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DISNEY’S WILDEST RIDE: IGER, CHAPEK AND THE MAKING OF AN EPIC SUCCESSION MESS

Published Wed, Sep 6 20236:00 AM EDTUpdated Thu, Oct 19 20232:07 PM EDT
Alex Sherman@sherman4949
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Key Points
 * What did a private bathroom, Oogie Boogie and a hippo have to do with the
   behind-the-scenes chaos between Bob Iger and Bob Chapek at Disney?
 * Here’s the inside story of a CEO succession plan gone awry — a cautionary
   tale about ego and hubris at the highest levels of corporate America.
 * This article is based on conversations with more than two dozen people who
   worked closely with Iger and Chapek between 2020 and 2022.

In this article

 * DIS+0.42 (+0.50%)

Follow your favorite stocksCREATE FREE ACCOUNT
Illustration by Elham Ataeiazar

After pushing back his retirement four times, Bob Iger finally made the leap. On
Feb. 25, 2020, he announced he would step down as Disney’s CEO. His hand-picked
successor, Bob Chapek, then Disney’s parks chairman, would take over the
day-to-day job of running the company, effective immediately.

As part of the changing of the guard, the Disney board suggested the new CEO
should take over Iger’s expansive office at Disney headquarters in Burbank,
California.



There was just one problem. Iger had no interest in moving out. He wasn’t truly
leaving Disney, anyway. His succession plan allowed him to stay on as executive
chairman for 22 more months. Chapek would report to him and the board. Iger
would also “direct the company’s creative endeavors” — nebulous phrasing
suggesting he would retain control of movie and TV content and operations.

There was a practical reason Iger didn’t want to move out of his office. It had
a private shower, built for former CEO Michael Eisner, and a vanity for
shaving. Iger, now 72, consistently woke up around 4:15 a.m. to work out and
then shower. On evenings when Iger was heading out for a Disney premiere, award
show or benefit, he would often take a second shower — this time in the office.

Iger told Chapek that he lived for those “two-shower days,” according to people
familiar with the conversation.

Iger chose Chapek, now 64, as his successor because of Chapek’s integrity and
business acumen, not his interest in Hollywood socialization. Chapek has the
outward corporate demeanor of a Midwestern businessman — or, as one colleague
jokingly put it, “a tuna salad sandwich who sits in front of spreadsheets.” He’s
a risk-taker who’s not afraid to upend the status quo, but he’s not a schmoozer
by nature. Whereas Iger holds court around his Brentwood mansion — a short
stroll from celebrities, producers, super-agents and other Disney executives —
Chapek lives about an hour’s drive from downtown Los Angeles, in Westlake
Village. Iger enjoys yachting; Chapek is more of a power-boating and kayaking
kind of guy. 

Both men agreed Chapek wouldn’t have much need for the office shower; Chapek
would instead move into a smaller office on the same floor. 



On the wall of Iger’s office bathroom hung two posters. The first was a framed
collage of newspaper front pages and magazine covers with images of Iger
celebrating Disney’s purchase of Marvel in 2009. The $4 billion deal was
arguably Iger’s shrewdest decision as CEO and one of the best media and
entertainment acquisitions in U.S. corporate history.

The second picture spoofed the movie poster for the 1975 Clint Eastwood thriller
“The Eiger Sanction,” but the image was of Iger instead of Eastwood, with the
title “The Iger Sanction.”

Zoom In IconArrows pointing outwards

LMPC | Getty Images

“The Eiger Sanction” is about an assassin who comes out of retirement for one
last job.

On Nov. 20, 2022, Bob Iger came out of retirement to become Disney’s CEO once
again. The board had fired Chapek. Within days, Iger fired Chapek’s closest
advisors, including his former chief of staff, Arthur Bochner; his assistant,
Jackie Hart; and his de facto second-in-command, Kareem Daniel. In July, Iger
extended his contract through 2026, the fifth time he has pushed back his
departure as CEO.

Chapek confided to a friend that his tenure at Disney was “about three years of
hell,” defined by one overriding theme: his unrelenting fear that Iger wanted
his job back. 

Iger, meanwhile, has told peers and colleagues he returned to Disney to correct
what he sees as one of the biggest mistakes of his career — choosing Chapek. 

“When the two people at the top of a company have a dysfunctional relationship,
there’s no way that the rest of the company beneath them can be functional,”
Iger wrote in his autobiography, “The Ride of a Lifetime.” “It’s like having two
parents who fight all the time.”

Iger wasn’t describing his relationship with Chapek — he was recalling his
observations living through the meltdown between Eisner and his No. 2, Michael
Ovitz, in the 1990s. The pair got along great for years, until they became the
top two people at Disney. Within 16 months, their relationship had exploded and
Ovitz was fired. 

But like a son who vows never to repeat his father’s mistakes and then proceeds
to do just that, Iger’s relationship with Chapek followed a strikingly similar
pattern.

There’s no company in the world more associated with storytelling than Disney;
its most famous movies are modern versions of timeless fables. The story of the
Chapek era is timeless in its own way. It’s a tale of how good intentions
clashed with hubris and ego can erode one of the most famous organizations in
the world — a case study in corporate dysfunction and succession gone wrong. As
Iger and the Disney board resume their search for a successor, a critical
question looms: Have they learned the moral of the story?

watch now
VIDEO5:1305:13
Disney’s succession mess: The inside story of Iger and Chapek
CNBC News and Programming


This account is based on conversations with more than 25 people who worked
closely with Iger and Chapek at Disney between 2020 and 2022. They declined to
be named, as the events and conversations were private. Many of the details have
never been reported. 

Through a representative, Chapek defended his record as Disney CEO in a
statement to CNBC.

“Bob is proud of the work he did in the course of his 30-year career at Disney,
particularly during his nearly three-year run as CEO, steering the company
through the unprecedented challenges of the pandemic, and setting the course for
business transformation as he and his team took the disruptive yet necessary
steps for business revitalization and long-term growth,” said a Chapek
spokesperson.

Iger declined to comment for this story.


IGER’S SUCCESSION PLAN

Iger’s decision to step down as CEO not only shocked the entertainment and media
worlds, it took even his close associates by surprise. Disney’s head of
streaming, Kevin Mayer, whom many outsiders had pegged as Iger’s likely
replacement, found out minutes before Iger’s public announcement. “I didn’t know
that was coming at all,” Mayer told CNBC in 2021.

