It's been almost a year since Bob Iger, the celebrated CEO of the Walt Disney Company, came out of retirement and took back his spot at the top of the entertainment giant. But the company and the business climate had begun to change in the eleven months he was away. Disney was no longer a money printing machine.
When I came back, one of the things I discovered was that the disruptive forces that have been preying on that business for a while greater than I thought.
Bloomberg's Thomas Buckley reports that Iger, who was revered for his golden touch, is now having a rocky time trying to turn things around.
You have to imagine that he either must truly love the company and love the brand to put himself through this one more time, potentially at the expense of his legacy, or it's simply the case, as sources told me during his retirement, that he can't imagine himself doing anything else than being the CEO of the Walt Disney Company.
I'm Westcasova today on the big take. Can Bob Iger save Disney again? Tomas? Reading your story, it sure sounds like a tough time to be Bob Biker.
I think it's an incredibly tough time to be Bobbiger. It's interesting because there was a period of times, so the fifteen years during his first tenure, where it was necessarily very easy being Barb Biger. It's a very difficult job running the Walt Disney Company, but it certainly came with a degree of stature and reverence that I think he's really missing in his second tenure, because the Walt Disney Company is a very very different company today than
it was back then. During his first tenure, you know, he was celebrated for the acquisitions of Pixar Marvel, which is arguably one of the smartest acquisitions in the media entertainment history, and today I think think that the company is in very very different shape. It has a TV division that is suffering from a huge degree of cord cutting. Its latest run at the box office over the past two years has not been particularly successful. A lot of
Disney's big budget movies are really underperforming. And then its parks business is on paper doing fairly well, based on the fact that internationally many of the parks were closed this time last year. Domestically, it's really having quite a tough time attracting customers based on several price increases that
were put through by Barbiger's predecessor. On top of all of that, when Barbaiker left the company in February twenty twenty, just before the onset of a global pandemic, he exited the company in December twenty twenty one as executive chairman.
By that time, Disney's stock price was at about two hundred dollars, its market capitalization was well over three hundred billion dollars, and coincidentally, you had Netflix's stock that went from eight hundred to two hundred when the so called streaming bubble burst and Wall Street started caring a lot more about the profitability of streaming services than they did about subscriber growth at all costs. So he has come back to a company that is now trading at about
its lowest level in a decade. And he had long prided himself on consistently outperforming the S and P five hundred by great measures during his first tenure, And today it turns out if you're a shareholder back when he first became CEO in October first, two thousand and five, you would be worse of investing in Disney than you would have been investing in the S and P. Five hundred. So it feels like Wall Street has erased all trace of his past Laurels.
Thomas, Let's go back a little bit to talk about how Disney found itself in this place, and maybe a good way to start is at that moment when Eiger, riding high, decides he's going to step aside and hand over the company to his success.
The moment finally came when he anointed Bob Japek his hand picked successor. And this was a moment that had been postponed serially during his first tenure. He postponed his retirement four times before finally agreeing to step down as.
See or why did he keep hanging on?
I think that certainly in his first tenure, being Bob Eiger was an absolutely phenomenal gig to have. You know, on the one hand, you have your sixty five million dollars a year compensation package. On the other hand, you have unfettered access to Disney's four corporate jets. You're revered in town as one of the most powerful figures in all of Hollywood. You know, you have a seat at the table that is completely unmatched. You have the ear
of Spielberg, you have the ear of Jim Cameron. You have a fan base you know that is so incredibly devoted to the parks that you're able to build a growing number of attractions and know that people will always show up for them and review you for building them.
I think that he always knew that he was going to have to leave that life at some point, but was cognizant of how much he would miss it when he did, and so he postponed it four times, to the extent which colleagues of his ended up gifting him custom made license plate in jest, asking is their life after Disney.
And what happened then when he ultimately did decide to hand over the company.
