What was the connection between a private bathroom, Oogie Boogie and a hippo when it came to the difficulties between Bob Iger and Bob Chapek at Disney? This article looks at the inside scoop of how a CEO succession plan went off track — an illustration of the arrogance and pride existing among the highest level of businessmen. This is derived from interviews of over two dozen individuals who were closely affiliated with Iger and Chapek between 2020 and 2022.
Bob Iger had pushed back his retirement four times before announcing on Feb. 25, 2020 that he would step away from his role as Disney's CEO. He had chosen Bob Chapek, the company's parks chairman at the time, to take over his job, with the caveat that Iger would remain as executive chairman for 22 months. In order for the new CEO to take over, the Disney board suggested Chapek should take to Iger's expansive office in Burbank, California. Iger, however, had no interest in moving out having spent his mornings there with a private shower (installed for former CEO Michael Eisner) and shaving vanity. He valued his "two-shower days" and told Chapek that he was not looking to leave the organization.
Chapek was chosen as his successor due to his integrity and business acumen. Though they had different lifestyles, both men agreed that Chapek wouldn't need the office shower and moved to a small office on the same floor. On Iger's bathroom wall hung two posters; one was a collage of newspaper front pages and magazine covers celebrating Disney's purchase of Marvel in 2009, and the other was a spoof of the 1975 Clint Eastwood movie "The Eiger Sanction". Instead of Eastwood, the poster featured Iger himself with the title "The Iger Sanction".
On November 20, 2022, Bob Iger returned from retirement to take charge of Disney again, following the company's decision to fire Chapek. Rapidly, Iger removed Chapek's most trusted advisors. In July, Iger extended his contract to remain as the CEO till 2026. Chapek privately expressed to a friend that his time at Disney was "three years of hell", mainly due to his suspicions that Iger was gunning for his job. Iger himself has shared with peers and family that he returned to Disney out of a desire to rectify one of his biggest mistakes of his career: choosing Chapek.
Iger recounts a similar corporate meltdown between Eisner and Ovitz in his autobiography, "The Ride of a Lifetime," emphasizing that when the top two individuals of an organization don't get along, it has a profound and damaging effect on the entire company. And sadly enough, Iger's tale with Chapek followed suit, with the same unfortunate consequences.
As Disney and its board now seek a new CEO, they must ask themselves whether they have truly learnt from this situation. The Chapek era has provided a classic example of how ambition and ego can fester and disrupt a hugely successful business. Disney, with its longstanding heritage of captivating storytelling, will no doubt be hoping that this lesson serves as a cautionary tale.
This story was informed by over 25 people who had close ties to Chapek and Iger between 2020 and 2022. These individuals chose to remain anonymous since the information was derived from private conversations and certain details have never been revealed. A representative for Chapek provided a statement to CNBC which noted Bob's satisfaction with the work he had done in his 30-year career at Disney, especially during his nearly three-year term as CEO. This included leading the company through the various difficulties brought on by the pandemic and initiating business transformation to ensure ongoing success and growth. Iger declined to provide comment for the story.
Iger's departure from the position of CEO was both unforeseen by the entertainment and media industries as well as by those near to him. Prior to the public statement, even those who had anticipated that Kevin Mayer, Disney's head of streaming, would take the helm, did not know. During an interview with CNBC in 2021, Mayer shared that he was "not aware of that development".
Iger was confident that the moment was right to choose Bob Chapek to take his position as CEO. With the great success of Disney's recently launched streaming service, Disney+, Iger was sure that Chapek was the ideal caretaker to maintain his legacy. Hailing from Hammond, Indiana, and being the son of a World War II veteran and a working mother, Chapek had a real passion for Disney's theme parks since he was young due to the annual trips to Walt Disney World his family took. After gaining his MBA at Michigan State, he joined the company in 1993 and by 2015 had become the chairman of the Parks division. Impressing Iger with his operational skill and his ability to save costs, Bob Chapek was considered a low-drama manager who was highly respected by the board. Every division he had managed had flourished under his leadership, specifically with the Home Video division when the Disney animation films such as "The Little Mermaid," "Aladdin," and "Beauty and the Beast" were first released and the Consumer Products division when "Frozen" came out. His most impressive achievement, however, was Shanghai Disney, the $5.5 billion theme park that opened in 2016 following months of delays. Iger and Chapek took several trips to Shanghai together in order to revamp the park and get the cost overruns under control. This project sealed the deal for Chapek being appointed as the new CEO, as Tom Staggs, who was previously in line for the position, left the company when Shanghai Disney was finished.
