Bob Iger had been out of Walt
for nearly a year, but as most people around him knew, he had never really let go. Acting almost as a shadow CEO, he had undermined his successor and provided an ear for unhappy Disney executives, some of whom he had mentored.
When the call to return as chief executive came, it was from someone on his old team. Mr. Iger later told people he had an inkling of how the script would go.
For nearly three years, Mr. Iger’s chosen successor at Disney,
had faced one crisis after another: a pandemic that closed theme parks and movie theaters, a bitter fight with Florida’s governor and a previously unreported boardroom clash with his chief financial officer.
One by one, Mr. Chapek had lost support of Disney fans, studio talent, executives, employees, Wall Street and, finally, the company’s board.
The troubles boiled over in a Nov. 8 earnings call. During the 56-minute presentation, Mr. Chapek glossed over a $1.47 billion loss in Disney’s streaming division and focused instead on such successes as Mickey’s Not-So-Scary Halloween Party, one of Walt Disney World’s live attractions.
In a text exchange with Disney Chief Financial Officer
called the results “devastating.”
The next day, Disney shares plummeted 13.2%, one of the largest one-day drops in company history.
the second activist investor to challenge Disney this year, started buying shares. Mr. Cramer on his show called for Mr. Chapek’s head.
Other chief executives might have weathered the setbacks. But none had Mr. Iger breathing down their neck.
The former Disney chairman and CEO, who ran the company for 15 years, stuck around long after Mr. Chapek assumed the top job in February 2020. That Mr. Iger was unhappy with Mr. Chapek is well established. Less well known is the depth of his antipathy and the lengths he went to deflate Mr. Chapek behind the scenes.
Mr. Iger, then still under contract as executive chairman, didn’t move out of the office he kept at Disney’s headquarters in Burbank, Calif. He called strategy meetings with Mr. Chapek’s underlings without inviting the new CEO.
Mr. Chapek told friends that Mr. Iger’s attitude seemed to be: “They work for me, not for you.”
Mr. Iger, 71 years old, felt slighted that Mr. Chapek didn’t lean on him for advice. He told confidants that Mr. Chapek, 63, was doing a terrible job and that he was incompetent. As Mr. Chapek struggled to find his footing, Mr. Iger hovered in the wings. In a podcast interview, he said the Disney character he would most like to be was Thor, the Norse god who is coaxed out of retirement to help the superheroes conquer the villain Thanos in “Avengers: Endgame.”
At the end of 2021, Mr. Iger finally departed Disney after postponing his retirement four times over the years. His return began with a phone call 11 months later, on Nov. 16.
Ms. McCarthy, the Disney CFO, was fed up with Mr. Chapek’s performance and leadership, and she turned to the one person she believed could dislodge him. She and Mr. Iger had worked together for more than 15 years and had stayed in touch, including meeting for lunch last summer at the annual gathering of media executives in Sun Valley, Idaho.
Ms. McCarthy called to ask Mr. Iger if he would consider returning. He said he would. Two days later, Board Chair
offered him the job, knowing he would likely accept.
The move completed a bruising, yearslong power struggle worthy of a company known as the entertainment industry’s foremost storyteller.
Disney’s challenges are now Mr. Iger’s to tackle. The stock hovers at a nearly three-year low. The company’s market capitalization has fallen by more than half since last year, erasing hundreds of millions of dollars from shareholders’ portfolios.
In discussions with investors following Mr. Iger’s return, Disney investor-relations executives have described the company’s status as weak, a remarkable low point for creators of the happiest place on Earth.
This account of how Mr. Iger succeeded his successor is based on firsthand accounts of current and former Disney executives, as well as people close to the company who are familiar with the events, actions and conversations leading to Mr. Chapek’s ouster.
From the beginning of Mr. Chapek’s tenure, there was tension with his predecessor. When the Covid-19 pandemic forced theme parks to close early in 2020, the two men fought over a plan to furlough more than 100,000 Disney parks employees.