In February 2020, as Disney’s head of streaming, Kevin Mayer, was in the line of
succession for CEO. But Mayer, seen here on Sept. 29, 2022, and colleagues were
stunned when Iger announced Bob Chapek would replace Iger immediately.
Bryan van der Beek | Bloomberg | Getty Images

But Iger figured the timing was right. He was getting close to 70 and he’d been
CEO for almost 15 years. The company’s recently launched streaming service,
Disney+, was an instant success. And Iger was convinced Chapek was the right
caretaker to continue his legacy.

Chapek grew up in Hammond, Indiana, “the son of a World War II veteran and a
working mother,” as he has described it. His family took annual trips to Walt
Disney World when he was young, seeding his genuine love for the company’s theme
parks. He studied microbiology at Indiana University and got his MBA from
Michigan State University. He joined Disney in 1993 and by 2015 had risen to
become chairman of the parks division. 

For more than two decades, Chapek earned Iger’s respect as a shrewd cost-cutter
and a low-drama manager. Iger especially valued Chapek for his integrity and
operational expertise. At each of the divisions Chapek led at Disney — home
video, consumer products and parks — profit and revenue soared under his watch.
He also benefited from some good timing, running the home video division when
Disney animation hits such as “The Little Mermaid,” “Aladdin” and “Beauty and
the Beast” were first sold on VHS, and piloting consumer products just as
“Frozen” launched. 

Chapek cemented his reputation with Iger and the board during the construction
of Shanghai Disney, the $5.5 billion theme park that opened in 2016 after months
of delays. Iger and Chapek traveled to Shanghai, China, together more than 10
times as Chapek got cost overruns and construction headaches under control. His
success helped Iger move on from former Chief Operating Officer Tom Staggs, who
was then in line to take the CEO job after Iger. Staggs left the company just
before Shanghai Disney finally opened.

Tom Staggs, then Disney COO, announces the Iron Man Experience planned for Hong
Kong Disneyland in 2016. Staggs had been promoted to the job specifically to be
Iger’s heir apparent.
Walt Disney Parks and Resorts

It was Iger’s experience with Staggs — who didn’t secure Disney’s top job after
being promoted to COO specifically to be Iger’s heir apparent — that made Iger
decide Chapek should start as CEO immediately. Iger told board members he didn’t
think Chapek needed to audition for the role. 

Years later, Iger would tell others he mistook Chapek’s stellar operational
track record for leadership skills.

This was a striking admission for Iger, who prides himself on his emotional
intelligence. He’s charming with co-workers and at ease with celebrities — a
Hollywood star in his own right. These traits paid dividends over the years. He
convinced Steve Jobs to sell him Pixar, cajoled Ike Perlmutter into selling him
Marvel, and persuaded George Lucas to sell him “Star Wars” and its bounty of
associated intellectual property. In 2017, he struck a deal with Rupert Murdoch
to buy most of Fox. 

Some Disney executives have privately speculated that Iger chose Chapek because
he wouldn’t rival him in either charisma or celebrity — or, more cynically,
because he was unlikely to eclipse Iger’s glittering record at the company. 

What’s clear is Iger didn’t know Chapek as well as he should have. On a
day-to-day basis, Iger worked far more closely with Mayer and Staggs. Iger
doesn’t mention Chapek once in his 2019 autobiography outside of the prologue —
even though by then Chapek was at least tentatively in line to be Iger’s
preferred successor. For comparison, Iger spends more than five pages of his
236-page book discussing the TV show “Twin Peaks.”

The entire process of naming a successor was bumpy. For a start, Iger kept
delaying his retirement: In 2013, 2014 and then twice in 2017, he renewed his
contract after saying he intended to walk away.

In 2017, according to people familiar with the matter, Iger first told Chapek he
was in the running to be his potential successor. The vetting process for CEO
would begin with Chapek flying across the country to meet one-on-one with board
members — not unlike contestants’ hometown dates on Disney’s hit reality show
“The Bachelor.” Iger had gone through a similar process, taking 15 meetings with
directors before securing the CEO position in 2005.

But Chapek never did the meetings. Iger agreed to buy the majority of Fox’s
assets in a $71 billion deal and renewed his contract as a condition of the
purchase, pushing back any talk of succession.

In January 2020, Iger told Chapek the plan was back on. This time, Iger told him
that instead of the one-on-one board interviews, Disney’s lead independent
director, Susan Arnold, would be in touch. Days later, Arnold delivered the news
to Chapek over lunch at The Rotunda, Disney’s executive dining room. She and
Iger had both recommended Chapek for the job, and the board had approved. Chapek
sat on the secret for six weeks before the public announcement.

Peter Rice, seen here on May 3, 2017, was head of Disney’s TV entertainment
business in 2020. He was one of several executives passed over for the CEO job
in favor of Chapek.
David Paul Morris | Bloomberg | Getty Images

In choosing Chapek, Iger and the directors had passed over Mayer and Peter Rice,
then head of Disney’s TV entertainment business. The board felt the leadership
styles of both men were too brash, according to people familiar with some of the
directors’ thinking. Also, Mayer had never run a business of scale, and Rice had
joined the company from Fox less than two years earlier.

However, Iger never consulted anyone who worked directly for Chapek in the runup
to naming him CEO, according to people familiar with the matter.  

He had pegged Chapek as someone who would accept his somewhat unusual succession
plan, in which Chapek would serve both as CEO and CEO-in-training while Iger
remained his boss and ran “creative endeavors” for 22 months as executive
chairman. 

“Any of the big creative decisions that have to be made, I fully intend for Bob
[Chapek] to be at my side,” Iger told CNBC’s Julia Boorstin on the day of the
announcement. “What this is about, really, is, we believe, a really good
succession process and a really smart transition process.”

WATCH: Bob Iger steps down as Disney CEO and announces Bob Chapek will take his
place

watch now
VIDEO1:3801:38
Bob Chapek, Disney’s new CEO, says he will follow path laid by Bob Iger
Fast Money


Iger needed full buy-in from the board for his plan, but that did not prove
difficult. Over the past 15 years he had become the gold standard of legacy
media and entertainment CEOs. From the time he’d taken over at Disney in 2005 to
the end of February 2020, Disney’s share price increased about 420%, far
outpacing the S&P 500 index, which gained about 150%.