Iger's experiences with Staggs had prompted him to strongly suggest to Disney's board of directors to appoint Chapek as CEO without the need for an audition. Iger later realized that despite Chapek's impressive operational history, he hadn't evaluated his ability as a leader. Iger's own charisma and celebrity made it possible for him to convince Steve Jobs to sell Pixar, and then persuade Ike Perlmutter and George Lucas to sell Marvel and Star Wars respectively. He also managed to acquire the majority of Fox's assets in a $71 billion deal. Thus, some Disney execs quietly speculated that Iger chose Chapek because he wasn't a rival to him in those areas. It's also clear that Iger didn't have a lot of familiarity with Chapek, given his close working relations with Mayer and Staggs. This process resulted in recurrent extensions of Iger's contract, until 2017 when Chapek was informed of his candidacy for being Iger's successor. Chapek was supposed to take 15 individual board interviews, as Iger had done before him; however, this never happened. Instead, after Iger suggested it, Susan Arnold informed Chapek of his appointment over lunch at The Rotunda. After being sworn to secrecy for six weeks, Chapek's appointment was revealed to the public.
In passing over Mayer and Rice as CEO, Iger and the directors felt that their leadership styles were too brash. Additionally, Mayer had no prior experience running a major business, and Rice had been at Disney for less than two years. Despite this, Iger did not consult those who worked with Chapek prior to his selection. Iger's unorthodox succession plan was for Chapek to serve as both CEO and CEO-in-training while Iger remained in charge of creative tasks. Iger explained his decision to CNBC's Julia Boorstin by saying "We believe this to be a really good succession process and a really smart transition process."
For his plan to come to fruition, Iger needed the board's full approval. Considering that he had come to be the gold standard of legacy media and entertainment CEOs in the 15 years since taking over Disney, it wasn't hard to get. By February 2020, Disney's share price had increased about 420% since he began, compared to the S&P 500 index's gain of 150%. Though lacking in media and entertainment experience, Iger was personally close with several board members, including Nike's Executive Chairman Mark Parker and General Motors' CEO Mary Barra. In addition, Michael Froman, the spouse of another director, also housed with Iger's partner, Willow Bay, during their university days at Penn. Parker is credited with providing the foundation for Iger's succession plan, though it was nearly identical to one Michael Eisner had attempted to secure for himself and failed. In 2004, Eisner proposed he step down while remaining chairman, with Bob Iger taking on the position of CEO. However, directors Roy Disney and Stanley Gold quit their posts, accusing Eisner of having a plan that allowed "Michael Eisner and Bob Iger" to retain control of the company.
In March 2004, 43% of Disney shareholders had refused to reelect Eisner to the board, leading him to relinquish his chairman role. Eisner stepped down as CEO in September 2005, leaving Iger in charge and free to make decisions with no one looking over his shoulder. This is what enabled him to act quickly and purchase Pixar, as he goes into great detail about in his autobiography. Chapek will not have the same amount of independence.
Iger remembers watching Eisner go on his final day at Disney: "It was a moment when it was hard to determine who you were supposed to be without a title or role that had identified you for a long time." Soon after Iger announced his retirement, people familiar with the situation said Chapek started to wonder if Iger had any regrets. Iger himself quickly began to suspect that he had made the wrong call. The first signs were subtle; at the announcement to staff on Disney's Burbank campus, Iger went as far as jokingly referring to himself as "Big Bob" and Chapek as "Little Bob"; a subtle hint to everyone that Iger was still the leader. On March 10th, 2020, barely two weeks following the switch, Iger, Chapek, Chief Financial Officer Christine McCarthy and a few other Disney executives flew to Raleigh, North Carolina to attend the yearly company meeting. While preparing for the event, Iger and Chapek talked about procedures for the presentation and expressed concerns regarding the coronavirus. Then Iger surprised Chapek when he said that he, not Iger, would be the one to do the annual "stump the CEO" Q&A session that Iger had always run. During his 27 years with Disney, Chapek had only attended the meetings once before, as a spectator.
Chapek had a background in Disney parks, consumer products, and distribution, so he knew little about ABC, ESPN or the movie studio. In order to be prepared to answer questions about anything, the investor relations team gave him a large binder of background material which he studied in private on the plane. Iger was perplexed, expecting that the men would practice questions and answers throughout the flight. He then went to the back of the plane to check if Chapek needed help and noticed the binder. "Isn't it all in here?" Chapek asked. Iger replied that the binder contained the basics, but not the nuances. Preferring to learn by reading and memorizing, Chapek chose to remain in the back to study. His first question in the investor call was about bias in ABC News - something he had little knowledge of, but had prepared for on the plane. This exchange caused Iger to worry that he had picked the wrong successor and might have made a mistake. On the flight home, Iger and Chapek discussed the developing coronavirus crisis and Iger got on a call with California Governor Gavin Newsom to discuss if Disneyland should be shut down; it would be shut down the following morning on March 14th.
At some point, McCarthy proposed that he and Chapek hold their first weekly CEO-CFO meeting amid the chaos. When they were discussing the third agenda point, Iger abruptly expressed his displeasure at having the meeting in his presence, as per the account of a person familiar with the episode. His reaction was out of character for Iger, who is usually known for operating in a corporate culture that encourages polite and respectful exchanges. Chapek and McCarthy concluded their meeting in silence, but afterwards Chapek informed others that Iger seemed to be having misgivings about relinquishing his post of 15 years. Those two conflicting views - Chapek as clumsy and solo; Iger as reluctant to pass on power - shaped the next two-and-a-half years.
