world's largest entertainment companies, it has recently laid out potential changes, including a possible breakup and spinning off its park and hotel assets into a real estate investment trust.
Blackwells said in a presentation published on Monday "Disney must produce an artificial intelligence strategy, and share elements of that strategy with its shareholders."
Since 2023, the largest technology companies have added more than $5.2 trillion to their cumulative market values after announcing major AI initiatives, Blackwells said, adding that Disney could do more if it adopted and preached the "technology native stack and mindset."
The critique does not acknowledge Disney's long-term investment in new technologies that span half a century, according to patent filings and current and interviews with 15 former executives, business partners and industry observers to discuss the company's technology strategy.
Disney also formed an AI Task Force last year to study artificial intelligence and how it could be applied across the conglomerate, Reuters first reported.
In a letter Monday to shareholders titled "Promises Made: Promises Kept," Disney said the board was committed to what it called an "ambitious plan" to restore value to shareholders. It argued that replacing Disney board members with the nominees of two activist investors would disrupt the company's progress.
Disney also took issue with Blackwells' proposal that it spin off its land and hotels into a real estate investment trust, and break up the rest of the company into separate entities. That strategy, it argued, demonstrated "a complete misunderstanding of Disney's strengths derived from the synergies across our businesses."
Blackwells, which is pushing to win three board seats at Disney, said its share price could potentially rise $246.96 from its current level of $107.74, the presentation forecast.
"Artificial intelligences' impact on Disney – is at minimum – comparable to its impact at large tech companies," Blackwells said. "Disney’s potential in the AI and spatial computing spaces cannot be understated," it added.
Blackwells also suggested that Disney hire a corporate chief technology officer to focus on technology transformation.
Nelson Peltz's Trian Fund Management is also campaigning for board representation at Disney, asking investors to elect its two director candidates.
VIRTUAL WORLDS
Among the 4,172 patents Disney has registered with the U.S. Patent and Trade Office since 1973, are 260 that refer to augmented reality, including one filing dating from 1997 that describes a virtual easel that would digitize an artist's illustration.
Patents reviewed by Reuters describe technologies for generating three-dimensional virtual environments and for incorporating augmented and virtual reality into moving theme park rides. One of these technologies is on display with the Avatar Fight of Passage attraction in Disney's Animal Kingdom, where guests ride a winged mountain banshee for a virtual 3D flight over Pandora's landscape.
Disney’s theme parks have historically provided a showcase for the company’s technology since the first audio-animatronic robots arrived at Disneyland in 1963, in the form of tropical birds chirping and wise-cracking in the Tiki Room.
Efforts to blend the physical and digital worlds have been happening in other areas. Disney’s consumer products group partnered with Lenovo in 2017 on a Star Wars-inspired game that used augmented reality and a smartphone to bring lightsaber battles into the home.
The Walt Disney (NYSE:DIS) Studio, meanwhile, has explored ways to use augmented reality to lift its most popular characters off the movie screen and place them into the physical world, where they would interact with fans.
Disney has also committed to create content for the Apple (NASDAQ:AAPL) Vision Pro mixed reality headset.
Its journey into the virtual future has not been without missteps.
The company created content for a half-dozen virtual worlds inspired by such popular film franchises such as Pirates of the Caribbean and Cars in the 2000s, only to shutter them less than a decade later.
It has also sold off its Avalanche Software game studio to rival Warner Bros Interactive in 2017, after failing to meet internal sales projections, according to one former Disney executive with direct knowledge of the situation.
Disney now licenses its characters and stories for games produced by other companies, a strategy which it says has produced nine games that grossed more than $1 billion in sales.
The company recently invested $1.5 billion for an equity stake in Fortnite-maker Epic Games.