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With Shareholder Value Plummeting, Disney Ousts Bob Chapek To Bring Bob Iger Back

Two men with light skin tones, one wearing a button-down sweater and the other in a suit jacket, pose in front of a spacecraft in a theme park.
Bob Iger (left) and Bob Chapek (right) at Star Wars: Galaxy's Edge.
(Courtesy Disney)
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The Walt Disney company made a shocking announcement Sunday night, ousting CEO Bob Chapek and replacing him with former Disney head Bob Iger, whose job Chapek took over not that long ago — in February of 2020.

Do the stories that Hollywood tells about itself really reflect what's going on?

If you're wondering if anyone saw this coming, well, certainly not this quickly.

Just four months ago, Disney’s board actually extended Chapek’s contract another three years. At the time, board chair Susan Arnold said in a statement that while the company was “dealt a tough hand by the pandemic,” Chapek “not only weathered the storm but emerged in a position of strength.”

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What Disney Said Sunday

Arnold had a very different take on Chapek’s performance on Sunday, when she said:

“The board has concluded that as Disney embarks on an increasingly complex period of industry transformation, Bob Iger is uniquely situated to lead the company through this pivotal period. We thank Bob Chapek for his service to Disney.”

Iger, who ran Disney from 2005 to 2020, said in a statement on Sunday night that he was “extremely optimistic for the future of this great company and thrilled to be asked by the board to return as CEO.”

Why Now?

The firing comes soon after Disney reported its quarterly earnings on Nov. 8. And that report was startlingly bad for streaming services, a key component of the media giant's strategy. The report showed massive streaming losses and uncertainty about that division being profitable.

That said, overall annual revenue was up 23%, thanks to Disney’s theme park and media entertainment divisions. And Disney said it had signed up a total of 235 million subscribers for its streaming platforms, which include Disney Plus and Hulu.

The issue is that those subscribers came at a horrific cost. Chapek said Disney lost $1.5 billion on streaming over the previous three months. For the past year, the company’s streaming losses are around $4 billion, and more than $8 billion since it launched Disney Plus three years ago. Chapek said he believed that streaming could be profitable in just two years, and that’s not really plausible. Soon after the earnings, he said Disney was going to implement wide cost-cutting measures.

After the earnings report came out, Disney’s stock price plummeted 13% the same day and is down more than 41% this year. At the end of 2020, Disney’s market capitalization was $328 billion. At the end of last week when the markets closed, it was $163 billion.

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That’s a drop of about 50%. Or, put another way, Disney investors have lost $165 billion of their money on paper over the last 22 months under Chapek.

When the markets opened Monday morning, Wall Street liked the Disney news, as Disney stock opened up about 8%.

Other Factors

And there were other possible factors.

Chapek was criticized for his handling of Florida’s “Don’t Say Gay Bill,” reacting slowly on an issue that mattered deeply to many Disney employees. And when he did act, he faced backlash from Florida politicians.

He also had a very public legal fight with Marvel star Scarlett Johansson over the release of "Black Widow" on streaming at the same time it was out in theaters. In a lawsuit, she said her contract — which included compensation based on box office performance — had been breached.

In June, Chapek fired Peter Rice, considered a major surprise. Rice was chairman of Walt Disney Television and the co-chair of Disney Media Networks and was considered a possible successor or rival to Chapek. Rice also had spoken out against the Florida legislation, at a time Chapek was still refusing to take a public stand.

Editor's note:

And coming out of the pandemic, Disney theme park enthusiasts have been angered by jacked-up, post-pandemic prices, which have generated better revenue but alienated a lot of long-time pass holders. 

About Chapek's Time At Disney

Chapek had many years at Disney, dating back to the early 1990s. He oversaw divisions including home video, consumer products and theme parks. But he didn’t have experience in running a movie studio, a TV network, and all of Disney’s many cable channels like ESPN, FX and Nat Geo.

Even after he took over for Iger, Iger remained around until the end of last year as kind of a shadow CEO, which Chapek reportedly didn’t like.

Iger's Challenges

Remember Arnold’s statement, where she talked about “an increasingly complex period of industry transformation?” That’s an understatement.

The movie theater business is essentially dead, even if Disney’s Black Panther: Wakanda Forever opened strongly, and Disney has the next Avatar movie opening soon. Under Iger and even more so under Chapek, Disney put most of its eggs in the streaming basket — a very competitive space.

So here's the billion-dollar question: How can you improve margins without raising prices and cutting costs, which inevitably affects the programming?

What questions do you have about film, TV, music, or arts and entertainment?
John Horn, entertainment reporter and host of our weekly podcast Retake, explores whether the stories that Hollywood tells about itself really reflect what's going on?

Updated November 21, 2022 at 7:34 AM PST
This story updated with additional information about the earnings report, details of Chapek's career and the market's reaction on Monday.