If you look at it from a shareholder perspective, Bob Chapek is somewhat of an obvious choice in that he's delivered outsize performance at the park's business that used to run. He did a phenomenal job in consumer products before that, a phenomenal job in home video, and what Eiger has been telling his friends and confidants is that he mistook
those operational chops for leadership qualities. Critics of that assessment say that actually, Bobigan knew exactly the kind of person and the kind of businessman that Bob Shapeck was, and he knew knew that Bob Jaypeck posts absolutely no risk outshining him, outshining his legacy when Bob Jaypek set about running Disney as he saw fit, which was to basically transform the company into a sprawling data aggregator, wherein he would track viewing habits of his customers at home on
Disney Pluss, and he would track spending habits of his customers in the parks, you know, so as to better market discounts and spending opportunities to them. I think that Bob Byger saw a real risk that the vision that Bob Jaypeck had would devalue the Disney brand. He was also very cognizant of some of the riffs that were being created across Hollywood, certainly with Scarlett Jansen when Bob Japek disclosed her salary and a dispute over a film
that she was involved with called Black Widow. Some of the fans had started to rebel against what they saw as being nickel and dimed in the parks. So it
used to be that. Bob Bieger during his first tenure, certainly, and we've seen this as well in his second, values the works of creatives immensely, and when Bob Japek restructured the company, many critics of that restructuring argued that it actually removed power from creative executives, and so the people running those film and TV businesses felt as though they were completely disenfranchised, completely disempowered at a time when they
were seeking to create new franchises for the business released new blockbusters both in theaters and on streaming.
Thomas ultimately, though, it wasn't just the stylistic differences from the way things were done before that made life impossible for Bob Japek.
Absolutely. I think there are a couple of, you know, moments in time that really point to a question of gosh, you know, what is happening at Disney. Certainly one of them is when Florida Governor run Desentis drafted a bill informally known as the Don't Say Gay Bill that would prevent teachers from discussing sexual orientation with students in Florida schools. A huge number of Disney employees really insisted that Disney
come out and condemn that bill. Japek refused to condemn the bill initially, which led to wark counts, and then he publicly did condemn it.
I called Governor desantiasis morning to express our disappointment and concern that if legislation becomes law, it could be used to unfairly target gay, lesbian, non binary and transgender kids and families.
Which led to a high profile war with descentis that is ongoing to this day, both the company and the Governor that are embroad in illegal battle that shows no signs of winding down anytime soon. The second test of his leadership is his devotion to growing streaming subscribers at a time when Wall Street was really favoring that. It
was favoring unbridled growth over profitability. I suppose the past year or so, a number of banks, in fact, all banks are much more focused on the profitable growth of those streaming services versus just attracting subscriber numbers. When Chapek disclosed back in November of last year a one point four to seven billion dollar loss in Disney's streaming service, it caught Wall Street entirely by surprise. It sent the shares down by the most in years and ultimately made
Chapex's vision for the company untenable. After that enormous loss in the market value of the company, the board convened and decided that the company should really be run by somebody who would be able to return it to its past form. And I suppose the issue critics would say with the board is that none of the members really have experience in media entertainment, so the only person they could think to return to the company's helm was the Baiger.
When we come back, Eiger returns triumphant, but the cheers don't last long. Thomas, I don't think anyone who was close to Eiger was at all surprised that he came back to the company.
Then, I think that's a great way of putting it. I mean, certainly, not only because everybody got a heads up before he took the job back, but also because he hadn't been telling his friends and confidence and honestly some of Hollywod's most important figures. He feared that Jaypek
was squandering the company's soul. He had suggested that Bob Chaypek was not the right fit for that role, and then the question became well, who would be the right fit for that role, and I think that Bobb Iger sincerely believes that he is the best possible fit for that role at this point in time.
Thomas, What did Bob Chapek have to say about all of this?
Bob Chaypek has declined to comment on every item in our story that concerns him, that concerns the company, that concerns Bob Iger's return, and I haven't seen him quote or interviewed anywhere else. So I think that since leaving Disney in November of last year, he has stayed very quiet on this whole state of affairs. When I Go returned to the company, he was very vocal that Shapek's silence on don't say gay was a matter of right or wrong. I think that that certainly ranklled Shapek to
an enormous degree. I think that he felt as though he didn't need to be coached from the sidelines.
Broadly. What was the reaction to the news that Eiger was returning to Disney.
Well, it's interesting because while it wouldn't have been a surprise to his friends and confidants, who really had a sense that he wanted his job back, to outsiders, looking in. It really felt like an episode of succession. And I think there was enormous elation across the Disney employee base because at that point in time, there was no inkling of the fact that Barbiger would be carrying out seven
thousand job cuts across the company. So when his return was first announced, which I think was in an email to employee at nine forty two pm in late November, it was a state of unbridled joy. I mean, I have heard from sources familiar that employees already at their desks in Asia leapt for joy. And so one indication that came very quickly after Eiger's return was that Disney has a private island that it owns in the Bahamas
called Castawiki. A sign on the pump house there that had been painted with Bob Chapek Mastershipbuilder was quickly replaced and painted over by one with Bob Ayger's name.
So Igery does return to the company and where did he find?