Within days, the two men had experienced their first clash of opinions. Chapek wanted to furlough a large number of Disney Parks' employees after the closure of Disney World, while Iger wanted to wait until the US government's Covid-19 relief act came through in order to give those furloughed workers support from the government. Iger then contacted Nancy Pelosi and Chuck Schumer to get an idea of when the bill would be passed, and eventually disregarded Chapek's idea. This did not go unnoticed by New York Times media columnist Ben Smith, who wrote that Iger had 'returned to running the company'. Chapek was upset and called Iger to tell him he did not need a 'saviour', leading to the two having an argument for the first time in over two decades. Chapek even told the Disney board he needed a seat on it and they eventually agreed, leading to a 'strongly worded' conversation between Iger and the board. Iger began to feel excluded from decisions and that Chapek was not 'obeying' him, as Roy Disney and Stanley Gold had predicted. A June board meeting concluded with Iger telling them that his relationship with Chapek had gone downhill and that Chapek lacked proper leadership qualities, having not consulted Iger, the former CEO of Disney, during the pandemic.
Once Iger concluded the call, the board asked Chapek if any of the employees were aware of the tension between the two. Chapek stated he did not believe they were, however, he was aware Iger was conveying his grievances about him to people close to the Disney organization as well as to Hollywood professionals and agents. Neither of them ever met to discuss their professional relationship. The board never insisted upon it. In private, Arnold repeatedly advised Chapek to remain patient, reiterating those sentiments over the following months in a series of mentoring sessions. She suggested that Iger should remain in charge of creative endeavours whilst Chapek could assume control over all aspects in the next 18 months, rather than sparking any power struggles in the meantime. In a matter of a few months, Iger's carefully structured strategy to achieve a managed succession was wrecked.
When Chapek took over Disney, Wall Street's attention was squarely focused on the streaming division of the business. Iger had already carried out an overhaul of the company, making the announcement of Disney+ in April 2019. This launch gained 10 million paying subscribers in a matter of hours. Chapek, however, identified two main issues with the streaming service. Firstly, he saw that too many people had been assigned the task of deciding what content is allocated to Disney+. This included Agnes Chu and Ricky Strauss, who have since left the company, along with Mayer, Feige, Kennedy and the leaders of Walt Disney Television and Walt Disney Studios. In Chapek's opinion, the structure was disorganised and needed to be addressed. Secondly, streamed movies still weren't seen as as prestigious as those with a physical cinema release. This caused Bergman and his team to be unwilling to assign successful films to Disney+ or Hulu. During the pandemic, Disney still held to the exclusive theatrical releases, also differing from WarnerMedias 2021 plan of releasing movies on HBO Max and in cinemas on the same dates.
Box-office profits did not motivate investor sentiment - streaming services did. In the early stages of Covid, Disney's inventory was scarce as production of new TV series and films had ceased. Consequently, Chapek wanted to get premium content to Disney+ as soon as possible. He decided to employ a 'make-sell' system which was discussed between Iger and former YouTube executive Bob Kyncl in 2018. This method separated those who create shows and films from those who market them. Studio heads and content division chiefs were still to give the green light to particular projects, yet someone else was to be in charge of providing noteworthy content to Disney+ or Hulu. Companies like Netflix, Amazon and Apple, who have similar structures, demonstrated to Chapek that separating distribution departments from the content creators may take Disney away from its traditional media background. Investors placed greater value on Netflix than traditional media due to its capability to expand rapidly, and if Chapek could persuade investors to view Disney as a high-tech firm, it could increase the share price. This gave rise to the establishment of Disney Media and Entertainment Distribution (DMED), with 46-year-old executive Kareem Daniel being selected to lead it. He had worked beside Chapek for years in home entertainment, distribution and theme parks. This reorganization granted Chapek and Daniel the ability to veto movie and TV budget decisions.
Chapek held a series of meetings with Iger to discuss this restructure, and while Iger did not oppose it, he did not entirely agree either. His obscure communication habits perplexed Chapek, making it difficult for him to tell if Iger was subtly disapproving or merely inquiring. Inside Disney, many executives saw the reorganization as a way for Chapek to move the balance of power from Iger's base of TV and movie executives. Chapek was unhappy with the fact that Disney's culture under Eisner and Iger showed non-creative managers like him as less important. Daniel did not make many people happy, as he was viewed as unqualified and having a lack of humility. Chapek tried to encourage him to be more 'Disney nice', but it was unsuccessful. Daniel declined comment on the story.