By 2019, Iger had personally selected every member of the board, which is
surprisingly lacking in media and entertainment experience. Iger is personally
close with several directors, including Nike Executive Chairman Mark Parker and
General Motors CEO Mary Barra. In addition, the wife of another board member,
Michael Froman, then vice chairman of Mastercard and now president of the
Council on Foreign Relations, had been housemates with Iger’s wife, Willow Bay,
at the University of Pennsylvania.

Zoom In IconArrows pointing outwards



It was from Parker that Iger got the idea for his succession plan, according to
people familiar with the matter. In October 2019, Parker, who was then CEO of
Nike, announced he would remain as executive chairman of Nike while passing the
CEO torch to John Donahoe.

That structure also happened to be nearly identical to one that Iger’s
predecessor Eisner tried and failed to secure for himself. In 2004, Eisner
floated a plan in which he would step down but remain as chairman, while Iger
would take over as CEO. 

But unlike Iger, Eisner had lost his grip on the board. Directors Roy Disney, a
nephew of Walt Disney, and Stanley Gold resigned their seats and in a blistering
letter objected to the notion of Eisner remaining as chairman. ”[His]
‘succession plan’ is for a company led by Michael Eisner and his obedient
lieutenant, Bob Iger, to be handed over to ... Michael Eisner and Bob Iger,”
they wrote. “Any arrangement that permits Mr. Eisner to remain as Chairman after
relinquishing his position as CEO is contrary to best governance practices.” 

Michael Eisner, former Disney chairman and CEO, is seen here on July 11, 2023.
In 2020, Iger came up with a succession structure that was nearly identical to
one his predecessor Eisner tried and failed to secure for himself in 2004.
David A. Grogan | CNBC

Eisner gave up his chairman role in March 2004 after 43% of Disney shareholders
withheld their votes to reelect him to the board the year before. He resigned as
CEO in September 2005. Iger assumed leadership of the company without anyone
hovering over his shoulder. This allowed him to move quickly on decisions that
Eisner might not have agreed with, such as buying Pixar. Iger describes the
acquisition process at length in his autobiography.

Chapek wouldn’t have nearly the same degree of freedom. 


BIG BOB AND LITTLE BOB

In “The Ride of a Lifetime,” Iger recalls watching Eisner leave the Disney lot
on his last day at the company: “It’s one of those moments, I imagine, when it’s
hard to know who exactly you are without this attachment and title and role that
has defined you for so long.” 

Just weeks after Iger announced his departure, Chapek began to wonder if Iger
had regrets, according to people familiar with his thinking. Equally soon, Iger
started to think he’d made a mistake. 

At first, the signals were tiny. When Iger announced his departure to staff on
Disney’s Burbank studio lot, he jokingly called himself “Big Bob” and Chapek
“Little Bob,” a light reminder to employees about who was still the boss.

On March 10, 2020, about two weeks after the handoff, Chapek, Iger, Chief
Financial Officer Christine McCarthy and a small handful of other Disney
executives flew from Los Angeles to Raleigh, North Carolina, for Disney’s annual
meeting. 

At the front of the plane, Iger and Chapek were going over logistics and
fretting about coronavirus. Iger caught Chapek off guard with some news. Chapek,
not Iger, would lead the question-and-answer portion of the meeting, an annual
ritual Iger called “stump the CEO.” 

During his 27 years at the company, Chapek had only attended one annual meeting
— as a guest in the audience. 

Chapek, then Disney CEO, speaks during a media preview of the D23 Expo, on Aug.
22, 2019.
Patrick T. Fallon | Bloomberg via Getty Images

Since Chapek’s background at Disney had been in parks, consumer products and
distribution, he knew little about the inner workings of ABC, ESPN or the movie
studio. He’d been given a large binder of background material by the investor
relations team, but now he had to be ready to answer questions on any topic,
which could range from Disney’s stance on the environment to the future of ABC
News. 

After a couple of hours of general preparation, Chapek retreated to a private
area in the back of the plane and closed the door to study. Iger was perplexed
and expressed his confusion to McCarthy. He assumed the men would run through
possible questions and answers throughout the flight. Iger walked to the back of
the plane to see if Chapek needed help preparing.

“Isn’t it all in here?” Chapek asked, holding up the binder, according to a
person on the plane.

The basics, yes; but not the nuances, Iger replied. Chapek, who prefers to learn
by reading and memorizing material — and thought he’d already spent the first
hour or two prepping with Iger — said he’d rather stay in back and study. (The
first question Chapek would receive was whether he thought there was bias within
ABC News — a topic about which he knew little but had prepared for on the plane,
according to people familiar with the matter.)

Iger would later relay this fleeting exchange to friends as one of the first
moments it occurred to him that he may have made a mistake. He had thought he
was handing off the company to a collaborative leader who would work with him,
side by side, for the next 22 months. Iger began to worry about whether Chapek
had plans of his own. 

Chapek’s first concerns that Iger might be having regrets came during the next
day’s flight back to Los Angeles, after a brief stop in Orlando for a Disney
town hall.

Coronavirus fears had billowed into a full-fledged panic. On this flight, Chapek
stayed up front with McCarthy and Iger, who got on a call with California Gov.
Gavin Newsom to discuss whether Disneyland should be shut down; it would be by
the morning of March 14. 

Christine McCarthy, seen here on April 29, 2019, was Disney’s chief financial
officer. As Iger’s departure from Disney prompted other executives to leave,
Chapek worked overtime to make sure he retained the veteran McCarthy.
Michael Kovac | Getty Images

At some point, amid the chaos, McCarthy suggested to Chapek that they do their
first weekly CEO-CFO meeting. They were around the third agenda point when Iger
snapped. It was disrespectful to conduct this meeting right in front of him, he
complained curtly, according to a person familiar with the exchange. 

It was rare for Iger to show Chapek a side of himself that wasn’t “Disney nice”
— the term many executives use for a corporate culture that emphasizes kind and
respectful interactions. Chapek and McCarthy quietly finished their meeting, but
Chapek told others after the flight he left with the distinct impression that
Iger was having second thoughts about relinquishing the job he’d held for 15
years. 

These dueling perceptions that manifested themselves on that March round-trip
flight — Chapek as bumbling and isolated; Iger as unwilling to give up control —
would define the next 2½ years.


