Sep 8, 2023

Bob Iger calls Bob Chapek's time as Disney CEO "three years of hell" in new report

Thanks to a new report by CNBC's Alex Sherman, much more about the tumultuous 2020-2022 period when the title of CEO of The Walt Disney Company went from Bob Iger to Bob Chapek and back again We can now understand. Chapek reportedly called this period "about three years of hell."

This article is based on over two dozen conversations with people who worked closely with Iger and Chapek during that period. It corroborates widely circulated rumors and introduces many new details about the two Bobs' relationship, the board's perception of both men, and the possibilities that await the company when Iger's contract expires at the end of 2026.

Following are five key takeaways from the report. The full text runs about 13,000 words, so this list is not definitive. It is well worth checking out the full text when you have time.

In February 2020, Bob Iger stepped down and Bob Chapek took over as CEO. Then came the pandemic, and in April, New York Times columnist Ben Smith wrote an article about how Covid-19 was affecting Disney. In it, Smith stated that Iger had "effectively returned to running the company." Iger did not deny the claim and said that the magnitude of the crisis was so great that it was necessary to intervene to help Chapek get through the situation. Chapek was furious and called Iger, telling him that he did not need a savior. According to sources familiar with the situation, this was the first time in 20 years that the two Bobs had had such a heated argument. Iger told several people that no co-worker had spoken to him the way Chapek did in that phone call.

The two continued to work together, albeit in a more limited capacity. Their interpersonal problems remained unresolved. Iger and Chapek never participated in face-to-face mediation about their working relationship; CNBC sources said the board did not request mediation, but executives spoke with the two individually about the situation.

Disney Chairman Susan Arnold repeatedly told Chapek to be patient over several months. She suggested that Iger be given creative management for the duration of his contract, and that after 18 months (when Iger's contract expires), Chapek be free to do things his own way. Arnold also had a private conversation with Iger, telling him that he should work to make Chapek successful rather than publicly undermine him.

The undermining, at least from Chapek's perspective, only got worse as time went on. In fact, Chapek later told a friend that his time in this position was "three years of hell."

Chapek's plan was to separate the team that made the shows and movies from the team that sold them. This is a mechanism used by other streaming distributors. Netflix, Amazon, and Apple all separate their distribution and creative teams. Chapek thought that if he implemented something similar at Disney, he might be able to break away from outdated legacy media habits and get investors to see Disney as a tech company. He believed that investors were more likely to favor high-tech companies over traditional studios, broadcast television, and cable operators. To that end, Chapek created Disney Media and Entertainment Distribution (DMED) and appointed Kareem Daniel to lead the division.

In the first half of 2022, no stock in the Dow Jones Industrial Average 30 performed worse than Disney, and Disney fell 40%. Chapek was instrumental in associating Disney, particularly Disney+, with other streaming giants such as Prime Video, HBO Max, and industry leader Netflix. That association was a good thing when other companies were doing well. However, in January 2022, Netflix's subscriber growth slowed, negatively impacting other streaming distributors.

Things got even worse when CFO Christine McCarthy and Chapek took vastly different stances on the November earnings report due later in the year: in September, the two informed board members of the report's contents, and in September, Chapek's CFO, Christine McCarthy, and Chapek were asked to preview it. In that preview, McCarthy presented a bleak outlook that surprised Chapek. In a subsequent session with the board, Chapek said McCarthy's financial management was off. He noted that Disney+ is still adding subscribers and that the company will be fine if the platform meets its goal of 215-245 million customers by the end of 2024.

At the November earnings call, Chapek maintained a positive outlook, much to the dismay of McCarthy and the other directors. The next day, the company's stock price fell 13%. Soon after, Disney's board decided it was time for a CEO change, and only one person was on the list of potential replacements. Chapek was fired so quickly that he could not even send a goodbye e-mail, and Iger was reinstated as CEO.

In July, Iger extended his contract through the end of 2026. Disney is expected to choose its next successor by early 2025, giving him two years to work under Iger and prepare for the role. This is roughly the same length of time between when Chapek learns he is the next candidate and when he takes office.

We have already discussed the possibility of Disney splitting the business in two and why that might be attractive to Iger and crew; the CNBC report repeatedly states that a split Disney would be easier to sell and that many believe Apple might be interested repeatedly stated.