As agents and Hollywood players got to know Daniel as Disney's new power broker, his lack of experience in the entertainment world showed in ways that were embarrassing to some colleagues. For example, he would enlist several members of his communications team to help him through premieres, leading some executives to make jokes about his self-importance. His team would also create documents teaching him how to act during these events, with tips for impromptu conversations with celebs, journalists or producers. The DMED communications division eventually grew to more than 100 people, leading some to feel this was too much. Despite this, since DMED was key to the company's future, Chapek did not step in. Some of Daniel's peers felt veteran Disney execs were unfairly hard on him, though, as it was Daniel's job to control costs. Chapek had to sort out numerous disagreements between Daniel and Bergman, as both were accustomed to leaving unsatisfied. Bergman declined to comment.Meanwhile, directors, actors and producers were not pleased with the reshuffle. In the industry, relations are paramount, and they didn't know Daniel. They wanted to know if their movie would go straight to a streaming service or have a theatrical release, but their usual contacts in the creative world could not answer. TV, however, was less resistant to the changes, as streaming was not seen as being lesser quality. Although creative execs were blocked from data they used to measure show progress, in the low broadcast ratings era, streaming frequently increased viewership and prolonged TV series.The exception was ESPN. Rights deals are their bread and butter, and ESPN execs got used to negotiating them directly with leagues. After the reorganization, they lacked control over budgets, and there were more layers of bureaucracy.
Chapek was attempting to reorganize the company during a period when almost all personnel were functioning remotely. Interactions on digital platforms were growing exponentially in size. Discussions became hard to manage. Junior managers from Daniel's distribution unit, who were a part of the conferences since ESPN+ was being offered alongside Hulu and Disney+, put queries to league administrators that highlighted their lack of business awareness. This situation left ESPN Chairman Jimmy Pitaro so disheartened that he thought of departing the organization, according to someone acquainted with the situation. Pitaro refused to make any remarks.
Throughout all this, executives who had been adversely impacted by the new structure were complaining to Iger, who said that he didn't support the reorganization, and that Chapek was only hearing about this secondhand. Many veteran creative staff viewed this as a mistake, while Chapek's supporters believed it was necessary to modernize Disney, claiming that TV and movie executives were trying to undermine the business, with Iger's approval, according to those closely connected to the restructuring. During late 2020 and early 2021, Disney employees started to become uncomfortable with the Iger-Chapek dynamic. McCarthy cautioned Chapek that Iger's complaints were being heard by a wide range of people. McCarthy refused to comment for this story. The majority of workers chose to remain silent and just do what they were told. Zenia Mucha, who had been Disney's head of communications since 2002, prior to Iger becoming CEO, took a more proactive stance. By reminding Chapek of Iger's esteemed status and legacy, she encouraged him to present the company as united. Chapek, however, didn't believe Mucha was entirely devoted to him, as he felt she was mainly loyal to Iger, and others close to Chapek felt she wasn't as supportive of him as a communications head should have been. Mucha argued that the country was in the midst of the pandemic and therefore not an ideal time for promoting stories in Hollywood periodicals, according to people familiar with the situation.
Chapek did not want to fire Mucha while Iger was still chairman, according to sources familiar with the case. Seeking to improve his image in Hollywood - where content creators and agents had become increasingly dissatisfied - the board recommended he seek the counsel of external communications firm Brunswick Group. Chapek began the process early in 2021 without having briefed Mucha. When contacted for comment, the latter declined.
Throughout the first half of 2021, Disney and Chapek had seen success. Disney+ had surpassed the 100 million subscriber mark in March, considerably more than their competitor Netflix had achieved in the same period. Furthermore, the world had been vaccinated to a great extent and theme parks were beginning to open again. At a board meeting in June at the Aulani resort in Hawaii, members praised Chapek, which he saw as a sign of them recognizing him as the head of the company. He felt he had managed to make Iger lose his way of returning. However, only a month later, things turned sour, as Chapek and Daniel decided to launch "Black Widow" for a premium fee on Disney+ and in cinemas at the same time in July 2021.
Johansson's initial contract stipulated her compensation was dependent on an exclusive theatrical release for up to four months, which hadn't become a concern prior to Covid. Bryan Lourd, her agent at CAA, spent months warning Disney executives that Johansson would sue for remuneration if they followed their plan. Bob Iger noted this dispute was a business problem, not a creative problem, but he and Chapek weren't speaking to each other at the time. When Johansson eventually filed a lawsuit, attorneys from Disney revealed to approximately 20 executives, including Iger and Chapek, various ways to respond. This included issuing a public statement that suggested Johansson's goal was financial gain. This statement was pushed by Disney's communications team, but both Iger and Chapek were unhappy with it. In the end, Iger suggested Chapek apologize to Johansson, but he refused. Disney and Johansson settled the lawsuit in October 2021.
In November, Iger held a goodbye party at his Brentwood house for 70 guests, among them Steven Spielberg, Al Michaels, and many Disney leaders. His invitation to Chapek was reluctant, and Chapek's first inclination was to decline. Once he realized it would look bad, he canceled his plans in Orlando and attended the party, where the tension between himself and Iger was noticeable. Iger's leaving allowed Chapek to take control of Disney. He combined government relations and media communications, merged out Mucha and general counsel Alan Braverman, and brought in former BP corporate affairs boss Geoff Morrell. Other executives out with Iger included Alan Horn and Jayne Parker. Chapek also fired top TV exec Rice, and worked on retaining CFO McCarthy, giving her a jokingly lifetime contract. Chapek's inner circle shrank to a few top executives, and he felt he had an ally in new board chair Arnold. Ultimately, Arnold was left in a firestorm.