RELATIONSHIP BREAKDOWN

Just days later, the two men had their first strategic disagreement. Chapek
wanted to furlough about 100,000 parks employees after Disney World closed its
gates. Iger advocated waiting for the government’s Covid-19 relief act to kick
in so the furloughed employees would have some government money to hold them
over. Iger called then House Speaker Nancy Pelosi and Senate Minority Leader
Chuck Schumer, both Democrats, to ask them how close the U.S. government was to
passing the bill. Ten days, they told him. Though it wasn’t a creative issue,
Iger overruled Chapek. Disney didn’t furlough employees until April.

Around the same time, then New York Times media columnist Ben Smith published a
story about the pandemic’s disastrous impact on Disney. After “a few weeks of
letting Mr. Chapek take charge,” Smith wrote, Iger had “effectively returned to
running the company.” Iger didn’t deny this. “A crisis of this magnitude, and
its impact on Disney, would necessarily result in my actively helping Bob and
the company contend with it, particularly since I ran the company for 15 years!”
Iger said in an email to Smith.

Chapek was furious. He called Iger and told him he didn’t need a savior,
dropping a carefully placed expletive or two, according to people with knowledge
of the call. It was the first time in more than 20 years that Chapek and Iger
had had a major argument. Iger would tell people no colleague had ever spoken to
him like that before in his life. 

Chapek also complained to the Disney board about the story, demanding to be
given a seat immediately; Disney had already promised him one but had not set a
date. Chapek did not want Iger and the board talking about him or his job status
while he wasn’t there, according to people familiar with his thinking. Three
days after Smith’s story ran, Disney complied. Arnold privately had a strongly
worded conversation with Iger about setting Chapek up for success rather than
undermining him, according to people familiar with the conversation.

Arnold declined to comment for this story.

WATCH: How Bob Iger returned as CEO: Disney’s succession saga

watch now
VIDEO2:4902:49
Disney’s succession saga: Bob Iger’s wild ride to return as CEO
Squawk Box


The relationship only deteriorated from there. Iger began privately grumbling
that Chapek wasn’t involving him in company decisions. Iger told colleagues that
he felt like he was on a bus that the other passengers wanted him to drive but
he couldn’t reach the steering wheel. He began to understand that Chapek was not
going to be an “obedient lieutenant,” as Roy Disney and Stanley Gold had once
theorized Iger, himself, would be as Eisner’s chosen CEO.

At the end of a June board meeting, conducted via Zoom, Disney directors asked
Iger — but not Chapek — to stay on the call for a customary “executive session.”
According to people familiar with this conversation, Iger told the board his
relationship with Chapek had soured and that Chapek wasn’t exhibiting proper
leadership qualities. The pandemic was shaking Disney to its foundations, and
Iger believed Chapek should be working more closely with the man who had run the
company for the last 15 years. 

Bob Iger, Disney CEO, during a CNBC interview, Feb. 9, 2023.
Randy Shropshire | CNBC

After Iger left the call, the board brought back Chapek and asked him if
employees were aware of how bad things had gotten between the two men. Chapek
said he didn’t think so, but he knew Iger had been complaining about him to
Disney confidants and Hollywood executives and agents. 

Iger and Chapek never participated in a face-to-face mediation about their
working relationship. The board never demanded it. Privately, Arnold counseled
Chapek to be patient, something she’d continue to do for months to come in a
series of coaching sessions. Let Iger run creative, she said. In 18 months,
Chapek would have control of everything. Until then, don’t engage in turf wars.

In less than four months, Iger’s plan for a managed succession had gone up in
flames. 


DIVIDING THE COMPANY

When Chapek took over Disney, it was clear that Wall Street cared more about its
streaming results than any other division of the business. Iger had already
begun to reposition the company accordingly: “We’re all in,” he said when he
unveiled Disney+ in April 2019. Disney+ added more than 10 million paying
subscribers in 24 hours. 

However, Chapek saw two major problems with the streaming operation. First, he
believed there were too many people making decisions about what content was
slated for Disney+. Iger and Mayer had tasked this responsibility to Agnes Chu,
senior vice president of content, and Ricky Strauss, president of content and
marketing for Disney+. Both Chu and Strauss have since left Disney.

Others wanted a say, including Mayer, Chu and Strauss’s boss, as well as Marvel
Studios President Kevin Feige, Lucasfilm head Kathleen Kennedy, and the heads of
Walt Disney Television and Walt Disney Studios. Mayer told Chapek the structure
was messy and needed fixing.

Chapek brought a business school mentality to this challenge, which naturally
rubbed creative executives the wrong way. He often cited the concept of ARCI —
which stands for “accountable, responsible, consulted and informed” — as a
framework for ensuring clear decision-making structures. Chapek would often say,
“Who’s got the A?” — referring to accountability. With streaming, the answer
wasn’t clear.

Second, Chapek understood that streamed movies were still seen as less
prestigious than those with a traditional theatrical release. The chair of Walt
Disney Studios, Alan Bergman, and his direct reports were reluctant to give
projected hits to Disney+ or Hulu. Actors and directors overwhelmingly still
wanted a box-office release. Even during Covid, Disney didn’t abandon exclusive
theatrical releases, unlike WarnerMedia, which put each of its 2021 films on HBO
Max and in cinemas on the same dates. 

Alan Bergman, chairman of Walt Disney Studios, at the D23 Expo, Sept. 10, 2022.
Bergman lost some decision-making power under Chapek.
The Walt Disney Company via Getty Images

But box-office returns weren’t driving investor sentiment — streaming was. And
during the early months of Covid, Disney had limited inventory because
production on new TV series and movies had ground to a halt. Chapek wanted to
put premium programming on Disney+ as soon as possible. 

His idea was to implement a “make-sell” model, a phrase Chapek borrowed from
Iger, who had discussed it with former YouTube executive Robert Kyncl in 2018.
The idea was to create a clear division between people who make shows and movies
and people who sell them. Studio heads and content division leaders would still
choose which projects to greenlight, but someone else would have the authority
to bring needle-moving content to Disney+ or Hulu.

Companies such as Netflix, Amazon and Apple also separate distribution divisions
from content creation, and Chapek hoped that adopting a similar structure would
move Disney away from its legacy media habits. Investors valued Netflix far
higher than legacy media because of its growth profile; if Chapek could get
investors to view Disney as a technology company, they might reward him with a
share price multiple bump. 

To this end, Chapek created a new group called Disney Media and Entertainment
Distribution, or DMED. To lead the division, he chose Kareem Daniel, then a
46-year-old executive who had worked closely with Chapek for years, first as a
Stanford MBA intern in home entertainment and later in both distribution and
theme parks. The reorganization gave Daniel — and Chapek — veto power over movie
and TV show budgets.

