April 12, 2020. Bob Iger's relationship with his successor, Bob Chapek, began to fall apart that day.
In February of that year, Iger resigned as Disney's chief executive. Iger and the board had long believed that Chapek was the front-runner for the position, given his operational experience and decades at the company. Iger would stay as executive chairman and direct the company to help with the transition.
The timing of a CEO change at arguably the world's most famous entertainment company couldn't have been worse. Disney closed its theme parks around the world after Iger stepped down.
The two of them seemed to be ready for the challenge.
Iger said during the company's annual shareholder meeting that he could not think of a better person to succeed him.
The optimism was returned by Chapek.
Disney CEO Bob Chapek's contract is up early next year. There are some key points.
I've learned a lot from watching Bob Iger lead this company to amazing new heights.
Ben Smith, a media columnist for the New York Times, wrote a story after reaching Iger by email. Iger wasn't going to turn Chapek to the wolves as a brand-new CEO while the world was falling apart. Iger said he would stay around to help run the company.
Iger said in his email that he would help Disney deal with the crisis since he ran the company for 15 years.
Three people familiar with the matter say that Chapek was angry when he saw the story. He didn't want extra help. Iger had delayed his retirement three times before. According to people familiar with his thoughts, Chapek felt like he was doing it again, leaving him as a hapless second banana. Iger was already reporting to Chapek.
The people said that the Disney board had little interest in starting a fight because of the state of the company. Disney named Chapek to its board three days after Smith's story was published.
Bob Iger poses with Mickey Mouse attends Mickey’s 90th Spectacular at The Shrine Auditorium on October 6, 2018 in Los Angeles.One of the people familiar with the situation said that it was a turning point.
According to about a dozen people who spoke with CNBC, Iger and Chapek haven't been able to mend their relationship since that incident. The relationship and discussions about it are not public.
In the months that followed, Chapek began making key decisions about Disney's future, including a dramatic reorganization of the company, and the dispute over the actress's salary. It became clear that the executives weren't speaking with one voice and that internal messages from both men would sometimes conflict.
While much of the public narrative has centered around Iger's departure as chairman, he has actually been firmly in control of Disney.
Normal times would allow Iger and Chapek to work more closely. The two executives didn't talk to each other. There is a small circle of close friends with whom Chapek makes major decisions, including a long-time right-hand man, a chief of staff, and a CFO.
Iger has not been in that circle.
In December, just days before his departure as executive chairman, Iger threw himself a going-away party, inviting more than 50 people to his house. He talked about his time at Disney in front of the crowd. People who attended the party said there was little interaction between the two men. Guests, including veteran Disney executives and on-camera talent, sat at two long tables at Iger's house.
The two people sat at different tables. Daniel was near several of his reports. Spielberg sat next to Iger. The people said that Iger spent about 10 minutes publicly praising his former colleagues.
One of the guests, who asked to remain anonymous, said the party was very awkward.
Neither Iger nor Chapek would comment on their relationship.
The decision to move away from Iger showed chutzpah, but it also put him on an island against a Disney icon, who was also the chairman of his company. He has not been able to benefit from the many relationships Iger developed at Disney.
Replacing Iger, who had been Disney's CEO since 2005, was going to be difficult. After orchestrating a series of intellectual property acquisitions, including Pixar, Disney's Lucasfilm and Marvel, Iger was beloved by Hollywood and highly respected as a CEO, which will likely go down in media history as three of the smartest deals ever. Iger is considering running for president of the United States.
According to colleagues, Iger's strength is his struggles with emotional intelligence.
Bob Chapek, left, and Bob Iger.The leadership styles of the executives have come to light quickly.
Iger was embarrassed by the public spat with Johansson over compensation after Disney+ streamed Black Widow at the same time it hit theaters.
The public acknowledgement that he let Disney employees down by not fighting harder against Florida has reminded Iger loyalists. Iger took a public stance against the legislation.
Disney employees were upset by the execution. Several Disney employees have called Iger in to complain about the worst week they have ever had working at the company. CNBC previously reported that Chapek met with Disney creative leaders to discuss his response to the bill.
The biggest difference between Iger and Chapek was the removal of profit-and-loss power from Disney's veteran division leaders.
The future of Disney's CEO is likely to be determined by how successful his internal changes are.