Mr. Iger wanted to delay staff cuts until Congress approved legislation to blunt the economic impact of the pandemic. Mr. Chapek sought to move quickly to cut costs and preserve cash. Mr. Iger won, persuading the board that it was better to wait.
Mr. Chapek complained privately to his deputies that he wasn’t fully in control. Soon, everybody heard why.
Mr. Iger told the New York Times in April 2020 that his plan to take a back seat was undone by Covid-19. “A crisis of this magnitude, and its impact on Disney, would necessarily result in my actively helping Bob [Chapek] and the company contend with it, particularly since I ran the company for 15 years!” he said.
Mr. Chapek was livid. Any hope Mr. Chapek would seek out Mr. Iger for counsel went from unlikely to out of the question.
In August, Disney reported its first full quarter in the pandemic and delivered its first quarterly loss since 2001, nearly $5 billion.
The Covid-19 lockdowns had one silver lining. Disney+, the company’s newly launched streaming service, gained 21 million subscribers in its first quarter of 2021. With people stuck at home, Disney+ became Mr. Chapek’s top strategic priority. It was a point of rare harmony between Messrs. Chapek and Iger.
Lam Yik/Bloomberg News; Qilai Shen/Bloomberg News
In April 2019, seven months before Disney+ launched, Mr. Iger had told investors the company projected that the new streaming service would sign up 60 million to 90 million users in its first five years.
In December 2020, Mr. Chapek announced he was raising the Disney+ targets that Mr. Iger set. By 2024, Mr. Chapek said, Disney+ could reach 260 million subscribers. Privately, Mr. Iger questioned the eye-popping prediction, saying it wasn’t smart to offer such an ambitious goal. Mr. Iger’s leadership style leaned to underpromising and overdelivering.
By early 2021, Mr. Chapek’s push started to bear fruit. In February that year, Disney reported a quarterly profit of $17 million—paltry compared with $2.1 billion a year earlier but moving in a positive direction.
The next month, the company announced that Disney+ had reached 100 million subscribers in its first 16 months. Disney stock hit an all-time high closing price of $201.91 a share on March 8. The milestone was especially significant given that two core elements of Disney’s business, movie theaters and theme parks, remained hobbled by Covid-19.
Disney+ offered a solution for the conundrum of how to release movies when many movie theaters were closed. Several would-be theatrical releases premiered on the platform, helping goose subscriptions and the stock.
The company decided its 2021 Marvel Studios movie “Black Widow” would premiere simultaneously in theaters and on Disney+. The film’s star, Scarlett Johansson, asked to renegotiate her contract to compensate for the potential loss of box-office bonuses.
After weeks of back-and-forth, the actress sued Disney, setting off one of the highest-profile talent fights in many years.
Disney’s communications staff issued a statement, reviewed and approved by Mr. Chapek, saying that Ms. Johansson had already been paid $20 million and that her lawsuit was “especially sad and distressing in its callous disregard for the horrific and prolonged global effects of the Covid-19 pandemic.”
It drew a harsh public response from Hollywood insiders and Ms. Johansson’s fans. Critics of Mr. Chapek cast it as an example of the pitfalls of having a Hollywood outsider as chief executive of an entertainment company.
Mr. Chapek, a self-described latchkey kid from Hammond, Ind., was the son of a machinist who traveled to Walt Disney World during summer vacations with his family. He joined Disney in 1993 in its home-entertainment division, making direct-to-video movies. He moved up to lead the consumer products division, overseeing retail and licensing deals and, later, ran the parks division. Earlier, he worked at
H.J. Heinz Co.
, in the seafood and pet food divisions.
Mr. Iger, who grew up in a middle-class Long Island suburb, spent his working life around show business. He climbed the ranks at the ABC broadcast network for nearly two decades before Disney bought it in 1995.
As Disney CEO, Mr. Iger was known for his deft touch with movie stars, agents and creative executives. He lives in Brentwood, a tony Los Angeles neighborhood bisected by Sunset Boulevard.
Mr. Iger had previously announced but failed to leave Disney. After saying in 2011 he would retire in 2015, Mr. Iger extended his contract several times, most recently after Disney’s $71.3 billion acquisition of the entertainment assets of 21st Century Fox. Potential successors didn’t stick around, and the company’s bench of CEO candidates dwindled.
