Welcome back to In the Room.

And welcome to the weekend. In tonight’s email, news and notes on Bob Iger’s linear dilemma and the ESPN juggernaut, Apple’s Jon Stewart problem, and Jeff Bezos’s options for the future of The Washington Post.

Of course, Peltz’s pressure did overwhelm Disney, perhaps for the best. Bob Iger, who returned to the company in part to tame The Smiling Crocodile, eventually agreed to cut $5.5 billion in costs, eliminate roughly 7,000 jobs, and restructure the company so that ESPN would operate as its own division, distinct from the entertainment unit that houses the streaming services, linear TV networks, and production studios. One upshot of that restructuring: nine months later, Peltz isn’t the only one who can see how poorly Disney’s entertainment business is faring.

On Wednesday, Disney revealed that ESPN delivered more than $16 billion in revenue and $2.9 billion in profit in fiscal year 2022. By comparison, the entertainment division brought in $39.6 billion in revenue but just $2.1 billion in profit. (My partner Bill Cohan has a brilliant breakdown of ESPN’s business and valuation coming on Sunday in his Dry Powder private email. Sign up here if for some reason you live off the grid and don’t already subscribe.) Given that this is the first time ESPN’s numbers have ever been broken out publicly, much attention has been lavished on its performance and durability, even if roughly two thirds of that revenue is dependant on dissipating affiliate fees (and, indirectly, on the ever more expensive costs of broadcasting live sports). But the real story is the sorry state of the linear networks.

Sure, we’ve known this for some time, but it’s nevertheless staggering to see the cold hard numbers. And it explains in concrete terms why Iger hung the “For Sale” shingle on ABC and the linear networks in Sun Valley while sounding the call for a “strategic partner” for ESPN. Little progress seems to have been made on a sale since last month, when Bloomberg reported that Disney had held “exploratory talks” with Nexstar Media. Though as I reported recently, Disney is also embarking on an effort to fundamentally transform its linear businesses—perhaps anticipating a sale—which will almost certainly translate to further staff cuts down the line. What’s most notable about this effort is how abruptly it came down the chain of command just a few weeks ago. Disney typically handles such matters with careful thought and Long Range Plans. This time around, I’m told, there seems to be a chaotic, last-minute push for very consequential budget changes.

In recent days, of course, Peltz has revived his plans for a proxy fight, strategically leaking to the Wall Street Journal that Trian has expanded its stake in Disney to 1.7 percent and plans to seek multiple board seats. As Bill Cohan has noted, this latest foray is being spearheaded by Peltz’s son, Matthew, a former Goldman Sachs investment banking analyst who is now co-chief investment officer at Trian. Interestingly, one detail Bill has gleaned from his sources is that the younger Peltz is willing to be patient on the sale of the linear assets until they can get to a fair price. As Trian sees it, “Disney should not puke these assets just to have a higher growth rate,” Bill writes.

Then again, looking at the financials Disney released on Wednesday, it’s reasonable to conclude that the best time to sell the linear assets (ex-ESPN) would have been at any point before yesterday. On that note, one of Peltz’s most acute critiques of Iger pertains to his $71 billion acquisition of Fox in 2019, which Peltz says “turned what was once a pristine balance sheet into a mess.” Rupert Murdoch’s timing of his sale to Iger—and that price, thanks in no small part to Brian Roberts—will go down as one of the savviest moves of his storied career, and perhaps one of Iger’s gravest miscalculations.

As for ESPN, well, it is a juggernaut—but it’s a juggernaut in rapid decline. The pay TV market is in free-fall, sports rights are skyrocketing, and ESPN+ lost subscribers for the first time last quarter. Needless to say, that strategic partner can’t come fast enough.

But the move has set off alarm in the creative community, a contingent of which is worried that Apple bristled at anything that might complexify the company’s core business relationship with China—a tension thrown into sharp relief by Tim Cook’s surprise visit to Beijing this week. One Hollywood veteran described it to me as “a clear and present danger of content creation at a global company with a totally different business model.”

An Apple representative declined to comment on the matter, though one source with some insight into the backstory said concerns over China had been drastically overblown. To be sure, it’s worth keeping in mind amid all this that Stewart’s Problem wasn’t a terribly popular or influential show. Alas, it’s proven hard for the generationally talented Stewart to successfully manifest a new persona after the unrivaled success of The Daily Show.

Both Steiner and Lewis are somewhat traditional candidates, albeit in different ways. Steiner’s acolytes describe him as a fiscally responsible veteran of finance and government who, notably, has the pertinent experience of having worked for another of the world’s wealthiest people. Lewis is a former journalist who has demonstrated an ability to grow digital businesses, including the Journal, and who has what one friend described as “the swagger, the editorial chops, and the drive that will be required.” (Working for Murdoch is also relevant experience…) Neither one is pristine: during the Whitewater hearings, Steiner was forced to testify that he’d lied in his own journal; Lewis was present at Murdoch’s media empire during the phone hacking scandal, though he denies involvement. By and large, however, both men are well respected by their peer set.

Perhaps what matters most is what Bezos himself wants from a C.E.O. His interim chief, Patty Stonesifer, capably identified that the Post’s previous leader, Fred Ryan, was operating beyond his means, without much rigor or transparency. She responded by moving to eliminate 240 positions through buyouts that will effectively balance the budget. The question now is whether Bezos believes the Post can achieve success merely through better fiscal responsibility and KPIs, or whether it needs to identify and execute a more ambitious vision that will make it essential and valuable to news consumers on a daily basis—not just during major political news cycles.

When she announced the buyouts, Stonesifer described the Post as “a really good business” that simply “overshot” its expenses (to the tune of $100 million in annual losses). If that’s truly the Post’s only problem, then maybe all it needs is a more disciplined financial manager. But if you believe, as many do, that the Post actually has a lackluster overall product (despite its great political and policy journalism)—and that it has hemorrhaged audiences and talent while ceding market share to the Times, Politico, Punchbowl, et al.—then the answer may be something else entirely.

Either way, this is a captive investment for Bezos. He’s not worried about a stock price, a board, or other investors. One can only presume that he wants a leader who can execute slow and steady terminal growth while also mollifying the various and anticipated headaches, media glare, and temperamental egos. Easy job, right?