At this point, bad news for Disney CEO Bob Chapek is so normal that no one expects him to get any good news. It was only last week that I told to someone I know that there’s a chance Disney might try to replace Chapek. Much to my lack of surprise, an article dropped this week that media executives believed that failed Presidential candidate (and former Disney CEO) Bob Iger might be brought back to replace Bob Chapek. So, not wanting to be disbelieved that I predicted Chapek’s potential fall, I thought I'd give my analysis on reasons why Chapek might be removed, the motivations for the people making the decision, the strengths and weaknesses of Iger as an alternative, and the likely impact on the company regardless of what happens.
It’s no secret Bob Chapek is extremely unpopular as CEO of the company with fans amid growing complaints about leadership. It takes about two seconds to find negative press and never-ending complaints about his decisions and events going on at Disney, especially in the parks with the decision to make fastpasses a paid service through the Genie+/Lightning Lane controversy and the terrible rollout of the Star Wars hotel fiasco. It’s not just fans though as negative press has been following him from official Hollywood news services trying to cast him in a negative light, from the controversy over contract negotiations with Scarlet Johansson to the long awaited industry backlash over the company’s handling of Star Wars. So from Disney’s customers to industry insiders, every walk of the entertainment machine seems to want a piece of him.
This isn’t just going unnoticed as actions by Chapek seem to suggest that this is starting to weigh heavily on him. The man has been avoiding press events that would give increased chances to take questions or face fan backlash over decisions at the parks. Likewise, there were reports that he’s extremely upset about his reputation as a “beancounter” so he’s definitely aware of his bad reputation. It’s not surprising therefore that there are rumors that he might be removed as CEO.
However, though the growing problems with Chapek are superficially easy to find, people may not understand those likely aren’t important to Disney investors. Firstly, that would be because he’s managed to mostly weather the controversies without massive hits to the company structure. The Scarlett Johansson lawsuit was settled out of court with Marvel head Kevin Feige claiming Chapek had been underestimated after initial reports of feuding, managed to get positive early reviews for the Genie+ system, and most importantly has been able to get most of proposals instituted such as increased control over creatives to distribution and managing to get price increases. Overall, he is still getting what he wants which means he has a lot of power.
Secondly, he has the full support of the board for those decisions. Reports confirm that decisions under Chapek such as prioritizing streaming were being pushed for by board members. In fact, reporter Kamran Pasha argued that what was doing may have been on behalf of Iger’s successor as Chairman, Susan Arnold, so it may be that Chapek is actually making policies based on what the board wants as opposed to acting independently. It’s therefore unlikely they’re going to fire him if they are getting what they want.
It’s important to remember that as a company, Disney needs a lot of money to stay afloat and Chapek’s decisions are intended to make Disney more profitable. Most of the decisions come at a time when Disney has been bleeding cash and needs to get itself back on track for that reason. As a result, most of Chapek’s financial decisions have made sense purely from a business standpoint and that would make sense as to why it appeals to investors and board members, who are the main point of power Chapek has to worry about.
People may not understand this, but Disney has been taking on massive amounts of debt and doing massive spending sprees in the last decade. Obviously, the pandemic hit them hard and the had to take on massive loans and face heavy layoffs to stay around. Making up for that has to be a priority, especially now that the lockdowns are ending and Disney has opportunities to make money at the parks and the box office.
Nevertheless, issues with spending were also a huge problem when Bob Iger was still CEO that will need to be accounted for in the future. Under his leadership, they spent money like drunken sailors with the company over spending on purchases for Star Wars and Fox. They even bought two new cruise ships right before the pandemic hit, meaning those went unused. Keeping in mind he actually said there was no money in video games right before it was revealed the company was considering buying Activision (and dodged a bullet by not doing so), it seems he had one heck of a spending problem.
Likewise, there were other issues with Iger as well, such as his global initiative. While that had some success in Africa and especially Latin America, neither was really the company’s focus as he was instead interested in China. From making films primarily for the country to shooting a movie in the Xinjiang region with Chinese concentration camps (and thanking the people running it in the credits), Iger made a priority to expand Disney’s global influence and like most of Hollywood thought the future for global trade was the country with the world’s largest population. Unfortunately, the business community is pushing to leave China amid souring ties between the US and China with Bob Chapek signaling similar intent, to the point that it was rumored he was considering selling Disneyland Hong Kong and Shanghai, so this only further implies Chapek was picked to undo Iger’s legacy.
This sets the stage then for the idea that the Disney board has no intention of bringing back Iger and will probably keep Chapek in the short term. It was rumored that Iger was actually forced out by the board and Chapek was their replacement for him despite not being ready for the job (rumors not helped by the joint interview they did). So since they are supporting his decisions and may have wanted his predecessor gone, it seems unlikely they’d want him back after pushing him out and taking the company in a radically different direction.
For those unaware, this is a product of an existing corporate war between established Hollywood and there growing replacements. Historically, those heads of Hollywood have run in a different direction than corporate Wall Street. Recent mergers have put a lot of traditional Hollywood companies under the control of organizations that haven’t been part of their club and that’s changing their model, industry, and organization in ways that will have lasting implications and likely ruin the power of established Hollywood elites.