Just over a month into Chapek's time leading the firm without Iger, Florida Gov. Ron DeSantis, a Republican, proposed the Parental Rights in Education Act - which opponents labelled the "Don't Say Gay" bill. This bill would prohibit “classroom instruction by school personnel or third parties on sexual orientation or gender identity". As one of the largest taxpayers and employers in Florida, Chapek and Morrell soon encountered questions from the media about the company's position on the issue. Employees - primarily animators at Pixar and Disney Animation - wanted to know what the company intended to do. Iger took to Twitter, writing "If passed, this bill will put vulnerable, young LGBTQ [lesbian, gay, bisexual, transgender and queer] people at risk". Over the period of time he was CEO and chairman, Iger had freely spoken on various causes, including climate change, diversity and abortion. In a series of virtual meetings held after the killing of George Floyd, Iger had informed Disney employees that the most effective way to bring about change was to make their voices heard, according to people on the calls.
Chapek sought to chart a different course. Before DeSantis presented his proposed legislation, Morrell had put forward a fresh communication scheme to the board, which suggested Disney should avoid getting drawn into political disputes and instead transmit its values through “three Cs”: content, culture, and supporting community organizations. Chapek and Morrell had expected they would have ample time to elaborate on their strategy internally. But Iger's tweet put more pressure on Chapek to speak out. Hence, on March 7, 2022, they put their new PR approach into effect with a memo to all personnel, signed off by the board. It declared that the firm would not take a formal position on the bill. Arnold, who is openly gay, authorized the statement but told Chapek it should also add its name to the Human Rights Campaign (HRC) letter, which had been in existence for several months and contained a catalog of U.S. companies broadly "united in opposing the wave of anti-LGBTQ+ legislation". Chapek planned to sign the HRC letter but did not wish to counter the message of his initial statement. Morrell and Chapek concurred that doing so would clash with the company's new strategy of steering clear of external disagreements, as informed by those conversant with their thinking. In the memorandum to personnel, Chapek wrote: "Corporate statements do very little to modify outcomes or to transform opinions. On the contrary, they are often employed by either side to encourage disunion and spark outrage. In a nutshell, they can be counterproductive and weaken more effective ways to effect change."
The backlash was swift. Employees criticized Chapek with hashtags like #Disneydobetter and #Disneysaygay. But Chapek and Morrell were convinced that this was the right decision for the company. They did not intend to enter into a culture war with DeSantis, who at the time had a solid relationship with Chapek. They had also considered the implications for China – the 2019 blockbuster "Avengers: Endgame" had taken an incredible $614 million at the Chinese box office, and Disney runs billion-dollar theme parks both in Shanghai and Hong Kong. Chapek and Morrell thought it was best to sidestep social and political issues in order to avoid any dispute with the Chinese government.
Arnold informed Chapek of the furious reactions from the LGBTQ community and the potential damage to Disney's brand. Chapek was thus forced to retract the statement for the sake of the company, and he was evidently livid, berating his communications team and lamenting having released the statement in the first place if the board did not support him. Despite his anger, Chapek was in a weak spot – his contract would expire in February 2023, and going against Arnold would be a risky move.
Chapek hurriedly crafted a new statement. He addressed the issue again two days later at Disney's yearly meeting, conceding that “the original approach, no matter how well intentioned, didn't get the job done.” He reiterated their commitment to support the community moving forward.
Morrell proposed that they donate around $5 million to an LGBTQ cause, but they were uncertain as to which one. The pair ended up choosing the Human Rights Campaign (HRC), which ultimately declined the donation.
Arnold was still not satisfied and told Chapek he had to formally apologize - especially to Disney employees. Consequently, they both crafted a statement on March 11th in which Chapek said "I am sorry for not being a stronger ally in the fight for equal rights; I let you down." Nevertheless, it did little good as on March 22nd, hundreds of Disney employees staged a walkout to critique how Chapek dealt with the incident. He then decided to take a company-wide tour to address doubts and answer questions. Iger had some allusive words for Chapek during a late March interview with CNN's Chris Wallace, saying that "when you're dealing with right and wrong, or when you're dealing with something that does have a profound effect on your business, then I just think you have to do what is right and not worry about the potential backlash to it." This was the second time Chapek was associated with a significant communications fiasco within a year, causing severe damage to his reputation among the company. As a new CEO and lacking the influence or internal respect to easily fend off the negative effects, the comparison to Iger's reaction to a slip-up at a senior management retreat in Orlando is intriguing. While at the retreat, around 20 Black executives heard Iger make a joke that unintentionally called attention to race. Though the incident spread quickly within the company, Iger's individual advocacy for diversity, such as backing the production of Marvel's "Black Panther" and guiding Black executives, was a testament to why it had no significant effect on his credibility. He reached out to Newton right after the ceremony to apologize and spoke with her for another hour the next day, additionally calling all the executives who had been in the room that day to say sorry. Newton accepted his apology and they maintained a strong relationship until she left the company 4 years later.This story emphasizes how a unified communications team can prevent incidents from becoming public, as well as the value of a leader who can promptly and sincerely apologize for errors and be accepted.
