Let’s Evaluate Bob Iger’s First Year Back at Disney
A year ago today, the seemingly impossible happened.
In a matter of hours, Bob Chapek watched himself go from announcing an Elton John concert live on Disney+ to being forcibly unemployed.
The Walt Disney Company’s Board of Directors terminated Chapek, only months after handing him a contract extension.
Chapek’s successor was also his mentor and predecessor, Bob Iger.
The chaotic events of that night provided the perfect capstone to Disney’s pandemic-era chaos. Sadly, the tumult hasn’t stopped since then.
Let’s evaluate Bob Iger’s first year back at Disney.
The Hand We’re Dealt
If you watched the most recent season of Loki, you know about the character Ouroboros as well as the meaning of that name.
Throughout history, philosophers have used the metaphor of a snake eating its own tail to signify confusion over where something starts and ends.
At Disney, this chicken and the egg/ouroboros debate circles back to Iger and Chapek, two Disney executives who worked together for many years.
This duo plotted the future of Disney right up until Iger announced his replacement, and Disney’s Board promoted Chapek.
Later, Iger became the once and future king of Disney as he reclaimed his throne, ostensibly to clean up Chapek’s mess.
Therein lies the underlying debate about Disney’s struggles over the past few years. Who has earned most of the blame?
The timing of the pandemic in early 2020 muddies the debate, as Iger seemingly rewarded Chapek with the job of a lifetime, Disney CEO.
Conspiracists wondered whether Iger had sneakily thrown Chapek under the bus.
Even those critics who dislike Bob Chapek the most would acknowledge that Iger and/or the pandemic dealt the CEO a terrible hand.
Similarly, when we debate Iger’s big comeback as (theoretically) the returning hero, we must admit that Chapek left the house in worse shape than he found it.
Ultimately, Iger led Disney from 2005 through early 2020 and remained as Executive Chairman until New Year’s Eve 2021. It’s his house.
Let’s keep that in mind as we discuss how Iger has performed during his return engagement.
Miscellany I – The Florida Feud
I’ll start with the topics that are most challenging to categorize but have impacted Disney as much as anything else we’ll discuss.
For example, Bob Iger inherited the Florida Feud from Bob Chapek, who absolutely botched his response to the Don’t Say Gay bill.
At first, Chapek tried to sit in the middle on a topic with zero common ground. Then, once his employees revolted, Chapek overcorrected.
In the process, Chapek tried to smack around Florida Governor Ron DeSantis, someone who didn’t fear him at all.
DeSantis calculated a way to score significant political points and catapult himself onto the national stage at Disney’s expense.
While that move hasn’t worked out well for DeSantis, it has proven even more irritating to Disney.
These machinations exemplify Iger’s business acumen. Unfortunately, in the short term, political cronies with zero theme park experience run Disney’s land.
That reality tempers any credit I’m inclined to give Iger for making the absolute best out of an unwinnable situation.
Ultimately, a court will determine Disney’s fate here.
Miscellany II – Wall Street Wars and Woes
Similarly, Iger thwarted an aggressive attempt by activist investor Nelson Peltz to push himself onto Disney’s Board of Directors. For a time.
Disney’s flagging stock price currently resides at almost exactly the same level as it was last November when the Board overthrew Chapek.
On that date, Disney stock held a value of $91.80. You can compare that with the current price, but it’s probably close.
The point is that Disney has spun its wheels in place for a calendar year.
Iger shouldn’t take all the blame here, as his assignment was the equivalent of asking a cruise ship to make a U-turn.
Still, some of the causes for Disney’s stagnant stock prices are directly connected to Iger’s leadership and decision-making.
For example, Iger sat on a council of media corporations who could have headed off the Hollywood strikes at the pass.
Instead, this group nonchalantly allowed the writers and, later, the actors to strike, presuming that one of the groups would fold.
Historically, Hollywood power players have claimed a strong track record in breaking unions. The opposite happened this time.
Media conglomerates eventually ceded to most demands that writers and actors made.
This resolution led to the unlikely outcome that if Iger and his fellow moguls had worked a deal before the strikes, they probably would have gotten a better deal. Oops.
The result of this greed was that Disney not only stopped making movies and television series but also couldn’t use stars to promote them.
Iger blew this one badly. Not coincidentally, the company’s stock kept absorbing hits, which has led to the return of – you guessed it! – Nelson Peltz.
We haven’t even entered 2024 yet, but it’s already feeling like a Groundhog Day repeat of 2023.
What I just said about the strike matters greatly with two films we’re about to discuss.
If you had asked me a year ago whether star promotion dramatically impacted the box office, I would have scoffed. And I would have been an idiot for that.
As we’ve learned over the past five months, Hollywood titles typically collapse on opening weekend when they lack star promotion.
Disney did what it could to mitigate the damage with its first post-strike release, Haunted Mansion.
Executives asked the cast to film a day at Disneyland’s Haunted Mansion…and it was delightful!
Alas, by the time the film opened two weeks later, people had forgotten.
Haunted Mansion disappointed at the box office, but somehow the worst was to come.