In recent years, celebrity culture has been on the decline with people getting increasingly sick of decades of scandals, entitled celebrities, and recent pushes for activism, as reflected in declines in viewership for the Oscars, movie theaters and comic book stores closing, and failure in new marketing campaigns to gain traction. Historically, Hollywood has prioritized good press over making money (to the point that Marvel comics restructured its stories around a comic book series that was well reviewed but financially unprofitable), and that has resulted in repeated financial loses for the industry (such as declining return on investment at the box office, Disney Star Wars films making less than the prequels when adjusted for inflation, toy sale declines, and multiple projects being announced and canceled which implies corporate infighting). Since a business must be profit first and Hollywood isn’t, inevitably their models must be changed and since they have refused to do that, it’s inevitable they’ll be amalgamated like every other failed industry or company that became outdated.
Keep in mind, Iger allowed company heads like Lucasfilm President Kathleen Kennedy and Marvel President Kevin Feige to have limitless power and multi-year contracts. As a result, he was well liked by the heads of Hollywood as he gave them what they wanted, even when it was causing fan backlash. With Chapek in the seat, the focus has been primarily on profit which Hollywood doesn’t want as that could come at the cost of their power and prestige. It seems unlikely to change though and this will likely be the future of the industry as several other companies in the industry like Warner Brothers are facing mergers and the next chairman of Disney, Susan Arnold, used to work for the Carlyle Group, one of the largest investing firms on Wall Street whose CEO was recently elected Governor of Virginia, so it suggests the new model is here to stay as profit motivation takes over the industry. Since the old guard in Hollywood is losing power, it’s likely they’ll keep fighting to maintain their power, but they are going out of style and there’s no reason to believe the profit driven focus of the new entertainment industry will be here to stay.
All the same, though the chances of Iger returning are limited and it’s unlikely Chapek’s changes will be undone, that doesn’t mean his position is safe. Since Chapek’s entire career is about profit as opposed to press, it means he has to start making money for the company to justify his presence. There are issues with his rollout the company is facing.
Issues that Chapek is facing include stagnant subscriptions to Disney+. Disney was prioritizing that as its future last year and it still wasn’t projected to start making money until 2022 so that will need to make back a decent amount for Disney’s bottom line. Since subscriptions have stagnated, that will be a point of concern for his longterm success.
Likewise, other ideas he’s now rolling out need to be successful and we won’t have the financial data for a while. There are already cancellations for the overly expensive Star Wars hotel Disney is rolling out and the Genie+ system in the Disney parks is extremely unpopular with Disney fans. In addition, Chapek did see failures as head of Disney Parks such as the magic band system that did not make nearly the money expected, and the underperformance of Galaxy’s Edge in part because he repeatedly slashed the addition’s budget, including cancelling a third ride and live shows that were later added to the Star Wars hotel. We tragically won’t know how successful his reforms will be, but it could be a while before he sees the data the board and investors want and that could spell doom for his tenure.
There have been rumors he was picked as a scapegoat when the debt Iger put the company in finally hit the fan so that may be Chapek's legacy more than anything else. He is doing what the board wants at this time (and may even be ordering him to) but Hollywood for now still thrives on press. Removing him and replacing him with someone else could potentially be a way to rebuild some burnt bridges with fans and the old guard of Hollywood.
However, it’s unlikely his removal would change anything. If these are the actual policies of the board and have their complete support, then it’s unlikely his replacement will rock the boat significantly and will probably keep everything Chapek has done in place (provided it was profitable). There may be some minor changes to give the impression of reform, but it will never be significant enough to overhaul the new system of business in any way and won’t be more than enough to reduce negative press. As a result, the best time to get rid of Chapek would actually be after he’s instituted all desired reforms the board wants, and then replace him with someone who’s essentially the same but won’t have any baggage. This will keep everything in order as it is while superficially winning back potential customers and the old guard of Hollywood.
As for Iger, it’s unlikely he’d be their first pick unless there was no one else (as is what kept Kathleen Kennedy’s job alive for so long). It’s possible he comes back, but with significantly reduced authority with most power being held by the company chairman. Keep in mind, Iger was Chairman and CEO as of 2012 so just bringing him back as CEO won’t fully restore him to power unless Susan Arnold leaves. As a result, he may be brought back purely as a figurehead for superficial “remember the glory days” nostalgia bait while the company is run differently. As a result, this establishes the idea that new Chapek Disney is here to stay.
Of course, this is all dependent on Chapek’s reforms failing and Disney not getting the money/success it wants in the way/time it wants. If things work out, the rattling of angry journalists who are losing power won’t mean anything. If they don’t, they will instead likely find a way to keep what’s happening now stay the way it is in the future regardless of one man’s dream. Regardless, it is unlikely there is any reason to remove Chapek so he’ll likely be staying around for a while and if he isn’t, there’s no reason to believe his removal will be a major change.
