As Bob Iger Departs, Disney Investors Also Look to Get Off the Ride

(Bloomberg) -- Walt Disney Co.’s board promised a smooth transition from the end of the Bob Iger era to the new regime under Chief Executive Officer Bob Chapek. In the final hours of Iger’s tenure, the reality looks much rockier.

It’s not just the pandemic, which shut down Disney’s theme parks, cruise ships, TV and film production just days after Chapek was promoted last year. The 61-year-old CEO’s organizational changes have rankled insiders, and executives from the Iger era are departing in droves. A lawsuit by actress Scarlett Johansson over her compensation was a blow to Disney’s talent relations.

Wall Street, meanwhile, is growing skeptical that the company’s flagship streaming service, Disney+, will hit Chapek’s target of as many as 260 million subscribers in 2024. Disney shares are down about 16% this year, heading toward their worst annual performance since 2008. Morgan Stanley said the stock is suffering from a “crisis of confidence.”

“The biggest problem that Disney is facing is Disney+ right now,” said Porter Bibb, a veteran media investor. “It’s not a profit segment. It’s kind of stalling in terms of subscribers. And it’s a question mark whether you can put a supremely popular and winning streamer together with comic book characters that keep getting recycled over and over again.”

Iger’s Shadow

Chapek has had to manage all this in Iger’s shadow. In nearly 15 years as CEO, Iger developed a rockstar-like reputation, making big acquisitions, opening a Shanghai theme park and launching Disney+. That’s put Chapek in the tricky position of trying to build on his predecessor’s accomplishments, while still steering his own course for the company.

As part of his goodbye tour, Iger has been popping into Zoom meetings with various Disney teams. In mid-November, he had a bunch of friends and co-workers over to his home for a farewell dinner. Chapek was scheduled to be out of town at a Disney fan event in Florida that day, but he changed his plans so he could attend, according to people familiar with the matter who asked not to be identified discussing private information.

Bill Smead, a Phoenix-based money manager who has owned Disney stock for 20 years, recently sold all of his 191,747 shares. He thinks Chapek will have a tough time delivering the kind of returns Iger did. 

“You never want to be the coach who follows John Wooden,” Smead said, referring to the UCLA basketball legend.

A company spokesperson declined to make Iger or Chapek available for an interview.

Putting his own stamp on the management structure, Chapek reorganized the company’s film and TV units so that major decisions, such as whether to begin production of a movie and where to air a new TV series, fall on a new division called Disney Media & Entertainment Distribution. It’s headed by Kareem Daniel, who started his career with Chapek as an intern in graduate school. 

While centralizing decision-making at a time when the company is focusing on streaming could be viewed as a wise move, the reorganization took authority away from the TV and film executives who were the traditional gatekeepers.

In the past year, a number of long-time Iger lieutenants have left or announced plans to leave, including studio Chief Creative Officer Alan Horn, General Counsel Alan Braverman and Chief Communications Officer Zenia Mucha. Her replacement, Geoff Morrell, ran public relations at oil giant BP Plc. He supervised that company’s response to the Deepwater Horizon disaster and is viewed by some Disney watchers as another sign Chapek is stacking senior management with his own loyalists.

On Wednesday, the company announced the hiring of Horacio Gutierrez to replace Braverman as general counsel. In the same position at Spotify Technology SA, Gutierrez led that company’s antitrust fight against Apple Inc. Iger, a friend of founder Steve Jobs, sat on the Apple board for years. 

The board, meanwhile, chose Susan Arnold, a former Procter & Gamble Co. executive and 14-year Disney director, to replace Iger as chairman. The move, while in keeping with Disney’s corporate governance guidelines, leaves Chapek with less autonomy than most of his predecessors because he is not serving in both roles.

Spending Push

Chapek has outlined plans to expand Disney+, which like its rivals had to curb TV and film production as a result of the pandemic. The company plans to spend $33 billion in total on content this year, a 32% increase. 

The dispute with Johansson was resolved quickly, with the actress agreeing to work on a number of Disney projects. And some executive departures should be expected when a new CEO takes over. Chapek has said he’s very happy with his move to centralize decision-making for the company’s film and TV units.

“I think it’s going to be one of the keys to our success in the future,” he told investors at a conference in September.

Anne Sweeney, an 18-year Disney veteran who left the company in 2015 after heading its TV division, said it’s too soon to judge the Iger handoff and Chapek’s performance.

“They’re on a steep learning curve and they’ve made some good decisions,” she said in an interview. “Like anyone else, they’re going to stumble now and then. Succession is never easy, especially when your whole office is on Zoom.” 

The individual most versed in Disney succession planning, outside of Iger, is Michael Eisner, the company’s CEO for 21 years before leaving after a boardroom battle in 2005. He’s an unabashed fan of the current management team.

Chapek, Eisner said, worked for him in home entertainment, where he navigated a shift from selling videocassettes to video rental stores to consumers directly. The move meant a drop in revenue initially, for what was ultimately a greater payoff down the road when millions of families began building home-video collections.

“He was quite brilliant in managing that,” Eisner said in an interview. “As to why he was selected, I suspect it was because he had a lot of experience addressing new media.”

Iger has said he’s still not sure what he will be doing next. Many in Hollywood expect him to continue making personal investments, like the vegan food business he bought into last year. Eisner, who purchased a soccer club in England in 2017, told him he should buy a sports team. Iger has said he’s considering writing another book, a follow-up to his 2019 memoir “The Ride of a Lifetime.” This one would focus on leadership decisions made during the pandemic. 

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