Mr. Chapek, who lives in Westlake Village, an upscale San Fernando Valley suburb at the far western edge of Los Angeles County, had worked under Mr. Iger for more than a decade. The two men appeared collegial.
Months before Mr. Chapek was named CEO, Mr. Iger wrote him a letter of recommendation in support of an honorary degree from Indiana University, Mr. Chapek’s alma mater.
“Bob is celebrated for his business acumen and his proven ability to repeatedly deliver historic performance,” Mr. Iger wrote, praising Mr. Chapek’s work in developing Shanghai Disneyland, one of Mr. Iger’s signature projects.
“But, what I have always admired most about him—and what truly defines him as a leader and drives his success—is his humanity,” Mr. Iger wrote, “the fundamental decency at the core of his character.”
At the start of 2022, Mr. Chapek’s lieutenants were describing him as a big-idea executive whose imprint on the company would soon be clear. Mr. Chapek ordered division chiefs from Disney’s movie studios, parks and other segments to brainstorm about how metaverse technology could boost business.
In February, Disney hired a theme-park executive to head a new metaverse-focused division, and the company hinted at new projects involving fantasy sports and theme-park innovations.
Then the real world intervened. Many Disney employees, fans and activists called on the company to oppose a Florida state bill that would prohibit classroom instruction about gender identity and sexual orientation for children through grade three and set limits for older students.
Mr. Chapek declined to take a position on what opponents had labeled the “Don’t Say Gay” bill. “As we have seen time and again, corporate statements do very little to change outcomes or minds,” he said in a company message. His lieutenants rushed to calm workers in emails, noting the company’s support of gay, lesbian, bisexual and transgender causes.
Disney films had featured LGBT characters and story lines in such productions as “Star Wars: The Rise of Skywalker” and Marvel Studios’ “The Eternals.” Theme parks held “Gay Days.”
Mr. Iger, who had embraced Disney’s progressive politics, tweeted what many in the company had wanted to hear from Mr. Chapek. “If passed, this bill will put vulnerable, young LGBTQ people in jeopardy,” he wrote.
Mr. Chapek quickly reversed course. “You needed me to be a stronger ally in the fight for equal rights and I let you down. I am sorry,” he said in a companywide letter. Angry employees staged walkouts.
Florida’s Republican governor, was displeased. “You’re a corporation based in Burbank, California, and you’re going to marshal your economic might to attack the parents of my state?” he said at a public event.
The governor later pushed Florida’s legislature to pass a bill eliminating a special tax district that allowed Disney to essentially self-govern the land where the theme parks are located.
The conflict alienated progressives, who had wanted Disney to take a strong stand against the bill, but also conservative fans, who complained that Mr. Chapek’s response indicated the company’s capitulation to left-wing activists. Ironically, while Mr. Iger embraced liberal causes, Mr. Chapek has a more conservative view. He hired former members of President
George W. Bush’s
administration to staff his government-relations office.
In late March, while the controversy was still raging, Mr. Iger told TV interviewer Chris Wallace that “one of the things that CEOs accept as a responsibility is that they’re going to have to weigh in on issues, even if voicing an opinion on those issues potentially puts some of your business in danger.”
Some company directors began talking informally among themselves about whether Mr. Chapek was still capable of steering the ship.
One option they considered was replacing Mr. Chapek with board member
a former longtime head of
as an interim CEO while the board hunted for a successor.
In June, Disney’s board instead renewed Mr. Chapek’s contract through 2024 in a unanimous vote. Two directors, Mr. Parker and
General Motors Co.
CEO, had been reluctant to go along. Others persuaded them that support of the full board would boost Mr. Chapek’s confidence and shore up his performance.
The sniping continued. Soon after the contract announcement, Mr. Iger told a friend he believed Mr. Chapek was a failure in the most important measures of success for a CEO: internal satisfaction, investor relations and consumer support.
