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Days after Bob Iger’s Feb. 25 resignation as CEO of Disney, the surprise move is still stuck in Hollywood’s craw like a piece of gristle. “I still can’t get my brain around the abruptness,” says a top executive. Having talked through the several theories floating around, he says, “None of it adds up to me.”
Veteran Wall Street analyst Hal Vogel agrees. “It was very unusual to come out with an announcement at 4 o’clock [Eastern] the day that Disney was being pounded in the market,” he says. “There were recent conference calls with quarterly earnings. You’d think there would have been a hint at least that would have eased the way through this announcement. Instead, when the market is down sharply, all of a sudden he’s resigned.”
The stock price has dropped sharply since then, which may provide hints about the reason for the hurry.
Iger, who turned 69 on Feb. 10, contended that the move was “only abrupt in other people’s eyes because we haven’t been talking about it publicly.” The Disney board was well aware of his plans, he said, and his successor, Bob Chapek, had been chosen well in advance. Analyst Rich Greenfield can see why the storied Disney leader may have been ready to make a move after a “Super Bowl year” in 2019 but he, too, has questions. “It makes all the sense in the world that Bob would have left sometime in 2020,” Greenfield says. “The only thing that nobody can explain is why it felt so rushed.”
The announcement blindsided top Disney executives, including direct-to-consumer chairman Kevin Mayer, top TV exec Peter Rice and film studio chief Alan Horn. The three only learned of the change a few short hours before the rest of the world. The impact on morale at the highest levels is unknown but seems unlikely to be good. Also worth noting: Having promoted Chapek to CEO, the company named no successor to run the theme parks. That would not seem to signal careful planning, especially with coronavirus having already caused three parks overseas to close.
The sense of haste seemed particularly out of character for Iger, who would be expected to design at least the appearance of a smooth, calm transition — “because everything Bob has done is perfect,” as a former Disney exec puts it. Iger is widely known as exceptionally image-conscious and deliberate about presentation. But when he and Chapek were interviewed together on CNBC, a couple of old Disney hands commented (in separate conversations) that the appearance seemed uncharacteristically slapped together. “Bob is always groomed to perfection. He has a very specific on-camera appearance,” says one. “That was not the Bob we saw on CNBC.”
Disney has long been one of the darlings of the corporate world but it’s also true that the waters are starting to churn and there is an argument to be made that Iger has just handed Chapek a pretty undesirable job. After a string of lauded acquisitions — Pixar, Marvel, Lucasfilm — Disney seems to be having trouble digesting the $71 billion acquisition of most of Fox. In an August earnings call, Iger blamed Fox for a $175 million third-quarter loss and said Disney was scrapping most of the film slate it had acquired. In September, he told The New York Times that Fox had problems before Disney bought it, saying, “I’m convinced that the turnaround can happen. It’s not a snap your fingers, but it’s not 10 years of lost value. It’s a year and a half.”
That year and a half — if that’s what it turns out to be — is packed with other challenges. There are questions about how Disney+ is progressing in the wake of its impressive launch in November. That’s where the company has put all its marbles, and it reported a robust 28.6 million subscribers in its recent earnings call. But building a streaming service is a daunting task. Netflix had no competitors when it started and it enjoyed lightning-in-a-bottle hits right out of the gate. In 2020, making a bet on streaming means spending big while doing without traditional revenue sources, and dealing with a lot of competition.
Disney+ hasn’t been making much noise since the last episode of The Mandalorian dropped in December, Greenfield says. Citing a lack of new, exclusive content, he adds, “I would suspect viewership, especially among young adults to adults, has fallen meaningfully over the last two months.” (That matches recent data released by the Reelgood app showing that viewers’ use of Disney+ declined in recent weeks while Netflix rose.) Greenfield says Disney will need to flip that script to justify price increases that he says are inevitable given the unsustainably low cost of a subscription at launch ($7) and the freebies for Verizon subscribers.
Despite Disney’s wealth of cartoon characters, superheroes and Jedi knights, making the streaming service a must-have could be a more daunting challenge than many might have imagined. That might explain why Iger feels a need, as he said when announcing the transition, to focus on the creative side in his new role of executive chairman. Still, none of that explains the abruptness of the change.
Maybe what tipped the scale was the unpredictable impact of coronavirus, which obviously affects film distribution, cruise ships, hotels and theme parks. Disney has already closed parks in Shanghai, Hong Kong and Tokyo, costing the company tens of millions of dollars, and in his position, Iger must have a good sense of what is coming globally. Vogel says problems at the parks in the US could be much more damaging to the bottom line as Easter approaches. “We don’t know what will happen yet,” he cautions.
But Greenfield says with three theme parks already out of commission, “we have to imagine that every employee was worried about what impact the closure of U.S. parks would have on the company’s stock price and finances — not to mention what happens if movie theaters in the US and globally have to shut down.” So, he wonders, “Did that play into Iger’s thinking in terms of timing? Was that an accelerant to his departure?”
In recent days, Disney stock has gotten pummeled along with many others. When Iger became CEO in 2005, the stock was at $27. On the day he stepped down as CEO, it was at $126. (In November, it posted its highest-ever close at $152.) At this writing, it’s below $114. Iger’s announcement may have seemed hasty but he locked in an impressive run-up in the share price on his watch. Worth noting: Iger’s lavish pay package, which already faced criticism, remains unchanged despite his resignation. Three shareholder-advisory firms plan to oppose Disney’s executive-compensation package at the annual meeting March 11.
By sticking around as executive chairman, Iger gets to do what is arguably the fun stuff — working on movies and tv shows — though he was always seen more as a brilliant manager than as a creative type. And while Iger is set to leave the company for good at the end of 2021, Greenfield suggests he could stay in that role for years — without day-to-day responsibilities — “like a CEO without the stress.”
This story first appeared in the March 11 issue of The Hollywood Reporter magazine. Click here to subscribe.
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