The "Don't Say Gay" situation was far from perfect prior to Chapek's discussions for contract renewal with Arnold in the spring, but he was still able to point to positive news. The Covid pandemic hadn't derailed Disney, as the parks, experiences and products segment had seen their revenues more than double to $6.7 billion in the first quarter of 2022 compared with the previous year. Looking ahead, Chapek suggested a plan to transform Disney into a modern media company, with Disney+ the main focus. An analysis of complaints from Disney+ users showed a lack of general entertainment; thus, Chapek desired to create a "hard bundle" of Hulu and Disney+ to give adult viewers more choices.
Chapek was hoping to identify a role for Disney in the metaverse and hired 50 people to work on "next generation storytelling," avoiding the term "metaverse" to avoid derision. This didn't stop several Disney executives from mocking the project internally, questioning if Chapek was attempting to differentiate himself from his predecessor, Iger. With Iger no longer on the board, Chapek was willing to look into spinning off or selling ABC and ESPN, which was an idea Iger had persistently refused. Chapek wanted to create an ESPN app where viewers had access to all sports, regardless of who owned the rights, and would have to form partnerships with other streaming services. Chapek was also successful in rebuilding relationships with Hollywood creatives. Ultimately, the board gave Chapek a short extension until July 2025, as a way to express their belief that he may still deliver results. Chapek viewed the extension as a victory, but was concerned about the possibility of Iger bringing on the pressure, now that he was not bound by any fiduciary duties. Unbeknown to Schake, Iger had been regularly talking to Chapek and the board to gauge their confidence and views on his replacement.
In the summer of 2022, Bob Iger spent his time vacationing on his yacht in the South Pacific, writing his second book, attending the funeral of his mentor Thomas Murphy, making some personal investments, and meeting with venture capital firms and tech startups for advisorship. September of the same year saw him joining the board of venture capital firm Thrive Capital, founded by Josh Kushner. Nevertheless, his heart still lay with Disney and a close friend of his labelled him as "bored out of his mind" during this period. Additionally, he talked with a number of Disney executives both past and present to get their opinion on his replacement.
During the start of 2022, Disney had the worst stock performance in the Dow Jones Industrial Average, slumping nearly 40%. This was due to Netflix's lacklustre subscriber growth, a jump in interest rates, and the ending of the pandemic. In response, Bob Iger contacted Schake, Disney's new communications head, to extend his well wishes. Schake then asked Iger to dinner, in which they both had acquaintances with former President Barack Obama and his wife.
Schake then informed both the board and Chapek, his replacement, of the dinner; something Chapek was not pleased with as Schake was meant to be his communications director. Unbeknown to Schake, Iger was already in contact with the board and Chapek, regularly getting their viewpoint on his replacement to gauge their confidence.
At the Disney board meeting prior to the fourth-quarter fiscal earnings report being released, CFO McCarthy deviated from the script and told the board that the quarter's financials were likely to be very poor. Her assessment was that the quarterly revenue would be $1 billion less than expected, with earnings per share well below the Wall Street consensus of 55 cents. She pinned this on Disney's failure to adjust their streaming strategy, and suggested layoffs to improve profitability. CEO Chapek, who had been worried that former CEO Iger was plotting a return, was relieved to find that, earlier that year, Iger had publicly dismissed such speculation as "ridiculous."
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It is essential to be punctual for every appointment or meeting.
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Arriving on time to any appointment or gathering is of utmost importance.
Chapek was caught off guard by McCarthy's responses. He was unaware that the numbers would be so far off from the projections of the Street analysts. People familiar with the matter stated that McCarthy didn't inform him she was going to bring such a blunt assessment into the meeting. Board member Mark Parker was quoted as asking "How could this happen?" Directors Safra Catz, Oracle's CEO, and Derica W. Rice, formerly president of CVS Caremark, questioned Chapek about Disney's forecasting techniques and how the respective division heads communicated their financial data. Faced with this, Chapek was unable to provide an answer and refused to blame anyone publicly. In an intimate session between Chapek and the board, he argued that if there was an issue, it was related to the bad financial governance of McCarthy. According to those familiar with the conversation, Chapek claimed that either McCarthy was not putting the figures out there or hadn't become aware of the magnitude of the losses. He shared his dismay to several of his colleagues, but did not bring it up directly with McCarthy, apart from telling her that she had unnecessarily alarmed the board, those acquainted with the situation reported. Besides, Chapek didn't think the results were as bad as McCarthy claimed them to be. He mentioned that Disney+ was still attracting 12.1 million customers during the quarter. As long as Disney+ was able to reach its goal of 215 million-245 million subscribers by the end of 2024, Chapek felt that the company was still doing well. When the company's profits and revenue had surpassed analyst predictions, the stock prices had risen by 5% in the previous quarter, which led Chapek to believe that even if the fourth quarter didn't meet expectations, it would only be a single quarter. McCarthy realized that her honesty with the board would make Chapek see that his optimistic outlook of the business was not rooted in reality. People familiar with the matter said that McCarthy had been receiving unreliable information from DMED and that the estimates were regularly modified. Before the November earnings call, the DMED and finance teams had gathered in Disney's 2022 management retreat in Orlando to create a strategy. General counsel Horacio Gutierrez told those present that it is permissible to have one's own opinion but not one's own facts. He strongly suggested and pressured McCarthy, Daniel, Schake, CFO Justin Warbrooke, head of investor relations Alexia Quadrani, Bryan Castellani, DMED's executive vice president of finance, and several others to spend most of the retreat in a conference room. They missed the amusement like getting to interact with the animals in Animal Kingdom and being able to ride new theme park attractions without waiting in queues, according to those in the know about the meetings. Chapek had eliminated the mandatory sports activity that was present in Iger's era.
