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On Aug. 23, thousands of Disney’s most faithful fans will trek to D23 Expo in Anaheim, where they’ll be treated to sneak peeks of the new live-action Lady and the Tramp as well as Star Wars series The Mandalorian and a High School Musical reboot, all of which are headed for Disney+, the streaming service set to launch Nov. 12. They’ll also hear from CEO Bob Iger, and, unknowingly, they might be given a shot at mingling with Iger’s eventual successor.
Some observers now believe the inside track may belong to Kevin Mayer, chairman of direct-to-consumer and international who is expected to appear at the convention to showcase Disney+. That Iger has called the upcoming streamer the “most important product” to launch since he became CEO in 2005 speaks volumes about the stakes for Mayer, 57, and how the performance of Disney+ could influence who takes over when Iger retires at the end of 2021.
With global content and advertising sales in his purview, “Kevin is controlling well over 50 percent of the company’s revenue,” notes Neal Lenarsky of STI Management, an executive search firm for media. “Running the direct-to-consumer puts him right in the bull’s-eye of Disney’s strategic future.”
But Disney has been down this road before. Iger, 68, has changed his mind multiple times about retirement, citing big initiatives he needs to see through before leaving, the latest being the partial merger with 21st Century Fox, which closed March 20. Not only might Iger extend his run again, but the succession bake-off also could change dramatically, as it did when former CFO-COO Thomas Staggs — once positioned as the primary contender — left the company in 2016.
Certainly Iger will leave big shoes to fill, given that his tenure has included bold moves like the acquisitions of Pixar, Marvel, Lucasfilm and most of Rupert Murdoch’s Fox assets, not to mention that shares of Disney have risen 490 percent, compared with 135 percent for the S&P 500, during his reign. But Iger himself filled the shoes of Michael Eisner, who, in two decades as CEO helped Disney shares surge 2,300 percent, also more than three times the S&P 500’s gain.
“Iger is a giant who has only grown in stature with the Fox deal and all-in strategic shift to streaming,” says analyst Steven Birenberg, founder of Northlake Capital Management. “How well Disney+ is doing next year … will have an impact.”
“Mayer is a fascinating choice,” adds analyst Jimmy Schaeffler of the Carmel Group. “The combination of two decades at Disney together with stints at Playboy, Clear Channel and the research firm L.E.K. Consulting, and the résumé works some subtle magic. The real question is: can his character and personality walk figuratively, and literally, in the footsteps of Walt Elias Disney and Robert A. Iger?”
Many industry insiders see the race to replace Iger as still a wide-open competition. “There is no one who obviously comes to mind as a successor,” notes Birenberg. “Iger will be difficult to replace,” adds Ben Weiss, chief investment officer of 8th & Jackson Capital Management. “He had vision and wasn’t afraid to bet big” and has “the respect of both the creative and the financial community.”
Having been president of ABC Television and COO of Capital Cities/ABC, joining Disney when it purchased that entity in 1996, Iger comes from the TV side of the business, which some suggest gives Jimmy Pitaro and Peter Rice a leg up. Iger thinks highly of the latter; he made Rice, 53, chairman of Walt Disney Television and co-chair of Disney Media Networks after Rice joined the company by way of the Fox purchase, where he was instrumental in doubling the revenue of Fox Networks Group and oversaw big-ticket sports rights deals.
As for Pitaro, he was asked to prove his mettle when in 2018 he was made not only co-chair of Disney Media Networks but also president of ESPN, which one insider called “the toughest job in television,” given that the leader in sports media has lost about 15 million subscribers in eight years due to cord-cutting. If he can right that ship — which Disney is trying to do partly through streamer ESPN+, now at 2.4 million subscribers — he may prove he can run all of Disney.
Bob Chapek, who in 2015 replaced Staggs as chairman of parks, experiences and products, also is a contender. Guggenheim Securities projects that parks and resorts alone will generate $7.4 billion in adjusted operating income in fiscal 2020, more than cable networks, broadcast TV or studio entertainment.
Mayer, meanwhile, has a steep hill to climb in order to make Disney+ a hit. Analyst Richard Greenfield of BTIG estimates Disney will sacrifice $500 million annually by saving content for Disney+ rather than licensing it to the highest bidder. And Disney’s direct-to-consumer segment will lose about $900 million in the current quarter as it ramps up its new streamer, which the conglomerate hopes will attract 30 million subs by 2024.
In replacing Iger, STI Management’s Lenarsky figures that Mayer, Rice and Chapek are the lead contenders and notes: “A critical part of successfully leading will be to keep and nurture talent that’s in place, and Kevin seems poised to do that.”
But the Disney board — and shareholders — hope that Decision Day is (again) put off a few more years, says Schaeffler. To avoid a “tragic transition,” the board is hoping for three things: “Bob extend his stay; immediately fashion a successful identification of his heir apparent; and be given a timeframe to have the successor learn directly from Bob himself.”
Aug. 21, 9:55 am PST. Corrected to note Guggenheim Securities projects that parks and resorts alone will generate $7.4 billion in adjusted operating income.
A version of this story appeared in the Aug. 21 issue of The Hollywood Reporter magazine. To receive the magazine, click here to subscribe.
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