Will Bob Chapek be Replaced?

  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.

Do Democrats Still Care About Unions?

        Unsurprisingly, unions played a role in the victory of President of Joe Biden.  In addition to receiving many union endorsements, union households voted over 60% in the swing states of Wisconsin and Michigan.  Likewise, it was revealed by a Time article that union collaboration with big business played a part in making sure their members supported Biden’s election.  In spite of this, some of Biden's first actions as president eliminated union jobs.

        In the first week of his Presidency, Joe Biden killed the Keystone XL Pipeline which destroyed 11,000 jobs, 8,000 of which would have gone to union workers.  This unsurprisingly got condemnation from unions such as LUINA, the Pipe Fitters, and the AFL-CIO.  Of course, Biden and Transportation Secretary Pete Buttigieg assured green jobs (that do not yet and may not exist) will replace those jobs, but since large portions of green tech are made in China, this could likely increase jobs instead for non-unionized foreign labor than American unions.

        This is hardly the only evidence though that the Biden administration might be turning on unions.  Plenty of his current policy positions have come out against union interests.  Further evidence suggests the Democratic Party may no longer be interested in union support.

        Other Biden policies include increased support for trade deals that will send jobs overseas such as the TPP and the promise to destroy the oil and gas industry (while telling those displaced to learn to code).  Meanwhile, though he has promised to raise the minimum wage to $15/hour, that remains stalled in the senate.  It seems unlikely he will carry much for unions with his future policies.

        This is likely a sign that union power in the Democratic party is waning.  After all, union membership has decreased 10% in the last 40 years so that may be heralding a reduction in interest for them from workers.  If unions do not carry as much power over labor, the Democratic party may be looking for other forms of support.

        Still, it’s no surprise as most of his financial support came from Wall Street which may suggest Biden’s more interested in them.  After all, he received $74 million in Wall Street donations.  Also, Biden has been hiring people from tech companies who usually oppose unionization.  With increased Democratic support coming from cities, it’s likely that their policy may reflect coastal elites more than working class Main Street.

        This then brings up the question: would unions be winnable for Republicans?  After all, the Dems are becoming increasingly hostile towards traditionally unionized fields like the energy industry and manufacturing as they increasingly become the party of the wealthy.  This may mean labor may be leaving the party of the donkey.

        However, there are many issues stopping the Republican Party from benefiting from labor support.  First of all, union leadership continues to benefit from Dem leadership.  While laborers may lose jobs, national leadership may not be concerned if the Dems keeping benefiting them specifically.

        This may actually mean a coming reckoning between labor and union leadership.  After all, some unions were reporting majority Trump support despite leadership opposition.  It should come as no surprise then that a majority of union members support voluntary dues laws like right-to-work as they don’t want funds to go to leadership that does not support them.  So this may be a bad sign for union bosses.

        All the same, a second issue may be Republican opposition in the past.  After all, many have taken stances unions have disliked in the past, such as Nikki Haley intervening in the Boeing labor dispute when she was governor or South Carolina.  So some may be untrusting of the party.

        Still, with dwindling numbers, changes in party structure, and a transitioning economy, union members may feel a need to start adapting to the times.  Those members still have families to feed, work to do, and long term threats to those things.  A change in political direction could be in the wind.

Addendum:  Of note, the Biden administration is making overtures towards teachers’ unions, especially by supporting not opening schools despite approval from the CDC.  Public sector and private sector unions tend to function with different sets of interests and rules so they have different interests.  So while private sector unions may be open to change, public sector unions will likely stick behind the President.

Someone Wants Xi Gone

  Recently, the think tank the Atlantic Council published “The Longer Telegram,” a report by an anonymous “former senior government official.”  In it, the author recommended that the United States pressure China to remove Chairman Xi Jinping in favor of a more “moderate” leader sympathetic to US interests while keeping the Chinese Communist Party (CCP) in charge.  Unsurprisingly, the article was a near sighted policy suggestion that would be at best hard to implement and at worst greatly make the United States’s problems with China worse.  However, a worthwhile question to ask might be “Who gains from doing this?”

        Now, there are ample reasons why people would want to remove Xi from office.  He’s actively engaging in genocide against a minority population, mishandled a viral outbreak that became an international pandemic and covered it up, has overseen a mass crackdown on dissent, manipulated the countries currency, used accumulation of other countries’ debts to manipulate their policies (to preclude naval expansion), etc, etc, etc.  There may be a shorter list of things Chairman Xi hasn’t done.