I’m still evaluating the damage on The Marvels, but here’s what I’ll say with confidence.
Ant-Man and the Wasp: Quantumania probably wound up slightly profitable, depending on how the tax breaks worked.
Similarly, while The Little Mermaid and Elemental started slower than expected, the quality of both eventually led to solid box office performances.
Those modest winners are nearly the highlights of Disney’s movie year, with Indiana Jones 5 the lowlight.
Yes, the studio claimed one unqualified success with Guardians of the Galaxy Vol. 3, but the overall studio performance is shockingly grim.
Most people haven’t even discussed pricey disappointments like The Creator and A Haunting in Venice because they didn’t notice the titles.
Disney calculatedly decided to lower its advertising spin on movies since it lacked stars to promote them.
The result has been a hugely disappointing 2023. However, 2024 will be much worse because Disney will lack high-profile titles due to the strike.
Also, Iger’s Disney job after he stopped being CEO was to run creative. So, this is all on him.
This one was Chapek’s baby during his tenure. The former CEO recognized that the most powerful corporations on this planet are all digital.
So, Disney reorganized with a focus on being a digital company.
That happened a while ago, and I don’t think Iger has ever clarified whether it’s still true.
Chapek went all-in on streaming, only to watch in growing horror as Wall Street moved the goalposts as the pandemic waned.
Seemingly overnight, investors preferred companies to turn a profit on streaming rather than to entice massive numbers of subscribers.
By that point, Chapek had already committed tens of billions to turning Disney into a streaming media empire.
When Chapek reported Direct-to-Consumer (DtC) losses of nearly $1.5 billion in a single quarter, Wall Street turned on him, as did Disney’s Board.
That earnings call was the last one of Chapek’s Disney career. Not coincidentally, when Iger returned, he emphasized one change.
Iger would find the requisite financial balance to enable DtC to turn a profit by the end of fiscal 2024. That’s a deadline of next October.
How likely is Disney to achieve that goal? The answer depends on who you ask.
However, I can point to steady growth in the division in terms of quarterly earnings.
Similarly, Iger has reduced costs at a steady rate. After 12 months back on the job, he had cut DtC’s losses by $1 billion, which sounds great.
Alas, Disney is still losing $400 million per quarter on DtC. Also, with the strike over, the company will spend more on content, the hidden factor here.
Overall, I think Iger has performed admirably with Disney’s streaming content, but he still faces overriding questions, such as the future of ESPN.
Speaking of ESPN, here’s where Iger faces an absolute mess.
At some point during the next two years, Disney will give up the ghost with linear television, at least when it comes to live sports on ESPN.
At that point, the Flagship project will take ESPN over the top as a fully digital service.
In other words, ESPN will switch from being primarily a cable channel to mainly a streaming service.
Yes, ESPN+ already exists, but it’s a supplement, an appetizer instead of an entrée.
Right now, Iger is plotting a trajectory with some staggering pitfalls.
Disney just revealed that ESPN earned more than $16 billion in revenue in fiscal 2022.
During the most recent quarter, ESPN claimed $3.9 billion in revenue. And the catch with both totals is that nearly half of it comes from carriage fees.
That’s the money that cable companies pay ESPN to use ESPN. Disney will lose a lot of that revenue when the service switches to digital.
Chapek’s forte was never sports, nor did he particularly understand the nuance of licensing sports rights.
Some of the deals Chapek made and failed to make have hurt Iger’s cause.
Now, Disney’s current leader must pick up the pieces and find a path to profitability.
Iger has tried to entice outside parties to purchase a part of ESPN to mitigate costs, but those plans have yet to bear fruit.
Meanwhile, Iger has hinted that he’ll sell some cable channels and possibly even ABC.
Also, word leaked that Disney was deep in negotiations to sell Star India, whose value has dropped about 60 percent since Disney bought it in 2019.
Chapek left a mess for Iger, but Disney’s current CEO hasn’t grabbed a mop and broom as quickly as I’d have liked.
10/10. No notes.
I realize you’d probably like a deep dive into the numbers, but I’m working on something more expansive along those lines for a later piece.
Instead, let’s focus on the core tenets here. Chapek raised prices too often.
Iger bristled about this point while outside the company. Once he returned, he grudgingly accepted that some of them were necessary for the bottom line.
Still, Iger has practiced what he preached by unearthing several theme park changes that benefit you and me on the ground level.
Park Passes are (mostly) going away, annual passes are back, and Park Hopping and the Disney Dining Plan will return in eight weeks.
Iger has also promised another Disney Decade of park expansion. While talk is cheap, he did file the paperwork with the government, so it’s really happening.
In short, all’s right with Disney’s theme park empire.
While Iger hasn’t heroically swept in to save the day like Mickey Mouse would, he’s aced the park test.
In the other categories, he generally grades somewhere between “needs improvement” and “see me after class.”
I’ll always have a soft spot in my heart for the way he torpedoed Nelson Peltz, Ike Perlmutter, and Ron DeSantis in the same week, though.
That was some Game of Thrones stuff right there.
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Feature Photo: (Charley Gallay / Getty Images for Disney)