Chapek only stayed for a few minutes of the initial strategy meeting, instead preferring to spend his time in activities that would help him to be more personable with employees. His recently grown beard was seen by his colleagues as a way to make him more 'human', yet a number of those in the conference room were irritated when they heard he was having fun, such as petting a hippopotamus. Schake, Quadrani, and McCarthy, whom Chapek referred to as "the mean girls" (in reference to the 2004 Lindsay Lohan movie) for their seeming banding against him, and those with negative views on Disney's prospects as Eeyores (a reference to Winnie the Pooh's gloomy donkey friend), each warned him that the reaction to the quarter could be devastating.At the West 66th Street office in New York for the earnings call, the finance team recommended Chapek to be candid about the streaming division's huge net operating losses compared to the previous year, while emphasizing the long-term focus of the company.Chapek failed to take their suggestions. McCarthy was especially angered by his lack of consideration for the business, and that instead of being sincere, Chapek spoke optimistically about the ticket sales for Disneyland's 'Oogie Boogie Bash' Halloween event. Disney's share price afterwards dropped 13%, a greater decrease than that of the general market.The aftermath was rough for Chapek, with the activist hedge fund Trian Partners, led by Nelson Peltz, investing $800 million in Disney - leading board members to dread the potential of a board seat takeover and the ousting of current directors. Additionally, board member Catz expressed her disapproval of the controversial animated movie 'Strange World', which featured an openly gay character, telling Chapek it was too divisive and not of the usual Disney standard. Catz declined to comment on the matter.
Disney executives, including Chapek, were aware they had to release the movie in order to keep the goodwill of the LGBTQ community. The movie was released on November 23, 2022, however it turned out to be a huge financial loss with a cost of $200 million. The failure of Chapek to take the warnings of his people seriously was met with discontentment amongst executives, prompting Iger to encourage them to speak to the board together. In an unorthodox manner, board members talked to top Disney executives, all of whom asserted they were no longer behind Chapek as their CEO. Those interviewed declined to comment on the situation. The board thus determined a CEO change was needed, with one likely successor already apparent.
Walden and Bergman both lived close to Iger. On 12th November, the two of them, accompanied by Iger, took a walk in the neighbourhood and informed Arnold of their worries, according to sources acquainted with the incident. Walden inquired if Iger would be open to a return and, by this stage, a few current and past Disney executives had also suggested Iger to come back. It is said that Iger responded that he would take into consideration the offer, yet did not reveal it to his wife, as per a source familiar with the incident.Not long before their planned stroll, on 19th November, Walden phoned Iger to explain that she had no intention of going on the walk at all; she had merely made the arrangement so that he would be in for a call with Arnold, who formally offered him the return. Walden declined to comment.Iger and Bay talked it through. She remarked that if the board was asking him to return, he should say yes.The following day, Disney astounded its employees and Wall Street again. The board had terminated Chapek, who was not even permitted to send a farewell email. Less than three years after his departure, Iger became the CEO of Disney again.Close to Christmas, Schake, Quadrani and McCarthy were gifted presents from a fellow worker: pink sweaters, a reference to their "mean girl" past.
Michael Eisner and Bob Iger have been two of the most celebrated CEOs in Disney's history, and there are a few remarkable resemblances between them. Neither wanted to leave the business. Both had difficulty finding someone to take the reins from them. Eisner opted not to comment for this story. After spending 21 years at the helm, Eisner was eventually unable to maintain control of the board or Disney's shareholders and the stock dropped drastically, resulting in his resignation. Iger has been leading Disney for 16 years and is currently contending with the most difficulties the company has ever seen. Linear TV advertising money is rapidly declining as cable subscription numbers fall dramatically each year. ABC has ranked last among all major broadcast networks in prime-time viewing figures for the past two years. The slump in cable is particularly severe for ESPN, which obtains most of its revenue through programming fees paid by pay TV operators. Charter Communications, the largest U.S. pay-TV company after Comcast, recently announced that it has dropped all Disney-owned broadcast and cable networks from their Spectrum service in the midst of a dispute over programming fees. Additionally, there was a dip in attendance at Walt Disney World over the summer.
