After a turbulent tenure – marked by public and internal fights, restructuring and poor company performance – Bob Chapek was fired, and The Walt Disney Company board of directors immediately reinstated Bob Iger as its CEO on Sunday evening.
The move shocked many in the industry, and left others wondering if Iger will be able to save the battered company. Kim Masters and Matt Belloni analyze Disney’s move and Iger’s two-year contract to “steady the ship.”
This segment has been edited for length and clarity.
Disney news shocks Tinseltown
Kim Masters: I was having a pleasant dinner at a friend's house Sunday night when the news that Bob Chapek was out, Bob Iger was returning as the CEO of Disney, which shocked me, caused me to leave the dinner early, and shocked the town.
Matt Belloni: If you think you were shocked? So I'll tell you a funny story. I saw a journalist that had tweeted the press release, and I texted [him] saying, “Hey, man, I think your Twitter has been hacked.” Can you believe it? I didn’t think it would go down that way. I thought the whole thing was fake. I soon realized it was not fake.
Masters: It was not fake.
A brutal defenestration
Masters: Bob Chapek ushered out of there just with no glory, [a] pat on the head or anything, but a brutal defenestration. The arguments against Bob Chapek, we've run through so many times: there was the very public fight with Scarlett Johansson over her compensation, which was not the sort of thing you want under the gate, especially when you're a guy who doesn't come from the entertainment community. He'd always been in theme parks, doesn't know the entertainment community, so he was attacked for that.
Then he cruised right into the “Don't Say Gay” debacle, where he initially didn't want to take a position, and then the staff went crazy because Disney has a lot of LGBTQ or just progressive staff, [then] he flipped flopped and Ron DeSantis, the governor of Florida, went after him.
And then he fired Peter Rice, one of the most respected executives in the business, with no ceremony at all, and [now] he got the same treatment himself.
This seems to have come together very quickly. Although we found, in reporting I did [for The Hollywood Reporter], that the board had issued a unanimous statement, (I'm putting unanimous in quotes) of support for him in June. Apparently [it] wasn't unanimous and there were some board members who wanted to get rid of him then, and felt like he wasn't working out.
Masters: Ultimately, they were unanimously ready to replace him with Iger and Iger seems to have said yes in a matter of days.
He's coming into a host of problems that aren't going to disappear just because he's Bob Iger. The business is challenged. Legacy studios are finding that broadcast and cable revenues are dwindling, and streaming is hemorrhaging money.
A total tone deaf situation
Masters: But let's just start by saying what seemed to have precipitated the [firing], which was this earnings call, in which Chapek’s behavior seemed out of sync with people.
Belloni: It was bizarre. I listened to it, and he was so cheery and was talking about all these great events coming up at Disneyland. It's like, all the analysts and the investor are looking at him thinking, “What? You missed this badly on projections. You lost $1.5 billion in streaming in a quarter.” It was just a totally tone deaf situation.
And we've learned since, that the CFO of the company, Christine McCarthy, was one of the executives that went to the board and said that she had lost confidence in Chapek because she's sitting next to him on these earnings calls when he's embarrassing himself. So that was not good.
The earnings call was the last straw
Belloni: But I do believe that the overall financials of this company are the real reason behind this. If this company was doing great and the stock was going up, they would overlook some of these problems that Chapek has had personally, and they would say, “Okay, he's just learning on the job,” but not when the company is so down this year, 40% down in the market.
You [have] people like Dan Loeb, who are coming out saying, “Why aren't you selling ESPN? What's the strategy here?” It's just all closing in on Chapek, and I think this earnings call was the last straw.
Iger didn't make it easy
Masters: Following Bob Iger is difficult. He is a smooth, cashmere executive and one of the most admired in business, period. And Iger didn't make it easy. It was very clear to everybody that Iger [was] involved in the selection. I don't think Chapek was exactly his hand-picked choice. I think there was a little bit of a peak where the board was leaning on Iger to make a succession plan, and finally, it was like, “Fine, have this guy.”
Then it was very clear that Iger thought very little, including this reorganization that took power away from the creative executives, and gave it to a Chapek loyalist, Kareem Daniel, who was let go the day after Chapek.
So what will happen?
Masters: Iger has announced, “We're putting it back the way it was. We're going to put the power of the purse back in the hands of the creatives.” This cheers a lot of people, but everybody's going to be scrutinizing who is going to succeed Bob Iger. He screwed this up the first time. He's under pressure to get it right this time. He's postponed his retirement multiple times.
Belloni: And it is a personal failure on his part that he has not been able to identify and groom a successor. The board essentially acknowledged, by putting it in the press release, that his job is to steady the ship and to identify a successor to come in, and do this job after him. We’ll see if it takes two years, three years, whatever. But I think that's going to be on his agenda from the very beginning. If he doesn't already have a couple names in mind right now.
That's why it'll be interesting to see if Peter Rice comes back to the company. If he does, that's a big sign of what Iger is thinking for succession. Whether he elevates someone like Dana Walden internally, whether he goes outside the company. Someone like Jeff Shell at NBC Universal, or other executives that are at that level that maybe Iger could identify and bring in and groom. We don't know what the plan is yet.
A lot of changes are “going to go bye-bye”
Belloni: But the one thing that is clear is that a lot of these changes over the past three years are going to go bye-bye. The firing [of] Kareem Daniel on your first day on the job is a big statement to make, and it says to everybody, “This is a creative storytelling company. We're going to get back to that,” and I think that's not going to be the only one.
Will Iger play the same song?
Belloni: Disney has this weird setup, where there's a president of Hulu, who isn't even really in charge of the content on Hulu. So that is all [going to] get changed, and they're [going to] figure out how to best do it.
I don't think it will go back to 2020, and what we had then. It will be an evolved thing because the company is different now. He can't come in and just run the same playbook that he did in his previous tenure at the company. He's got a very challenging, very different Disney right now and he's got to figure out what that means and the strategy for it.
Masters: Iger is known for the so-called transformative transaction. He bought Pixar. He bought Marvel. That was a good decision. He bought Lucasfilm. He bought Fox, but he has built the company that way, and now what does he do with it? Does he try to buy something else or does he want to sell?
Belloni: It's a very different financial environment right now, too. Interest rates were so low, for so long that it enabled a lot of those transactions to be relatively debt free – although they do have a lot of debt now, especially from the Fox deal.
But with high interest rates, you can't just go out on a shopping spree, especially the way the Disney stock is these days. So it will be interesting because I don't think he can just play the same song back. So we'll see.
Masters: We will!