In October 2020, about eight months after he took over as CEO, Disney announced it was reorganizing its media and entertainment businesses. Disney has had two major reorganizations in less than three years. The main part of the announcement was the following.
The new Media and Entertainment Distribution group will be responsible for all monetization of content, both distribution and ad sales, and will oversee operations of the Company's streaming services. Disney's media and entertainment businesses will have sole P&L accountability.
Disney has done business for decades. One of the most important jobs in the history of media was given to Daniel, the leader of the new Media and Entertainment Distribution group. The decision was immediately divisive, leading to a burst of internal frustration among some veteran Disney employees who no longer control the budgets of their divisions, according to people familiar with the matter.
Content decisions can be made in sync across distribution platforms. Disney can be steered by controlling the budgets of each group and deciding where content ends up, instead of division heads running their own fiefdoms. Executives can focus on making content, selling ads, or building streaming technology with direction from Daniel. The heads of Disney TV, for example, would run their entire businesses.
Iger had begun to put in place the organization of Disney+. According to people familiar with the meeting, Iger met with Robert Kyncl, the chief business officer at YouTube. Kyncl had worked for seven years atNetflix, overseeing content partnerships.
Robert Kyncl, global head of content at YouTube Inc.Iger needed to run operations like a technology company and Kyncl told him if he wanted Disney to start trading at multiples. The distribution and content divisions were separated. Disney had structured the roles in a way that they didn't live within smaller groups.
CNBC asked Kyncl about the meeting.
If Disney wanted investors to see its streaming service as a growth engine in a digital-first world, Iger needed to centralize power around Disney+. According to two people familiar with the meeting, Iger drew a new organizational structure on a whiteboard in front of Kevin Mayer so he could show him it to him. The head of Disney's new direct-to-consumer unit would be Mayer. Disney reorganized in March.
Power struggles followed. Peter Rice had the authority to decide which shows aired on Disney+. Content executives were no longer able to have direct conversations with Hollywood talent and tell them if Disney would make their show or not. Disney's relationship with Hollywood would be affected by losing greenlight power. If studio executives didn't have the power to approve projects, they would lose credibility with creators, who would want to speak with the people at Disney who had that authority.
Close-up detail of the Disney+ app icon on an Apple iPhone 12 Pro smartphone screen.Iger had to make decisions on the fly. The main argument was that he would have greenlight power for Disney+. Iger chose Chapek as CEO months after Disney's Mayer left to become TikTok's CEO.
They did not comment for the story.
Many of the same principles that Kyncl and Iger discussed in the fall of last year were cited by Chapek.
The changes will allow us to be more effective in making the content consumers want most, delivered in the way they prefer to consume it.
When he became CEO, he went on a listening tour to find out what was working and what wasn't. The current arrangement had become problematic, he heard from both distribution and content executives.
Iger had decided to give greenlighting authority to the head of the streaming services. Disney plans to spend a record $33 billion on content in the next fiscal year, and he gave that power back to the content heads. Disney's content leaders can now tell creators directly if Disney will work with them, which is a good thing.
Long-term Disney executives lost the ability to run their own divisions because of Daniel's control of P&L. Creative leaders preferred to focus on making content rather than working on wholesale distribution agreements with pay-TV providers. Others didn't appreciate the loss of control over budgets.
A person familiar with Kelly Campbell's thinking says that her desire to have more control over a business than what Disney allowed her to was a factor in her decision to leave her job at Hulu to lead NBCUniversal's Peacock.
Campbell didn't comment on the story.
One film executive told CNBC that Disney operated smoothly when Alan Bergman, chairman of Disney Studios, and Alan Horn, former chief creative officer of Disney Studios, were in charge of the studio. The person said that in the new world, with Daniel in charge, it is much harder to find answers.
Iger already started making it clear to Wall Street that streaming was the company's new priority when he started the restructuring. By putting Daniel in charge of a variety of different budgets, he could more easily steer all of Disney in the same direction. It is possible that decisions could be made more quickly.
Disney put its new Pixar movie on Disney+ instead of in theaters first. Three people who participated in the discussions said that the decision would have taken months under Iger's structure. The debate took weeks, with Pixar executives agreeing that the movie should go to Disney+ first.
The results will be proof of the reorganization. Disney has a target of more than 200 million Disney+ subscribers by the end of 2024, compared with 130 million today. If Disney can get there, they can claim success, even as the company's shares have fallen 30% in the past 52 weeks, even as crowds have returned to Disney's theme parks around the world.