In the last few months, Disney has let go of 7,000 people. This follows the company's costly acquisition of Fox in 2019, which left them with nearly $45 billion in debt — causing Disney's shares to reach their lowest point since 2014. Since Bob Iger's return as CEO in November, the S&P 500 has gone up 13%, while Disney's stocks have decreased 11%. In response to this, Iger has reversed Bob Chapek's streaming reorganization and removed Alan McCarthy from his CFO position, replacing him with Bergman and Walden to handle budget and distribution decisions. This shift, however, has not been enough to solve the company's troubles, as Bergman's presence has coincided with a string of box office failures — "The Little Mermaid," "Indiana Jones and the Dial Of Destiny," and "Haunted Mansion" — the latter of which was deemed "one of the worst starts ever" by the Hollywood Reporter.
In the quarter ended July 1, Disney's streaming division registered a loss of $512 million and the company is still intent on breaking even on streaming by 2024. The goal set back in August 2022, of attaining 215 million to 245 million Disney+ subscribers (135 million to 165 million excluding India), has not been modified. Nevertheless, one individual involved in setting the target expressed that it would be "lightning striking five times" for Disney to reach those figures. At the moment, Disney+ has 146.1 million subscribers (105.7 million excluding India), which is about 16 million fewer than the count of customers on October 1st 2022, reiterating the fact that Disney has downgraded adding streaming subscribers, especially in India, and that the growth rate has decelerated.Disney declared a 27% growth in the price of Disney+ to boost streaming profitability in August. In late July, Atlantic Equities analyst Hamilton Faber pushed back his forecast for Disney to attain break even in streaming to 2026. According to expert opinions, Disney will likely end 2024 with around 50 million fewer Disney+ subscri
Chapek's tenure as CEO saw Disney lose more than a quarter of its market value, and the pandemic certainly took its toll. Still, in Chapek's own words, he should hold himself accountable for some of his mistakes. Refusing to collaborate with Iger was a misstep, especially considering Iger had appointed all board members, crafted the modern Disney, and continually tried to quit his post. Had Chapek better managed his insecurity over his employment, he might have been able to reach a compromise with Iger.
The house was decorated with vivid hues
The house was adorned with bright colors.
Iger must accept culpability for Disney's flawed succession. He chose Chapek, but showed a lack of support for the CEO publicly and privately. People close to Iger affirm that he is aware of his responsibility in this, which is why he resumed the role of CEO. At a private session at the Allen & Co. gathering in Sun Valley, he admitted his failure to properly vet Chapek, according to those in attendance.Disney's culture of "Disney nice" prevented meaningful discourse between Iger and Chapek, and administrators who were vocally critical of others (Mayer, Rice, McCarthy) got penalized. Iger did not communicate his issues directly to Chapek, and Chapek was reluctant to venture out and explore their differences. The board also noted that in their established board meetings, discussions were not as candid as they could have been.The board of directors is obligated to ensure good succession planning, which did not happen in this case. By giving the CEO position to somebody who did not control creative (the essence of the business), it led to uncertainty in leadership and power contests. Also effecting this, Iger did not have direct meetings with the potential successor before the appointment. Now, Iger seeks to find a replacement before the end of 2026, and has begun to vet contenders. Judgment of the successor will be based on performance in areas such as: movie creation, theme park pricing, news division operations, intellectual property integration, consumer product sales, and statesmanship. Company expansion initiatives will also be measured for success and potential losses.It is unlikely that the new CEO will be someone from within Disney, as none have anywhere near the experience in all areas required for the job. There is the possibility that Iger may want to rehire Mayer and Staggs from their joint venture, Candle Media. Regardless, this would reflect Iger's realization that his earlier decision had been a misstep. Iger, however, has not sought counsel from these two in his search for a new leader.
Simplifying Disney may make it easier to select the company's next CEO. In July, Iger informed CNBC he might be open to parting with the legacy cable networks and ABC. Advisors to Iger have been motivating him to do this for over five years, as per sources aware of the issue. Offloading assets might additionally make Disney simpler to sell, the same way Rupert Murdoch sold the major part of Fox to Disney. Over a dozen present and past Disney executives said privately they think Iger's ultimate goal is to stay as the CEO as long as he can and after that, sell the company to Apple - Iger's bond to the tech giant goes back to his close relationship with co-founder Steve Jobs. Yet, it is less certain regulators would agree to such a deal - or that Apple, which has never bought any major company, would even be interested in buying Disney. Iger's contract extension in July suggests he will be Disney's CEO for years to come. Subsequently, the internal candidates will do whatever they can to make a good impression on Iger and the board. Nonetheless, it is possible they will spend almost all of their careers working, vying for influence and hoping for a job they may never get. As it has been since 2005, the magical world of Disney is focused on Iger. Everyone else is just along for the ride.
Disclosure: Comcast is the parent company of NBCUniversal, which owns CNBC.WATCH: Disney's succession mess: The inside story of Iger and Chapek
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