I got returned to the company in November of last year and says that he found a company in much worse shape than he'd imagined it would be in I think that's difficult for a number of critics and observers to believe because he was only out of the business for eleven months, and also he has probably the most formed opinion of anybody on Disney's prowess in the industry and in the business world. Nonetheless, he says that he was really taken aback by the speed at which the
linear TV business is collapsing. I think what's important to remember here is that those linear networks, which include ABC, ESPN, FX, free Form and National Geographic, before the pandemic, they contributed about a third of Disney's revenue and about half of its profit. He says that he's been surprised at the
speed at which they're collapsing. And this is a pretty important point really in the widest state of Disney, because the wider state of Disney is the result of a huge deal that Bobaya carried out in the twilight of his tenure, which was the acquisition of twenty first century
Fox for seventy one point three billion dollars. And with that acquisition he gained a number of networks, including FX and National Geographic, that are today contributing to that profit the line despite the deal only being four years old, and thus relatively fresh.
So what is Eigernow doing to turn things around at the company?
I think that Bob's priority, certainly in the short term, is appeasing Wall Street as best he can and convincing investors and analysts that the company can be the growth engine that it once was. He has pledged to cut five point five billion dollars out of the company's annual costs, and the company is set to exceed that. As I mentioned, he's moving forward with thousands of layoffs, and he has pledged to reinstate a modest dividend at the end of the fiscal year. So I think that in the short
term that that is what he's trying to do. He's trying to gain the confidence of investors back, even though shares today are low than they were than when Chapek was ousted from the company. And he's also moved to restore authority to the creatives who had felt marginalize under
Chapec's tenure. So he pretty much disbanded the structure that Chapepek had set up and reformulated the company around three pillars Disney Entertainment, which is run by its head of TV and its head of Film and they have combined oversight over streaming than Disney Parks, experiences and products. And he's also broken out ESPN, which is very interesting. We're going to be getting access to those financials for the first time next month.
One other thing with ESPN that's been a little controversial is that they're getting into sports betting.
Absolutely so, I think that something that Bob had been incredibly reluctant to consider during his first tenure was involving ESPN in any sorts of sports betting due to the reputational concerns and the reputational impact that it would have on the Disney brand. He's been much more amenable in recent years to quickly plug holes at a time when ESPN's linear business is certainly under a tremendous amount of pressure.
And Thomas, you also right that one of Disney's fable divisions, its movie division, is also under a lodder pressure, and he's making moves to cut costs there too.
The film division at Disney is one of the world's most successful historically, if not the most successful. For example, of the Guardians three film that grows close to a billion dollars.
Someday, I'm gonna make great machines that fly, and me and my friends are gonna go flying together into the forever and beautiful sky.
Lilah the second Avatar film from Jim Cameron that is now the third highest grossing film in history.
So what does her heart be?
Sound like?
Mighty?
There are spots of prowess and brightness within the film division, but the majority of Disney's big budget releases have really really struggled in recently. For example, light Year, a Toy Story prequel, which is very difficult to believe given the affinity that people have for that franchise and that people
used to have for Pixar in general. A number of film goers are also increasingly fatigued by the number of superhero pictures and TV shows out there that relates specifically to the latest and manner wat film, and has led Eiger to say publicly that he's questioning the need for any second or third film based on any one character, and he's seeking to very much refresh the Marvel slate
in order to fix some of those creative problems. He has delayed disney slate of films by as long as three years, pushing some films back all the way to twenty thirty one, so I think that you can see he's seeking to take action now in order to be at a much better place five years from now. Nonetheless, because that development, production, and release pirit is so long, you could certainly argue that some of those problems were festering before he even left the company the first time around.
You've talked about how Eiger has been admired by creatives, people who actually make things instead of just executives and accountants, and yet during the recent Hollywood strike he came off as something almost like a villain.
That's absolutely right. I mean, it's really interesting because he was long held as a champion for creators, and I think that the degree to which he empowered those creatives during his first tenure, and the degree to which he's now restructured the company since his comeback, handing authority back to creatives really speaks to that affinity that he has for the creative process and for the people leading it.
He gave an interview to CNBC in which he said that the requests of some actors and writers, the very creative community he's always sought to empower, those requests were simply unrealistic.
The expectation that they have that is just not realistic, and they are adding to a set of challenges that this business is already facing that is quite frankly, very disruptive. I know they're.
Not number of people have since attacked him for those comments online. Certainly the head of the Actors' Union said that Barbiega was completely out of touch and in effect said that Disney should muzzle him and never allow him to speak on these issues again.
There he is sitting in his designer clothes, just go up his private jet at the billionaire's camp, telling us where unrealistic when he's making seventy eight thousand dollars a day.