Daniel's P&L oversight for all movie, TV and film distribution, advertising, sales, technology and other divisions used to be done by Disney employees with 20 or 30 years experience each. Disney has a market cap of about $240 billion. Disney spends billions of dollars a year on entertainment content.
Iger didn't like giving Daniel so much control. The former CEO felt that Disney was too complex and diverse to have the right budget control structure.
Daniel is disliked by many colleagues who have worked with him.
He is described by five former and current co-workers as smart, hard-working and friendly. He got an masters degree in electrical engineering. He likes to engage with people outside of work and slaps them. The people said that he demands of his direct reports and holds them accountable.
Daniel is Black is an extremely rare leader of global media companies. He is the first black senior executive to report directly to the Disney CEO. Some employees respect the symbolism of a minority leader in a high-profile role.
Daniel has worked in a variety of Disney units, including studio distribution, consumer products, games and publishing, and corporate strategy. He first worked for him as an intern in 2002 and has been close to him ever since. In 2007, and 2008, Daniel worked with Chapek on a number of projects. He was part of the M&A team that bought Marvel Entertainment and followed him to consumer products in 2011.
According to a person familiar with the matter, Daniel and Chapek worked together to shorten the theatrical window from four months to three months at the end of 2009.
Some of Daniel's strengths were also noted by CNBC, which said the job may be too big for him or almost anyone.
He has almost no experience running any of the businesses that were previously run by people with decades of experience, and he has the most important job at Disney.
A person familiar with his thinking says that Chapek disagrees with that assessment. He understands the job is massive in scope but feels that Daniel is the right person to handle it given his varied experiences at Disney, including as president of consumer products, games and publishing, and president of operations at Walt Disney Imagineering.
Daniel hasn't done any interviews since his promotion announcement. He wouldn't comment on the story.
If consumers want to experience a more unified digital Disney experience, they should log into Disney+, buy merchandise from the online Disney store, or manage theme park experiences with Disney's genie service. The challenge of unifying Disney technology and experiences is informally spoken of by some employees.
The pace of Disney's digital transformation needs to be sped up. The company goals in January were to set the stage for our second century, and ensure Disney's next 100 years are as successful as our first.
Disney isn't a technology company even though it is trying to restructure. Its employees don't have the same type of technological know-how as Apple and Google.
That is problematic for a company that wants to trade at a multiple. Disney has struggled to build back-end technology to sell advertising on all of its streaming services, according to a person familiar with the matter. Disney bought MLB Advanced Media in 2017, and the streaming infrastructure for Disney+ and ESPN+ is from that company. There is a separate infrastructure for Hulu.
The organizational structure is still being streamlined. Some of the people Disney hires to sell ads for its streaming services are from the 21st Century Fox acquisition. Those jobs can be duplicative and work against experience.
Although he hasn't gone into detail about what that means, he has mentioned Disney building its own metaverse several times. In a memo seen by CNBC last month, Mike White was promoted to Disney's senior vice president in charge of next generation storytellers.
What to do with Disney's current assets will be decided by Chapek. LightShed's Rich Greenfield has argued that Disney should spin out ESPN and combine it with a digital sportsbook. That hasn't been the priority of the man. The company has no plans to spin off or sell the sports network, despite the fact that it relies on traditional TV affiliate fees. Disney isn't interested in buying a sports betting company, people said.
It will take time for Chapek to show his employees and shareholders that he can do the things he says he will. Most of the people interviewed for this story said that Chapek is a skilled and determined operator. Disney's fiscal first-quarter results blew away analyst estimates on earnings per share, revenue and total Disney+ subscribers.
Iger believed in setting up Disney for a digital world where streaming dominates and legacy distribution models fade away. The men's failed relationship adds an element of sadness. Their goals are the same.
It is possible that Disney employees and the broader media and entertainment world get used to the method of leadership of the leader. Perhaps his biggest challenge will be convincing everyone that it's ok not to be.
At the end of February, his contract will be up.
One person said that Iger regretted how the change of control happened. He told Kara Swisher in a January interview that he was not returning to Disney.
Iger said that he was CEO for a long time. I'm gone.
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Disney CEO Bob Chapek addresses Florida's gay bill.
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