The Walt Disney Company has reappointed Robert Iger as CEO, effective immediately, for two years replacing Bob Chapek who took over the reins in 2020. Iger (pictured) is tasked by the board to set the strategic direction for renewed growth and to work closely with the board in developing a successor to lead the company at the completion of his term. Iger was previously CEO from 2005 to 2020 and according to the company, expanded on Disney’s legacy of storytelling with the acquisitions of Pixar, Marvel, Lucasfilm, and 21st Century Fox. He was also responsible for increasing the company’s market capitalisation fivefold during his time as CEO.
In a statement, Susan Arnold, chairman of the board, thanked Chapek for his service to Disney over his long career, including navigating the company through the unprecedented challenges of the pandemic.
The move comes rather abruptly as in June, the board extended Chapek's contract as CEO for three years, and Arnold previously explained that despite the pandemic, Disney was able to emerge in a position of strength with Chapek at the helm. "Chapek is the right leader at the right time for The Walt Disney Company, and the board has full confidence in him and his leadership team," she said then. Fast forward to today, the board concluded that as Disney embarks on an increasingly complex period of industry transformation, Iger is "uniquely situated to lead the company through this pivotal period". She added that Iger has the deep respect of Disney’s senior leadership team, most of whom he worked closely with until his departure as executive chairman 11 months ago, and he is greatly admired by Disney employees worldwide globally. Arnold remains the board's chairman.
According to CNBC, Disney shares rose 9% after news of Iger returning broke. As of last Friday, Disney's shares had dipped approximately 40% so far in 2022.
On his return, Iger said he is extremely optimistic about the future of Disney and is thrilled to return as CEO. "Disney and its incomparable brands and franchises hold a special place in the hearts of so many people around the globe—most especially in the hearts of our employees, whose dedication to this company and its mission is an inspiration," Iger added.
Just last week, Disney was reportedly planning a "targeted hiring freeze" and job cuts. Chapek said in an internal memo then that this staff reduction is part of its plan to evaluate operations and labour to find savings. Disney also underwent a "rigorous review" of its content and marketing spending together with its content teams.
“In the corporate world, sometimes we don’t appreciate how significant the contributions made by an outgoing company staff or leaders are until after they have left,” added media veteran Geoff Tan, who spent over 34 years working with SPH in Singapore in numerous leadership roles.
The Disney chairman and board of directors are accountable to shareholders for the performance of the company, and rehiring a CEO who they feel can take the company successfully into the next lap is their prerogative. Iger to date has been instrumental in the acquisition of Pixar, Marvel, Lukasfilm and 20th Century Fox all elevating Disney’s standards. The Disney+ and ESPN+ streaming services were also launched during Iger's tenure, making him one of the most dynamic CEOs the company has ever had.
Unfortunately for Chapek, the leader took over at a time when the world was locking down due to the pandemic. “Disney’s dismal performance during his watch coupled by a series of decisions Chapek made that did not go down well with both staff and the public possibly contributed to a rethink by the chairman and the board,” he added.
Adding to the view media consultant Don Anderson, CEO of Kaddadle, said Iger’s legacy as a prior “saviour” for Disney is a major driver for the move. When Iger first joined in 2005, succeeding Michael Eisner as CEO, he had to tackle commercial and content growth - which he excelled for 15 years. The growth surpassed the company’s prior period of renaissance in the 1980s and 1990s, which Eisner helmed. This helped solidify Iger's reputation and legacy – which has become a hard one to top.
“Any subsequent successor would be challenged by this, particularly after the COVID streaming video boom which for Disney has lost a big part of its lustre, given increasing losses in that domain,” said Anderson. For investors and partners, bringing back Iger is a signal that as a corporation, Disney favours a CEO who is more welcoming to new ideas and more of a peacemaker able to extinguish conflict - which Anderson explains, “is likely what tripped up Chapek given the internal protests and alienation of the LGBTQ+ community” from his response to Florida’s controversial “Don’t say gay” bill.
That, coupled with the share price being off by 40% since Chapek’s succession, along with a Q3 earnings miss, “forced the board’s hand” to go to a tried and trusted option in Iger - whose “bigger picture mindset” transformed and revitalised Disney’s corporate culture, Anderson explained.
CEOs are often rehired. So what makes Iger’s return special?
Iger’s return to Disney is by no means the first case of a CEO return. Apple brought back Steve Jobs when it was facing bankruptcy. Howard Schultz also assumed the CEO role at Starbucks on three different occasions. Meanwhile, Jack Dorsey returned to Twitter in 2015 after stepping down as CEO in 2008. But it’s worth noting that in all of the instances, the returning CEOs were the founders of their respective companies.
Iger, in that regard, is a special case, said Anderson. He is “often heralded as a strong, considerate leader who understands the creative process while clearly recognising the business imperatives, urgencies and opportunities”. This is especially at a time when the industry as it grapples with the economics of video streaming services. Moreover, his return also comes at a critical moment for Disney’s streaming service as it begins to diversify its revenue model through ad-support subscriptions.
With Iger being seen as someone always a step ahead in the media and entertainment space, the rehiring of the CEO, said Anderson, will give competitors such as Netflix and its founder Reed Hastings a further run for the video streaming money.
“He’s someone who can see the future, while empowering and motivating others around him and is less likely to get pulled into pithy political squabbles. He’s the peacemaker leader Disney desperately needs at this time,” said Anderson, adding:
Iger’s return should calm investors' nerves, but this period may be more important than his first go around as all eyes are on him to turn the business around.
From the marketing perspective, with a CEO such as Iger, marketers and partners know that the brand is in the right hands, and that the content slate will return to its pre-COVID robustness.
"Either way, Hollywood always loves a comeback story, although this one has two years to play out. The Disney board is still tasked with the unenviable job of finding someone who can walk in Iger’s big shoes. They may need to call in the Avengers to solve that one," he added.
Iger's return to the company comes at a time when the dominant user gains at Disney+ are juxtaposed with significant financial losses, Forrester VP and research director, Mike Proulx, said. He added that amidst an incredibly competitive streaming market for users’ attention and dollars, Iger’s top challenge will be to increase subscriber value without breaking the bank and compromising content quality. "That’s a tall order even for a seasoned and proven pro at the helm," he added.
Who is Chapek?
Chapek started his career with Disney in 1993 as marketing director and rose up the ranks to take on roles including president of Disney Consumer Products and chairman of Walt Disney Parks and Resorts. During his time as Disney's CEO, Chapek had to steer the company through tumultuous waters. Most recently, the company posted revenue of US$20.15 billion for the fourth quarter of its 2022 financial year, slightly lower than the US$21.24 billion expected, according to Refinitiv.
Disney+ subscriptions, on the other hand, surpassed expectations and brought the total subscriber base to 164.2 million, which was higher than analysts' estimate of 160.45 million. Meanwhile, Hulu had 47.2 million paid subscribers while ESPN+ had 24.3 million.
Nonetheless, Disney's losses in the streaming division grew to US$1.47 billion during the quarter and according to CNBC, this was more than double the loss from a year ago. Disney attributed this to the lack of "premier access" content or theatricallly released films. Chapek said during the Q4 2022 earnings that it expects DTC operating losses to narrow moving forward and that Disney+ will still achieve profitability in fiscal 2024.
According to The Wall Street Journal, there had been growing discontent among investors and top executives at Disney, including CFO Christine McCarthy, over Chapek's leadership in recent weeks. In fact, Disney executives and investors reportedly complained "for months" to Iger about the direction that Chapek was steering Disney towards, WSJ added quoting its source. These individuals were advised by Iger to raise their concerns to the board.
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