Bob Iger is back as Disney’s CEO after Bob Chapek stepped down. Disney fans, investors, and shareholders all have high expectations for this shift in leadership, and Iger’s near-hero status to those groups might make his return more difficult than some expect.
After disappointing streaming results in the last couple of quarters, execs are looking for someone to swoop in and make Disney+ profitable by the company’s promised deadline. Fans are looking for more “magic” and fewer price increases in the theme parks. Investors want to see strong results and profits from all aspects of the company. The Walt Disney Company Board of Directors wants a solid plan for Iger’s successor after his 2-year contract is up. Can Iger meet all of these expectations?
Bob Iger was Disney’s CEO and chairman for 15 years, from 2005 to 2020. He remained on Disney’s board through 2021 after appointing Chapek as his successor in 2020. In total, he has worked for Disney for over 40 years. But this could be his toughest show yet.
According to Fortune, the track record of “Boomerang CEOs” is “decidedly mixed.” Some, such as Apple founder Steve Jobs, have successfully pulled their companies out of difficult positions. But others, like Steve Ells (founder of Chipotle), struggled to rebuild relationships and ended up leaving sooner than planned.
So how will Iger’s return go? We can tell you one thing: Bob’s to-do list is nothing short of daunting. We’re looking at 7 of the biggest challenges Bob Iger is currently facing (or will soon face) as Disney’s CEO.
Making Disney+ Profitable
Bob Chapek put up disappointing results for Disney+ earnings during the last report, which many have speculated is one of the reasons that he was replaced. Streaming services are very expensive to start, and up to this point, Disney has mainly focused on getting content on the platform and building subscribers. However, the company has promised investors that Disney+ will be profitable by 2024 — a deadline that’s quickly approaching as Disney+ earnings continue to fall.
In the fourth quarter of 2022, Disney streaming services’ operating losses increased from $0.8 billion to $1.5 billion, which Disney attributed to higher losses at Disney+ and a decrease in results at Hulu. With losses almost doubling, investors are concerned about Disney’s ability to make their streaming services profitable.
Disney+ is about to get a price increase, and an ad-supported tier is being introduced. Both of those changes will take place on December 8th of this year. This could help Disney+ work towards profitability, but will it be enough when Disney has about a year to make up for huge losses?
Some experts think Iger should “consider resetting long-term financial expectations for Disney+” (Yahoo Finance), as the current goals seem unattainable. According to Citi Managing Director Jason Bazinet, Iger might be the best man to make an announcement about resetting those goals: “[Disney] may know they are not going to hit those or breakeven by the fourth quarter of 2024. If you are going to make an announcement like that, you are going to want to have someone of Mr. Iger’s caliber to make it more palatable.”
According to CNBC, Iger’s strategy with Disney+ pricing is different from Chapek’s. Some people who are familiar with both CEOs have said that “Iger wanted Disney+ to be the lowest-priced major streaming offering […] That way, customers would view Disney+ as a stronger value proposition to its competitors even if it felt other services’ content might be more robust.” Iger’s idea was to “slowly raise prices over time, targeting a $1 per month increase each year for the near future.”
So investors and the Board will be eager to see how Iger plans to make Disney+ profitable and what changes (if any) he makes to the current plan.
Navigating a Recession
Most experts have agreed that a recession is imminent in 2023. CNN reported a “98% chance of a global recession” and said, “The question of a recession is no longer if, but when.” When the world does enter a recession, it’s possible that the Disney Parks (currently one of the most profitable parts of The Walt Disney Company) could start to lose some of their impressive profits.
Right now, the Disney Parks, Experiences, and Products division is responsible for 62% of the operating income for Disney. The success in this area is making up for losses in the streaming section. However, if families choose to put off Disney vacations due to tight finances in a global recession, Disney may lose some of that cushion. That puts more pressure on Disney+ to become profitable sooner.
This dilemma also pushes Iger to find ways to keep theme park attendance up. Disney has previously hinted at possible discounts and other tools they’d use in the event of a recession, but we haven’t heard from Iger about what his plan will be.
Iger was the Disney CEO during the previous recession in 2008. During that time, Iger said that Disney “made a conscious decision to put in place promotions that would drive attendance. This strategy has had a predictable impact on margins, but it’s also had the intended effect of bringing people to our parks” (LA Times). During that period, Disney certainly felt the impact of the recession (at one point reporting a 46% drop in net income) but was generally applauded for keeping theme parks busy despite the difficult time.
Living Up to Expectations
Many fans, investors, celebrities, and coworkers have celebrated the return of Bob Iger. Josh Gad (voice of Olaf in Frozen) said, “I don’t think I’ve ever been so happy.” Fans are speculating that price increases will stop, Magical Express will return, and the tumult of the last two years will suddenly be repaired.