An internal survey of Disney employees had found low morale. And, according to a survey of consumer confidence by the Harris Poll, which Mr. Iger followed closely, fans were falling out of love with the Disney brand.
Despite the troubles, the contract renewal seemed to embolden Mr. Chapek. He held court at Disney’s D23 convention in September, showing off a new beard. He visited backstage with stars who were there to entertain some of Disney’s biggest fans.
Mr. Chapek drew a few boos, a sign of how some of the Disney faithful had turned on the CEO. Some customers were upset by a theme-park reservation system that Mr. Chapek had championed. Park visitors could pay a surcharge to skip long lines at popular attractions—on top of rising admission prices—which seemed to turn the quintessential American middle-class vacation into a pastime for the affluent.
Even casual Disney theme-park fans blamed Mr. Chapek for changes they disliked. Park visitors posted videos on TikTok and Instagram, saying rides closed for repair were “Chapek’d.” “Bob Cheapek” became a meme on fan sites and message boards, referring to the CEO’s reputation for cost-cutting and higher prices.
Inside Disney, creative leaders stewed over what they saw as dilution of their authority. Tension with Disney’s TV and film executives had started in his first year, when Mr. Chapek reorganized the company to empower business-side executives to decide content budgets and determine whether a movie or TV show premiered on a network, streaming platform or in theaters.
who had served as Mr. Chapek’s deputy in Disney’s parks division, took charge of the new group making distribution decisions.
Disney’s Harris Poll Reputation Quotient
Mr. Chapek defended the changes in a Wall Street Journal interview this year, saying that leadership required “the courage to do the right things, given all the forces that want legacy.”
Between the end of 2021 and the summer, funds managed by Fidelity Investments had cut their Disney holdings by 30%, and the
Fund Inc., a $5 billion mutual fund with about 46% of its assets in tech and media stocks, had sold its entire 2.8 million-share position in Disney.
Sequoia said in a letter to investors that proceeds from the Disney stock sale went to boost its position in
Disney’s biggest streaming rival.
By the numbers
Disney shares were down about 40% for the year when the company’s board met at the end of September. The meeting quickly became a referendum on Mr. Chapek’s leadership.
Ms. McCarthy told directors Disney would likely miss analyst expectations for revenue and profit in the coming quarter by a wide margin, catching Mr. Chapek off guard. Streaming losses were growing, she reported, and theme-park margins were shrinking.
and Derica Rice grilled Mr. Chapek over the company’s poor performance. Ms. McCarthy addressed most of the questions, later telling associates that her boss had fumbled his answers.
Mr. Chapek complained to colleagues that Ms. McCarthy gave numbers that they hadn’t previously discussed, making him look bad. The board and executives had been given briefing materials, including the results Ms. McCarthy presented, before the meeting.
Ms. McCarthy, 67, is known as a Disney devotee who during a battle with cancer often returned to the office straight from chemotherapy sessions.
In an interview with the alumni magazine of Smith College, Ms. McCarthy described overcoming life’s obstacles, including anorexia in her youth and sexism in the workplace. “What I learned at Smith was I had the confidence to speak up,” she said.
Some of Mr. Chapek’s recent moves weighed on her, including a programming strategy that also served as a way to shield losses in Disney’s streaming division. “Cute,” she said disparagingly of the move during a conference call with colleagues.
By October, relations between Ms. McCarthy and Mr. Chapek were so frayed that he didn’t include her in a board meeting. He also told executives that she had lost focus, distracted by her husband’s ailing health, and had become unstable, comments repeated to some Disney directors. Ms. McCarthy learned about it from colleagues.
People who know Mr. Chapek said such language would be out of character for him.
As the environment inside Disney’s C-suite worsened, more executives voiced concerns in phone calls to Mr. Iger. Some worried
the studio chief, and
head of the parks division, might quit. In June, Mr. Chapek had abruptly fired
Disney’s highest-ranking TV content executive, a move that remained on the minds of many creative leaders at the company.
Cracks showed in the parks business, which for the past year had been Disney’s most reliable moneymaker. Profit margins shrank in the fourth quarter. Bloggers and social-media influencers amplified visitor complaints about rising ticket prices. Market research by Disney found white visitors 55 and older souring on the parks because they viewed the company as “too woke.”