Chapek had a series of meetings with Iger to discuss the restructure, including
conversations in Iger’s Brentwood house and walks around the neighborhood.
Despite the unaddressed tensions between the two, the conversations were
cordial, according to people familiar with their interactions. 

Iger didn’t try to stop Chapek’s plan, but he also didn’t give it his full
endorsement. His opaque communication style frequently confused Chapek,
according to colleagues. Chapek couldn’t tell whether Iger’s questions were a
passive-aggressive way to signal disapproval or a genuine attempt to get more
information.

Inside Disney, many executives saw the reorganization as a way for Chapek to
shift the power balance away from Iger’s base — TV and movie executives. Chapek
had long felt that Disney’s culture, under both Iger and Eisner, treated
non-creative executives like him as second-class citizens, according to people
familiar with his thinking.

But Daniel rankled many company leaders, who thought he lacked the industry
experience or humility for the job. Daniel was known for his intelligence, but
he was prone to harshly shooting down opinions with which he disagreed,
according to colleagues who worked with him. Chapek tried, unsuccessfully, to
coach him to be more “Disney nice.” 

Daniel declined to comment for this story.

Kareem Daniel was hired by Chapek to lead a new group called Disney Media and
Entertainment Distribution. The reorganization gave Daniel — and Chapek — veto
power over movie and TV show budgets.
Source: Business Wire

As agents and major Hollywood players realized Daniel was Disney’s new power
broker, his inexperience in the entertainment world surfaced in ways that
embarrassed some colleagues. He’d enlist several members of his communications
team to help him navigate the red carpet at premieres, causing some executives
to chuckle about his self-importance. His team would also prepare documents
advising him how to act during these events, complete with talking points for
impromptu conversations with celebrities, press or producers on the carpet. The
DMED communications division eventually ballooned to more than 100 employees,
which some on the team felt was wildly excessive. Given DMED’s importance to the
future of the company, Chapek didn’t intercede. 

Still, some of Daniel’s colleagues felt veteran Disney executives were being
unfairly dismissive of him. It was Daniel’s responsibility to set cost controls,
so irritating studio executives was practically a requirement of his job. Chapek
adjudicated dozens of conflicts between Daniel and Bergman, according to people
familiar with the matter. Both men got used to walking away frustrated.

Bergman declined to comment.

Directors, producers and actors panned the reorganization. In a town where
relationships matter, they didn’t know Daniel. They wanted clarity on whether
their movie would go straight to streaming or get a theatrical release, and
their usual contacts on the creative side could no longer give them answers. 

When it came to TV, there was less resistance to the organizational changes,
because streaming wasn’t associated with inferior quality. While creative
executives were cut off from important data they used to judge the performance
of their shows, in an era of declining broadcast ratings, landing on a streaming
service often increased the total audience and extended the lifetime of TV
series.

One exception was ESPN. Rights deals are the sports network’s lifeblood, and
ESPN executives were used to hammering them out directly with leagues. After the
reorganization, ESPN executives lost their budget power and gained layers of
bureaucracy.

ESPN Chairman James Pitaro, seen here on July 25, 2023, contemplated leaving the
company after Chapek’s reorganization.
Jesse Grant | CNBC

Chapek was trying to rearrange the company at a time when nearly all employees
were working from home. Virtual meetings ballooned in size. Conversations became
unwieldy. Junior executives from Daniel’s distribution team, who were now
involved in meetings because ESPN+ was being sold alongside Hulu and Disney+,
asked questions of league officials that exposed their lack of business
knowledge, according to people involved in the talks. 

ESPN Chairman Jimmy Pitaro was so demoralized he contemplated leaving the
company, according to a person familiar with the matter.

Pitaro declined to comment. 


AWKWARD SITUATION

Throughout all this, executives who had lost power under the new structure were
frantically complaining to Iger, who told them he didn’t agree with the
reorganization — an assessment Chapek heard only indirectly — but that there was
little he could do.

Many veteran Disney creative executives viewed the reorganization as an example
of poor decision-making. Chapek loyalists saw it as a necessary change to
modernize Disney, which they felt was being sabotaged by petulant TV and movie
executives, with Iger’s tacit backing, according to people who were directly
involved in the reorganization.

Around this time, in late 2020 and into 2021, Disney executives throughout the
company started to feel increasingly awkward about the Iger-Chapek relationship.
McCarthy warned Chapek that Iger’s criticism was reaching an increasingly wide
audience.

McCarthy declined to comment for this story.

Most tried to ignore the rift and just do what they were told. 

Zenia Mucha, who had been Disney’s head of communications since 2002, before
Iger started as CEO, took a more active approach. Reminding Chapek of his
predecessor’s legacy and stature, she urged him to portray a united front with
Iger. 

But Chapek didn’t trust Mucha, who was so close to Iger that some at Disney
referred to her as his second in command. Chapek felt she was Iger’s
communications advocate and not his. Others close to Chapek felt Mucha wasn’t
championing him as much as a communications head should be celebrating a new
CEO. Mucha argued the country was being ravaged by coronavirus and it wasn’t the
right time for puff pieces in Hollywood trade magazines, according to people
familiar with the matter. 

Zenia Mucha, then Disney’s head of communications, left, seen here with Barbara
Walters on April 23, 2012, urged Chapek to portray a united front with Iger. But
Chapek didn’t trust Mucha, who was so close to Iger that some at Disney referred
to her as his second in command.
Charles Eshelman | Filmmagic | Getty Images

Chapek felt he couldn’t fire Mucha with Iger still lurking as chairman,
according to people familiar with the matter. On the advice of the board, who
agreed that Chapek needed communications help, Chapek began soliciting advice
from external communications firm Brunswick Group in early 2021 — without
informing Mucha. He hoped Brunswick could improve his image in Hollywood, where
he was growing increasingly unpopular with frustrated content creators and
agents. 

Mucha declined to comment. 


THE SCARLETT JOHANSSON CONTROVERSY

The first half of 2021 was good for both Disney and Chapek. The share price was
rising. Disney+ topped 100 million subscribers in March, blowing away Netflix’s
gains throughout the year. The world was getting vaccinated and returning to
theme parks. 

