”The tone changed,“ an insider said about what prompted the board’s emergency meeting and decision to bring back Iger
“After the last earnings call, I felt like the tide had turned against Chapek,”One insider stated that Chapek, along with other Disney executives, seemed to think it was a perfect quarter despite the grim reality. “The tone shifted.”
Disney+ has added new subscribers The company lost nearly $1.5 Billion last year, which is more than twice the amount it made a year before. However, streaming profitability was extended to September 2024. Even the theme parks, Chapek’s former fiefdom before he ascended to CEO, failed to deliver an expected boost in operating income despite rising revenues. (Disney shares plunged 12% the day after.
The fact that Chapek’s abrupt firing came just five months after the board renewed his contract for three years is a signal of how precipitous the decision was, according to several individuals close to the company.
According to one person familiar with the decision, the Disney board called an emergency meeting to approve the decision to bring back Iger and remove Chapek. After having handed the CEO reins over to Chapek in February 2020, the beloved CEO had retired in full as chairman of Disney in December 2021.
The board made a short statement saying, “The Board has concluded that as Disney embarks on an increasingly complex period of industry transformation, Bob Iger is uniquely situated to lead the Company through this pivotal period.”
The company’s stock rose 10%, to $101.02 in premarket trading on Monday.
Chapek had already weathered a number of PR debacles, from the mishandling of the don’t-say-gay law in Florida in 2021, to rough treatment of Marvel star Scarlett Johansson early on during COVID, to the sudden dismissal of respected Disney streaming and television leader Peter Rice in mid-2022.
Just two years into his tenure, the hard-charging, top-down Chapek had managed to alienate both the rank and file on Disney’s creative team – especially in animation and Imagineering – while also losing the confidence of Wall Street, several senior executives and ultimately the board (led by longtime member Susan Arnold, who will remain as chairman).
Iger has made it known to his closest confidants in recent months. “that he thought Chapek was a mistake,”According to an insider.
Disney’s spokesperson declined to comment on the story.
In truth, the decision to bring Iger back as CEO is also a not-very-subtle indictment of Iger’s own failure to plan and execute a successful succession. For all of Iger’s talents as a corporate leader, and they are many, that is widely seen as a clear gap in his legacy.
For many years, he was a mentor to potential successors but they would leave the company when they did not get the job. Former CFO Jay Rasulo left in 2015, while Tom Staggs, then short-lived COO, left in 2016. Kevin Mayer, who managed the successful launch and expansion of Disney+, left in 2016. Chapek emerged that year as a surprise choice to take the reins and then made similar efforts to shore up his power — ousting former Fox executive and head of TV content Rice earlier this year in what was widely seen as a play to remove a potential rival.
Iger now has 2 years to make a new succession strategy, and it will be a successful one. However, the Disney he takes control of is in a more difficult place than his predecessor. Iger will have to quickly prioritize and focus on a recovery strategy. With advertising revenue falling and the possibility of a recession, Iger has two years to create a new succession plan.
He also faces the scrutiny of activist investor Dan Loeb’s Third Point, which acquired a sizable stake in the company in August and then pressed for major changes to the business — including spending cuts, an overhaul of the board and a spinoff of ESPN that Loeb later retracted.
Among Iger’s first moves is expected to be a dismantling of the centralized structure put in place by Chapek, with all budgeting decisions made by the Disney Media & Entertainment Division led by Kareem Daniel. Daniel’s future is also in question, as a hard-core Chapek loyalist who has overseen the company’s slide. Iger was not known to be a fan of taking too much power from the creative departments leaders in television and film.
“I’d expect him to undo most of Chapek’s structure,”Iger was mentioned by one executive at a rival studio.
Additionally, Iger may also be tempted to turn to acquisition as a buttress for Disney growth — just as he did in the past. During his previous 15-year run as CEO, he oversaw the acquisitions of Pixar, Marvel Studios, Lucasfilm and 21st Century Fox — and doubled the company’s revenues from $32 billion to $70 billion.
His former lieutenants Tom Staggs and Kevin Mayer are likely to target the company they founded and managed. The two former Disney executives — once considered possible successor before Chapek’s selection — have built a powerhouse content in just two years with Candle Media, amassing about $4 billion in enterprise value in the children’s content leader Moonbug Entertainment and Reese Witherspoon’s Hello Sunshine, among others.
Unfortunately, Disney is still absorbing the financial costs of its $71.3 billion of Fox’s film and TV assets — and reported $48.4 billion in long-term debt earlier this month, making any new acquisition a challenge especially in an era of rising interest rates.
While two years may not seem like a long time to guide a company down the right path, it was enough time for Iger to be successful, as several observers suggested. “I don’t think succession went well,”One insider stated. “But I think his tenure as CEO went well – and this decision made sense.”
“But now,”Individual added “you have a really glaring succession question.”
Scott Mendelson contributed this report.