However, with so many problems to address, Iger is very unlikely to make everyone 100% happy. His reputation could take a hit if he doesn’t start making the changes that many fans and investors expect.
One advantage that Iger does have is his experience in this position and his talent for tactfully handling difficult situations. He may not be able to end all price increases in Disney World, but in the past he’s shown that he can address and frame those changes more diplomatically.
Iger has to reach “unicorn” status to accomplish all of the goals his proponents are already attributing to his reign.
Choosing a Successor
One of Bob Iger’s biggest jobs before he left his position as the Disney CEO in 2020 was to appoint a successor. According to some reports, Iger was not completely happy about his final choice of Bob Chapek.
In fact, some sources said that Iger spent some time “regretting what he has called one of his worst business decisions: the selection of Bob Chapek as his successor.” His decision apparently came during a time when he “got tired of all the things you have to do” and instead wanted to “play around with creative.” A former Disney executive said, “[Iger] said he was tired of being harangued about [succession] and said, ‘Fine, you guys have someone else run the business.’”
Another executive claims that Iger didn’t realize Chapek was “such a ‘novice’ when it came to handling complex issues like talent management and political battles, and that Chapek was arrogant and uninterested in other people’s opinions.”
If the issue of succession was such a disaster the first time around, Iger may be approaching this decision more carefully now. Under his current contract, Iger has 2 years to determine who will take over as Disney CEO once he leaves again.
It’s clear that this is one of the main reasons Iger is being brought in — to make a few course corrections and ultimately choose the next CEO. In Disney’s statement, it says Iger was brought back with “a mandate from 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.”
The New York Times also reported that succession is going to be a major issue: “The intrigue is where Iger may turn for the next leader. […] On the succession front, Peter Rice, a top content chief at Disney, and Kevin Mayer, one of the architects behind the launch of Disney+, are no longer at the company. Will Iger try to bring them back?”
Another possible successor that many have speculated could rise to the position of CEO is Josh D’Amaro, who is currently the Chairman of Disney Parks, Experiences and Products.
One area where Bob Chapek seemed to struggle was politics. Disney ran into several sticky situations during his tenure as CEO, including a very public feud with Florida Governor Ron DeSantis over Florida’s Parental Rights in Education law and the status of Disney’s Reedy Creek Improvement District.
During the former controversy, many Disney employees were not happy with how Disney handled the situation. There were company-wide walkouts to protest the lack of response by Disney.
As we mentioned earlier, Iger was not necessarily impressed with Chapek’s political prowess. He said he hadn’t realized Chapek was “such a ‘novice’ when it came to handling complex issues like talent management and political battles,” implying that Iger believes he would have done better in those situations.
Now, Iger is navigating the aftermath of several complicated political issues, and it’s up to him to find a solution that will appease all parties involved and bring Disney through with a repaired brand reputation.
Another shift that happened at The Walt Disney Company during Bob Chapek’s time as CEO is that many fans began to focus on the cost-cutting measures instead of the “magic.” Disney was frequently called out for being too expensive, and although the Disney parks have almost always been a pricy vacation, the expense was thrust into the spotlight due to frequent and occasionally drastic price increases, services that used to be free now incurring a cost, and surge pricing being introduced in several areas, including tickets and amenities.
Iger’s role now is to adjust that perspective so that the audience instead focuses on the positive, “magical” parts of Disney. He may accomplish this with a big, exciting announcement, like a new ride or expansion of a park. An announcement like that would certainly fulfill fan expectations and put Disney on a path of looking more and more like the “good guy.”
Working With Investors
Iger needs to appease the fans and the Board of Directors at Disney, but he also needs to make the investors happy. According to Bloomberg, he’s already up against some investors who aren’t excited about his return: “His return may be complicated by an activist investor. Nelson Peltz’s fund management firm Trian opposes his rehiring and is pushing for a board seat to advocate for more cost cuts.”
Other investors, however, are optimistic about his return. Wells Fargo analyst Steven Cahall said, “Chapek was seen as an ace on park ops, whereas Iger is the content guru, and we think content is believed to be the lifeblood of the company.”
We’ll continue to watch for updates from The Walt Disney Company about Iger’s plans for the future. Want to learn more about Disney’s choice to replace Bob Chapek with Bob Iger? Check out these posts:
- Bob Iger Is BACK as Disney CEO: Read Disney’s Statement Here
- Disney Stock Values Jump Following News About Bob Iger’s Return as CEO
- Bob Iger Is Back at Disney. Here’s What Can Change (And What WON’T).
- Why Disney Replaced Bob Chapek With Bob Iger
- Celebrities React to Disney’s Decision to Bring Bob Iger Back as CEO
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The post 7 Big Challenges Bob Iger Will Face as Disney’s New CEO first appeared on the disney food blog.