During a June board meeting in Hawaii at Disney’s Aulani resort, members heaped
praise on Chapek, according to people familiar with the proceedings. This time,
instead of asking Iger to stick around at the end for a private executive
session, they asked Chapek. It was a small gesture, but one Chapek interpreted
as the board viewing him as the true leader of the company, according to people
familiar with his mindset at the time.

Chapek told colleagues he was finally feeling more comfortable in the job. More
specifically, Chapek felt as though Iger had lost his path to return. 

In hindsight, it may have been the peak of Chapek’s tenure. Only a month later,
Chapek found himself back on shaky ground. 

In March, Chapek and Daniel had made the decision to launch “Black Widow” — a
Marvel movie starring Scarlett Johansson — for a premium additional price on
Disney+ and in theaters on the same day, July 9, 2021.

Scarlett Johansson and Florence Pugh star as Natasha and Yelena in Marvel’s
“Black Widow.” Johansson sued Disney for breach of contract after it released
the film in theaters and streaming on the same day.
Disney

There was one hitch: Johansson’s contract stipulated that her compensation was
based on an exclusive theatrical release for up to four months. Since her
contract was negotiated before Covid, this type of issue hadn’t arisen before.
Her agent, CAA partner Bryan Lourd, spent months negotiating with Disney
executives throughout the organization, warning Bergman and Chapek that
Johansson would sue for remuneration if they proceeded with their plan,
according to people familiar with the discussions. 

Chapek viewed Johansson’s contract as a creative issue and therefore Iger’s
territory. Iger had a long relationship with Lourd and knew Johansson. This was
Iger’s arena, Chapek thought.

Iger, however, wasn’t involved in any of the conversations with Lourd, who
thought Iger would have quickly resolved the situation given the value he
historically placed on creative relationships, according to people familiar with
the matter.

Lourd declined to comment.

If Chapek wanted to be CEO, he should be CEO, Iger reasoned. To Iger, this was a
clear business matter — a contract dispute — and not a “creative endeavor,”
according to people familiar with his thinking.

By this time, Chapek and Iger were barely speaking to each other.

In July, after multiple warnings from Lourd, Johansson sued. Disney’s lawyers
walked through the company’s options in a virtual meeting attended by about 20
executives, including Iger and Chapek. Iger didn’t speak, but he felt the
meeting was “amateur hour” — a meeting “run by children” — with far too many
people weighing in on how the company should respond, according to a person
familiar with his thoughts. 

Iger and Chapek both signed off on an aggressive public statement that accused
Johansson of “a callous disregard for the horrific and prolonged global effects
of the Covid-19 pandemic” and revealed her $20 million salary for the film. The
clear implication was that she was only seeking more money out of greed.

Mucha argued Disney needed to have a forceful response because the lawsuit
specifically named Iger and Chapek as financial beneficiaries from a stronger
Disney+.

Yet, both Iger and Chapek disagreed with the tone of the statement, according to
people familiar with the matter. Neither one stopped its release because each
believed the other should be in charge. 

Iger called Chapek and told him he should issue a public apology, according to
people familiar with the call. Chapek refused, said the people. Iger never even
considered apologizing, according to people familiar with his thinking.

Hollywood talent and agents largely blamed Chapek for the statement. Chapek
suspected Mucha was pushing this narrative to the press. To defend himself,
Chapek solicited other members of the communications team to help him call
reporters, without informing Mucha.

Disney settled the lawsuit in October 2021.

Bob Iger speaks during a CNBC interview at Disneyland in Anaheim, California,
Dec. 16, 2021.
David A. Grogan | CNBC

That November, Iger threw himself a goodbye party at his Brentwood house. After
26 years, he was finally leaving Disney. He invited about 70 guests, including
director Steven Spielberg, famed sports broadcaster Al Michaels, ABC
broadcasting anchors David Muir, Robin Roberts and Michael Strahan, and many
former and current Disney leaders.

Iger reluctantly invited Chapek. When he found out Chapek had a speaking
engagement at Walt Disney World set for that day, he was relieved, according to
people familiar with his mindset at the time. He didn’t want Chapek to attend —
and the feeling was mutual. Chapek’s first impulse was to decline. But he knew
it would look terrible if he didn’t attend, so he canceled his plans in
Orlando. 

At the party, the tension between the two was palpable. Iger sat next to
Spielberg, while Chapek sat far away at the opposite table, visibly miserable.
It did not escape attendees that Iger thanked dozens of people in his speech —
but not Chapek. It was humiliating, but Chapek told friends he felt relieved the
tension was out in the open. 

With Iger gone, Chapek could finally run Disney his way. He moved into Iger’s
larger office, the one with the private bathroom — but he never actually used
the shower, as Iger predicted, according to people familiar with the matter.

Chapek turned to some executive housekeeping that Iger’s presence had prevented.
He combined government relations with media communications, naming former BP
corporate affairs boss and onetime Defense Department press secretary Geoff
Morrell as chief of corporate affairs. That decision effectively forced out
Mucha, as well as general counsel Alan Braverman, whom Chapek viewed as a
diehard Iger loyalist. 

Other veteran executives left to coincide with Iger’s departure. They included
Alan Horn, Disney’s chief creative officer and chairman of Walt Disney Studios
from 2012 to 2020, and Jayne Parker, the head of human resources who had been at
Disney for more than 30 years. Chapek also fired Rice, the well-respected head
of TV, in June, telling him that he wasn’t a cultural fit. Rice had been at
Disney for about three years after coming to the company via Disney’s
acquisition of 21st Century Fox.

To combat the outflow of institutional knowledge, Chapek worked overtime to make
sure he retained McCarthy, the CFO. McCarthy, who had joined Disney in 2000 and
who was in her late 60s, was a master of internal politics and had close ties to
the board, according to colleagues. Chapek jokingly offered McCarthy a lifetime
contract after he found out she had bought a house in Montana, a sign she was
thinking about retiring, according to people familiar with the matter. 

By this point, Chapek’s inner circle had shrunk to a handful of senior
executives. He didn’t trust most of the existing leadership, largely because of
their ties to Iger, and primarily relied on Daniel, Chief of Staff Bochner
(later replaced by Claire Lee), Chief Human Resources Officer Paul Richardson,
McCarthy and the new head of parks, Josh D’Amaro.   

Chapek did feel he had an ally in Arnold, who had become the new board chair,
according to people familiar with his thoughts. Arnold represented the post-Iger
power center of Disney, and she was now also Chapek’s boss. It wasn’t long,
though, before she found herself in the center of a firestorm.


