• The Hollywood Reporter on LinkedIn
  • Follow THR on Pinterest

What Rich Ross' Exit Means for Disney and CEO Bob Iger (Analysis)

Bob Iger
Scott Olson/Getty Images

A $200 million "John Carter" write-down and unhappy top talent at Pixar and Marvel spurred the move. Plus: The town speculates on who will be tapped to replace Ross.

This story originally appeared in the May 4 issue of The Hollywood Reporter.

Surely Disney CEO Robert Iger could not have wanted to swing the ax quite yet. His pick to run the company’s film studio, Rich Ross, had only been in the chair since October 2009. Forcing him out would be a blunt admission of failure and would require Iger to find a more promising replacement. Given Iger’s plan to leave the CEO job in March 2015, many rivals have assumed that he is simply marking time and hoping to avoid headaches. “He’s got two more years and he’s done,” said a top film exec at a rival studio just days before news of Ross’ exit April 20. “He’s kind of checked out.”

PHOTOS: 9 Highest Paid Entertainment CEOs

That perception is consistent with Hollywood’s narrative about Iger: that he’s a television guy who dislikes the movie business and expressed that disdain by hiring an inexperienced executive who drove out veterans including studio president Mark Zoradi and casting chief Marcia Ross and replaced them with outsiders, notably the now-fired marketing chief MT Carney, and that Iger, 61, is looking to run for political office and simply hopes to exit Disney with his reputation as a leading CEO intact.

But the Ross debacle comes at an awkward time for Iger both inside and outside Disney. Sources say there have been insistent complaints from two internal players: Pixar’s John Lasseter and the demanding Marvel Entertainment chief executive Ike Perlmutter. Despite Iger’s backing, Ross became increasingly marginalized. He was slow to put material into the pipeline and all but absent from the fall negotiation to lower the budget on Johnny Depp’s The Lone Ranger, the only Disney film now shooting. Those negotiations were handled by Iger and studio president Alan Bergman.

Ross’ poor performance could shake confidence in Iger when other issues are swirling around him as well. Iger raised hackles in October by announcing plans to retire as CEO several years in advance and to take both the chairman and CEO titles in the interim. (Corporate governance groups believe the jobs should be kept separate.) Some large shareholders opposed the move at the company’s March annual meeting, where there also were remonstrances against Iger’s pay, which had risen to $31.4 million for 2011. Iger and the other board nominees were easily elected, but the company’s pay plan attracted 57 percent of the vote, down from 77 percent the previous year.

Then John Carter landed with a thud March 9. To some, it seemed obvious that Iger would be forced to make a change given the resulting $200 million write-down. But now that he has acted, some analysts are not satisfied.

“We don’t feel that it taints Iger’s legacy, at least not yet,” says Stifel Nicolaus analyst Drew Crum. “But let’s see who is picked to fill the position. After the flops for the studio, he needs to get this one right.”

More ominous was a comment that Needham & Co. analyst Laura Martin made to the Los Angeles Times: “There are real problems in Disney’s core content business — Disney Studios and ABC — that are both troubled, and Iger hasn’t fixed them,” she said. “If Iger loses another $200 million, his job could be on the line.”

But Iger can boast that Disney’s successful cable networks and parks are far more important to the company than the studio, which is part of a unit that brought in revenue of $6.4 billion in the last fiscal year, just 15.5 percent of the conglomerate’s $40.9 billion total. “A mistake in leadership at the cable networks or parks would be devastating,” says Sanford Bernstein analyst Todd Juenger. “A mistake at the theatrical studio is not as big a deal. Nobody invests in Disney because of the studio.”

PHOTOS: Oscars 2012: Executives Red Carpet Arrivals

Still, movies generate fresh intellectual property that drives the Disney machine. Iger made sure he had that at least partly covered by acquiring Pixar in 2006 (for $7.4 billion) and Marvel in 2009 ($4 billion). But those deals brought two influential men into Iger’s orbit who are said to have rejected Ross. Lasseter and Perlmutter are said to have become concerned about the lack of experience at the studio. Lasseter in particular reportedly was incensed at the perception that Ross was blaming director Andrew Stanton — part of the Pixar brain trust — for the John Carter failure.

Perlmutter, whose Avengers is poised for a huge opening May 4, seems to have few grounds for complaint. But the eccentric septuagenarian is so involved in detail that he once complained that journalists at a junket were allowed two sodas instead of one. This month, a source says Disney ran out of food at an Avengers junket because of budget constraints imposed by Perlmutter, causing reporters to seek sustenance at Universal’s nearby suite for The Five-Year Engagement.

Clearly, Iger reached a tipping point with Ross. But his exit hardly solves the studio’s problems. Disney has two films with budgets well beyond $200 million for 2013: Lone Ranger and Oz: The Great and Powerful. If either (or both) leads to a significant write-down, Ross might be blamed, but some may decide the buck really stops with Iger.