That, of course is fran Dresher. She's the Actors' union president who led the TV and movie actors strike.
He has been held up as the villain ever since those comments in the wider Hollywood creative community. But I think that he's trying his very best now to find resolution and seeking to get the creative community back to work, largely by offering much of what it was that they were seeking in the first place.
After the break, Will there so called house of Mouse remain under one roof What does this company under Bob Eiger or his ultimate successor look like five years from now.
Well, it's very interesting. I think that certainly what he said publicly that the linear networks may not be caught of the company's future really suggests that the likes of ABC FX, free Form, ESPN even will be somehow spun off and won't be included in Disney's future going forward. He's also said that he's seeking a partner for the ESPN business. You're looking at potentially selling a minority stake in that business or forming a joint venture in order
to help its transition to streaming. So I think the interesting question, and this has been put to me by sources familiar with the matter, is whether Bob's end game is ultimately Disney up into two separate companies, one to house all of its intellectual properties, so it's films and TV shows and streaming assets, and the other to run
its parks business. The thought of Disney splitting up its crown jeols is very difficult to process, but nonetheless it can be done quite efficiently if you establish a permanent licensing agreement between the two properties. And then the question becomes what happens to that content business? Do the two companies operate independently and publicly forevermore, or is the content piece of it acquired by a larger tech platform that
is seeking to very rapidly grow its subscription business. Many sources that I've spoken to for this story have consistently insisted that Bob's endgame is selling that piece of the company to Apple. Bob served for a number of years,
almost a decade on the board of Apple. He suggested himself in his memo that had his very good and successful friend Steve Jobs still been alive today, he definitely would have seen a possibility of merging Apple with Disney, or at the very least discussing the proposal.
And you write in your story that Eiger may or may not have given sort of a tantalizing clue about his desire to see Apple in Disney in talks.
So this has been the subject of much speculation among the Disney executives that I speak to. Physical copies of Steve Jobs's collection of Memoirs and Speeches that was published in April was distributed to about thirty thousand Disney employees. The inside joke within some executives of the company on the day that they received the gift was you know, gosh? Is he subtly hinting at talks that could be to come or talks that are happening now that would see Disney folded into Apple.
What if anything, as Apple said about this idea of disee Disney and Apple becoming partners.
Apple has never commented publicly on the prospects of an acquisition of Disney or any acquisition for that matter. Apple's business model is not at all predicated on a merger and acquisition strategy, which is very interesting. I mean, its largest acquisition to date has been beat to the tune of three billion dollars. This would really be a multiple of that, and I think that there would certainly be a number of cultural integration concerns that the two companies
would have to address. But I think that much of this speculation is more emanating from Eiger's desire to see these two companies ultimately matched than it is from any strategy that Apple has communicated to either its investors or its followers in TAMAS.
What is Bob Iger said about your reporting?
Disney has declined to grant me an interview with Bob and it's not for lack of trying over the past several months in order to be fair to him and fed to the company, but he has only done a handful of interviews since his return.
What happens next for Bob Iger and Disney.
I think that certainly, when he came back, you know, both he and the board stated publicly that he had come back to both reset the company in the right direction and figure out Disney's perennial succession problem. He was given a contract of two years with Whin to fix those issues. Back in July, the board extended his contract
all the way through twenty twenty six. Now, on that basis, I feel as though the conversation about succession is much less urgent today than it felt when he returned, and so it's impossible to know today truly who will be running Disney come twenty twenty six, or even the shape that Disney will have taken in twenty twenty six based
on what ascid disposals might be available to him. What's interesting to consider is that Bob's run so far is truly diametrically opposed to his first tenure, and as a result of that, you have to imagine that he either must truly love the company and love the brand to put himself through this one more time, potentially at the
expense of his legacy, or it's simply the case. As sources told me during his retirement that he can't imagine himself doing anything else than being the CEO of the Walt Disney Company.
Thomas, this is just fascinating. Thanks so much for taking us inside Disney.
Well, thank you so much for making the time speaks to me.
Thanks for listening to us here at The Big Take. It's a daily podcast from Bloomberg and iHeartRadio. For more shows from iHeartRadio, visit the iHeartRadio app, Apple Podcasts, or wherever you listen, and we'd love to hear from you. Email us questions or comments to Big Take at Bloomberg dot net. The supervising producer of The Big Take is Vicky Ergolina. Our senior producer is Catherine Fink. Our producers are Moberrow and Michael falleerro Hiel de Garcia is our engineer.
Our original music was composed by Leo Sidrin. I'm west Kesova. We'll be back tomorrow with another Big Take.