A FIGHT IN FLORIDA

A little more than a month into Chapek’s tenure without Iger at the company,
Florida Gov. Ron DeSantis, a Republican, introduced the Parental Rights in
Education Act — which critics called the “Don’t Say Gay” bill. The legislation
would prohibit “classroom instruction by school personnel or third parties on
sexual orientation or gender identity.” 

Disney is one of the largest taxpayers and employers in Florida, and Chapek and
Morrell were soon fielding media inquiries about the company’s stance on the
matter. And employees — particularly animators at Pixar and Disney Animation —
wanted to know how the company planned to react.

Iger tweeted his thoughts. “If passed, this bill will put vulnerable, young
LGBTQ [lesbian, gay, bisexual, transgender and queer] people in jeopardy,” he
wrote.

During Iger’s tenure as CEO and chairman, he had freely pontificated about an
array of causes, including climate change, diversity and abortion. In a series
of virtual meetings after the killing of George Floyd, Iger had told Disney
employees that making their voices heard was the best way to bring about change,
according to people on the calls.

Florida Gov. Ron DeSantis, a Republican presidential candidate, speaks in Rye,
New Hampshire, July 30, 2023. Chapek decided not to take a public stance on
DeSantis’ legislation known as “Don’t Say Gay,” prompting backlash from Disney
employees.
Reba Saldanha | Reuters

Chapek wanted to chart a different path. Weeks before DeSantis introduced his
planned legislation, Morrell had outlined a new communications strategy to the
board. He wanted Disney to stay out of political skirmishes entirely and instead
signal its values through “three Cs”: content, culture and community
organizations supported by Disney. 

Chapek and Morrell had assumed they’d have months to explain their strategy
internally. But Iger’s tweet dialed up the pressure on Chapek to say something.

On March 7, 2022, Chapek and Morrell put their new public relations strategy
into action. They penned a memo to all staff, approved by the board. It
explained that the company would not take a public stance on the bill.  

Arnold, who is openly lesbian, signed off on the statement but told Chapek that
Disney should also sign a public letter by the Human Rights Campaign, or HRC.
The letter, which had already existed for months, compiled a list of U.S.
companies generically “united in opposing the wave of anti-LGBTQ+ legislation.”
Chapek intended to sign the HRC letter but didn’t want to undercut the message
of the initial statement. Morrell and Chapek agreed that doing so would conflict
with the company’s new strategy of staying away from external conflicts,
according to people familiar with their thinking.

In the memo to staff, Chapek wrote: “Corporate statements do very little to
change outcomes or minds. Instead, they are often weaponized by one side or the
other to further divide and inflame. Simply put, they can be counterproductive
and undermine more effective ways to achieve change.”

Disney employee Nicholas Maldonado holds a sign outside Walt Disney World on
March 22, 2022, during a companywide walkout to protest Disney’s response to the
“Don’t Say Gay” bill.
Octavio Jones | Getty Images News | Getty Images

The blowback was swift. Employees chastised Chapek with hashtags such as
#Disneydobetter and #Disneysaygay. But Chapek and Morrell were convinced this
was the right thing for the company. They didn’t want Disney in a culture war
with DeSantis, with whom Chapek had a solid relationship at the time. 

They were also thinking about China, according to people familiar with the
matter. Disney’s “Avengers: Endgame” made an astounding $614 million at the
Chinese box office in 2019. Disney also owns billion-dollar theme parks in
Shanghai and Hong Kong. Chapek and Morrell believed it would be far easier to
avoid conflict with the Chinese government if Disney embraced a policy of not
taking stances on social and political issues.

Arnold told Chapek she’d been bombarded by furious comments from the LGBTQ
community and sensed Disney’s brand was at risk. Chapek would have to walk back
the statement for the good of the company, she said.

Red-faced with anger, Chapek laid into his communications team, telling them he
regretted putting out the statement if the board refused to back him, according
to people familiar with the matter. But Chapek was hardly operating from a
position of strength. He didn’t yet have an extension to his contract, which was
set to expire in February 2023. Thumbing his nose at Arnold would hardly be
wise.

Chapek scrambled for a new public response. He walked back his statement at
Disney’s annual meeting, which happened to be just two days later. “I understand
our original approach, no matter how well intended, didn’t quite get the job
done,” Chapek said. “But we’re committed to support the community going
forward.”

Morrell, who had already championed having community organizations lead the
charge for Disney’s social advocacy, suggested the company donate money to an
LGBTQ cause — but he wasn’t sure which one. He and Chapek landed on giving about
$5 million to the HRC and signing the public letter. The HRC rejected the
donation.

Disney’s lead independent director Susan Arnold told Chapek he needed to
formally apologize to Disney employees for not taking a public stance against
Florida’s “Don’t Say Gay” bill.
Source: Disney

Still unsatisfied, Arnold told Chapek he needed to formally apologize —
specifically to Disney employees. “You needed me to be a stronger ally in the
fight for equal rights and I let you down,” Chapek wrote in a March 11 statement
to employees that they penned together. “I am sorry.”

The labored apology only did so much. On March 22, hundreds of Disney employees
held a walkout to protest Chapek’s handling of the situation. Chapek agreed to
go on a listening tour throughout the company to answer any questions and
address concerns. 

In a late March interview with CNN’s Chris Wallace, Iger had some veiled words
for Chapek. “When you’re dealing with right and wrong, or when you’re dealing
with something that does have a profound effect on your business, then I just
think you have to do what is right and not worry about the potential backlash to
it,” Iger said.

This was the second significant communications gaffe pinned on Chapek in less
than a year. Chapek fired Morrell in April, abandoning his plan to merge
communications with government affairs. He replaced him with Kristina Schake,
who co-founded the American Foundation for Equal Rights, an organization that
led a legal challenge to restore marriage equality in California.

Chapek’s reputation within the company had been seriously damaged. As a new CEO,
he didn’t have the clout or internal respect to easily bounce back from
missteps.

An apt juxtaposition is how Iger responded in 2019 after making an unintended
insensitive joke at a senior management retreat in Orlando.