At the end of October, Mr. Chapek traveled to New York for meetings with investors. He gave the bankers a rosy report. With his top deputies, Mr. Chapek was also optimistic about the coming quarterly report. Some of his executives described Mr. Chapek’s demeanor as out of touch—as though Disney was killing it, one said.
On Nov. 8, Mr. Chapek gave a presentation in a fourth-quarter earnings call.
Disney+ had added 12.1 million net new accounts, beating analysts’ predictions and bringing its global total to 164.2 million subscribers. Yet its losses were 38% more than what Wall Street expected, approaching $1.5 billion.
Analysts from MoffettNathanson zeroed in on Disney’s projections for future profits. They had expected the company to forecast 34% growth in one significant income measure. Instead, Disney projected it would be in the high single digits. “Rarely have we ever been so incorrect in our forecasting of Disney profits,” the analysts said.
Before the call, Ms. McCarthy suggested Mr. Chapek address the grim news head-on. He instead wrote a script that spent more time praising the return of in-person events, such as live attractions at theme parks.
10 largest one-day declines in Disney’s stock price, by percentage change
The next day, Disney stock had one of its largest drops ever. Over the course of 20 months, prices had fallen from $201.91 a share to $86.75.
Activists pounced. Trian Fund Management LP bought more than $800 million worth of Disney stock in the days following the earnings report. Mr. Peltz, the fund’s co-founder, called Mr. Chapek to say he was acquiring a stake. He wanted a seat on Disney’s board, and to see the company cut costs.
In a matter of days, Mr. Chapek found himself standing between a panicked workforce and an investor community sensing blood in the water. On Nov. 11, he issued a memo to senior executives banning all but essential work travel and freezing new hires. Layoffs were likely, he added.
On Nov. 16, Ms. McCarthy took matters into her own hands. Without having confronted her boss or seeking board approval, she called Mr. Iger to gauge his interest in returning as CEO. She caught Mr. Iger at a low point—he had been telling friends he was more concerned over the direction of the company than ever.
He also told them he was frustrated with the idleness of his post-Disney life. In early October, Mr. Iger had taken a trip aboard the Aquarius, his 150-foot yacht, around the Fijian islands and complained to friends that his wife, Willow Bay—too busy with her job as dean of the communications and journalism school at the University of Southern California—couldn’t join him.
Mr. Iger had an offer to be an adviser at private-equity firm Redbird Capital. On Friday, Nov. 18, Ms. Arnold called with her offer.
That day, Mr. Cramer, who is a close contact of Ms. McCarthy’s, said on CNBC that he had heard Mr. Peltz had taken a position in Disney: “Disney needs his help. This current crew just isn’t cutting it.”
On Sunday, Nov. 20, Ms. Arnold called to tell Mr. Chapek his services were no longer needed.
The news broke as a group of Disney executives gathered at Dodger Stadium in Los Angeles for Elton John’s final U.S. concert, which was being streamed live on Disney+. Mr. Chapek, a big fan of the singer-songwriter, had planned to attend. He never made it.
A week later, Mr. Iger held a town-hall meeting in the Burbank headquarters that was live-streamed to far-flung employees. He pledged that storytelling and creativity would be at the heart of Disney’s mission.
The returning CEO inherits a set of big problems: Empty rooms at theme-park hotels, the long closure of Shanghai Disney and movie theaters in China, and Wall Street demands to see profits in the streaming division. On top of that, Mr. Iger has told the board he has another focus—finding a successor, again.
Winning back disgruntled fans might be his easiest chore.
On a Saturday afternoon in December, Mr. Iger walked Main Street in Southern California’s Disneyland, flanked by executives, his wife and security guards wearing earpieces.
“I love you!” passing fans yelled. Some stopped for selfies and autographs.
Mr. Iger looked ecstatic, leaving associates to wonder if he ever plans to leave.
—Sarah Krouse, Suzanne Vranica and Lauren Thomas contributed to this article.
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