        However, this is hardly new for China.  Never forget, censorship existed well before Xi became Chairman, massacring political rivals has happened before, and questionable economic practices are usually the norm.  So why would anyone think someone else from the party that continuously produces despots would be any better?

        Well, we could find out the bias of the paper by looking at the background of the author.  However, since it is an “anonymous” source, it is impossible to independently verify who used the info.  Also, as proven during the Trump administration, it is impossible to even prove independent sources are credible.  Therefore, we cannot use the author or their alleged background as evidence of anything.

        Instead, those funding the Atlantic Council may give us an insight into who is supporting the idea.  After all, those who give money to it likely do so because they support the institution.  However, if we do take a look at their donor list, we begin to see a lot of businesses that have financial ties to China.  This may imply that these companies may be supporting this for self-interested purposes.

        Some of the financial firms that have donated to the Atlantic Council include Goldman Sachs & Co., the JP Morgan Chase Foundation, the Mubadala Investment Co., and BP, among others (like Burisma).  Goldman Sachs is trying to buyout its Chinese partner, JP Morgan “is seeking to establish another Chinese joint venture in wealth management,” Reuters reported Mubadala investing $2 billion in China back in 2019 with plans for more, and BP has been expanding its gas Chinese importations.  It seems that companies doing business in China may have a vested interest in the nation’s leadership since it impacts their deals.

        There are also entertainment companies that have been doing work in China.  21st Century Fox (now owned by Disney) and NBCUniversal Telemundo Enterprises (owned by Comcast) are both on the donor list.  Both companies have investments in China so they are another potential interested party.  This is starting to suggest a pattern.

        Some of the more prominent companies though on the donor list are Google and Facebook, two of the largest tech companies in the world.  Both are actually banned in China but have been working with the Chinese government and are trying to get into the nation.  They may see regime change as a way to get themselves legalized internally, especially if they conform to Chinese censorship standards.

        Now this is a long list of companies that have financial ties to China, but the reader may be wondering just what exactly this means and how this connects directly to Xi Jinping.  Well, it is possible that the “Longer Telegram” report is a sign of growing dissatisfaction with Chairman Xi’s leadership and a belief that his removal could actually help these companies.  After all, Western firms are increasingly purchasing Chinese bonds so there is corporate desire to control political action in China.

        Under Xi’s leadership, the Chinese state has been greatly increasing state influence and authority over the countries’ businesses.  In addition, he is purging political rivals which creates a hostile environment within the government.  All of these would make business ventures hard for foreign companies hoping to use government ties to make a profit.  This may lead them to support a political rival for a better business climate.

        It is important to remember though that there is no hero in this conflict.  Yes, Xi Jinping is a genocidal authoritarian responsible for the worst pandemic in decades, but many companies have actively supported his rise to that position.  Nike, Apple, Coca-Cola and others fought to protect slave labor in the Xinjiang province while Disney thanked the agency overseeing that for letting them shoot a film nearby.  So their interests are not humanitarian and whoever replaces Xi will probably be just as bad even if he supports foreign investment.

        Nevertheless, the real question may be if there are any actual plans to implement policies on behalf of the “Longer Telegram” report.  Well, the Atlantic Council also takes money from governments including countries at odds with China like Japan and Korea, countries investing in China like the United Arab Emirates, and factions in the United States government like the United States Department of State, Department of Energy, and the Marine Corps.

        President Joe Biden has actively been focusing on addressing China by hiring multiple Asia experts.  However, Wall Street spent $74 million supporting Joe Biden (more than it did for Trump) and Joe has been hiring folks with ties to Wall Street, including tech companies, so he will have their voices in mind.  So there is a good chance that his policies may reflect the will of Wall Street, especially in favoring American financial interests abroad.

        All this is conjecture though at this time.  There have been no major pushes from the Biden Administration into Asia and there may be other ideas in the works besides removing Xi Jinping.  All the same, it would not be surprising if removing Xi while preserving communism suddenly became an interest of the US.  After all, President Joe Biden was the head of the Senate Foreign Relations Committee when the US voted to invade Iraq and Afghanistan so he may know something or two about regime change.