At the biannual multiday gathering, executives participated in athletic events
such as softball, horseback riding, yoga and bowling. The games were frequently
high-spirited. Former ESPN head John Skipper once ruptured his Achilles tendon
playing volleyball at one of the events and was taken to the hospital. In fact,
that year, Kareem Daniel hit a little dribbler down the first base line and ran
full speed to beat out a hit. Chapek was playing first base and charged toward
the ball. Daniel steamrolled over Chapek, knocking the wind out of him,
according to people who were there.

About an hour after the conclusion of the athletic activity, with executives
still buzzing over Daniel smashing into his boss, Iger presented the
“Tinkerbells” — spoof awards accompanied by some light roasting of the
recipient. Iger showed a photo of Latondra Newton, then Disney’s chief diversity
officer, who is Black, riding a white horse. Iger quipped, “Now that’s a horse
of a different color,” a colloquial phrase used to compare two very different
things. He added that Newton was always working, choosing to ride the white
horse to focus on diversity when all the other horses were brown.

There was a collective groan. Iger quickly realized he’d unintentionally brought
the subject of race into a light awards dinner. After the ceremony, he found
Newton and apologized. He spoke with her for about an hour the next day, too,
and called almost 20 Black executives who had been in the room that day to
apologize. Iger called Arnold, too, to explain what happened.

“Bob apologized to me afterwards and we had an honest and productive
conversation,” Newton said in a statement. “I forgave him. Bob has a long,
irrefutable track record as a champion for inclusion and we continue to enjoy a
positive relationship today. I consider him a friend.”

Word of Iger’s blunder spread quickly through the organization. But it was a
sign of the influence Iger commanded within the company, and his established
track record championing diversity — including pushing to get the Marvel hit
“Black Panther” made and personally mentoring Black executives — that the failed
joke had little impact on his standing. The incident ended up being an example
of how leaders who quickly and genuinely apologize can smooth over mistakes.
Newton would stay at Disney for four more years, leaving the company in June.

The episode is also emblematic of the importance of a unified communications
team. The comment never leaked to the media.

Had Chapek made a similar error, it’s doubtful executives, board members and
employees would have been so forgiving.


CHAPEK’S MILD TRIUMPH

The “Don’t Say Gay” debacle was hardly an ideal prelude to Chapek’s contract
renewal talks in the spring, which were led by Arnold. But, once again, he did
have good news to highlight. Disney had weathered the Covid pandemic. In the
first quarter of 2022, Disney’s parks, experiences and products segment saw
revenues more than double, to $6.7 billion, compared with the prior-year period.
It was time to look to the future.

Chapek outlined a bold vision to the board. He wanted to transform Disney into a
modern media company, with Disney+ a globally dominant streaming service. Disney
research showed the main complaint among Disney+ users was its lack of general
entertainment. Chapek intended to push Hulu and Disney+ together to give adults
more options — a “hard bundle,” he later called it. 

Despite difficulties during his tenure, the Disney board awarded Chapek, seen
here on Nov. 15, 2021, a contract extension in summer 2022, to give him more
time to implement his vision.
Charles Krupa | AP

He also hoped to figure out a role for Disney in the metaverse and hired 50
employees to focus on “next generation storytelling,” consciously avoiding the
term “metaverse” to deter derision. Several Disney executives privately mocked
the effort anyway, given the vagueness surrounding the entire concept. They
wondered if Chapek was trying too hard to distinguish himself from Iger,
according to people familiar with their thinking.

Without Iger on the board, Chapek also felt emboldened to rethink ESPN and
Disney’s other TV properties. In particular, he wanted to consider spinning off
or selling ABC and ESPN — a concept Iger had consistently dismissed (but later
floated in a July 2023 interview with CNBC). When Iger was chairman, Chapek was
so reluctant to broach the subject of selling legacy media assets that he’d
carefully massage the language in slide presentations to avoid annoying Iger,
according to people familiar with the matter.

Chapek argued that ESPN, under Disney, could have a future as a standalone
digital business, unbundled from traditional pay TV — “the hub of all streaming
sports,” as he and Pitaro put it. Chapek wanted fans to be able to watch any
game on an ESPN app, no matter who owned the rights. To make that happen, Disney
would need to strike partnership deals with both the leagues and competing
services such as NBCUniversal’s Peacock, Apple TV+, Amazon Prime Video and
Paramount+, which may or may not have been feasible. 

Chapek was also starting to gain traction with the Hollywood community. He’d
brokered peace on Johansson with Lourd and repaired that relationship. Dana
Walden, who replaced Rice to lead Disney’s TV division, invited Chapek to her
house to meet A-list showrunners and directors.

A majority decided Chapek deserved more time to implement his own vision, and he
received a relatively short contract extension, until July 2025. The message was
clear: We believe in you — as long as you keep delivering results.

Chapek interpreted the contract renewal as a qualified victory, according to
people familiar with his thoughts at the time. He couldn’t help but view it in
the lens of what it meant for Iger. On the one hand, an extension until 2025
would certainly make Iger’s return less likely. On the other, Chapek told
colleagues, he feared Iger might turn up the heat against him — especially now
that Iger was no longer bound by any fiduciary duties as chairman. 


CHAPEK’S SUDDEN DEMISE

Iger spent the summer of 2022 vacationing in the South Pacific on his yacht;
working on his second book; attending the funeral of former Capital Cities/ABC
CEO Thomas Murphy, a longtime mentor; making some personal investments; and
taking meetings with venture capital firms and tech startups that wanted to
enlist him as an advisor. In September, he joined the board of venture capital
firm Thrive Capital, founded by Josh Kushner.

Yet, as Chapek suspected and feared, Iger’s heart remained at Disney. One friend
described Iger at that time as “bored out of his mind,” though others noted he
appeared to be enjoying retirement. Privately, Iger continued to talk with past
and present Disney executives about Chapek and the future of the company, with
several urging him to return to Disney, according to people familiar with those
conversations.

In the first half of 2022, Disney was the worst performing stock in the Dow
Jones Industrial Average, down nearly 40% as part of the “great Netflix
correction.” Netflix’s lack of subscriber growth in January, combined with
rising interest rates and the end of the pandemic, had caused the market to
revalue streaming companies. Suddenly, simply growing Disney+ wasn’t enough
reason for investors to pump up Disney shares.

During the summer, Iger reached out to Schake, the new communications head, to
wish her luck in her role. In turn, Schake invited him to dinner. They shared
common acquaintances — specifically, former President Barack Obama and former
first lady Michelle Obama. Iger and the Obamas are friends, and Schake was
Michelle Obama’s former communications director.

Fearing Chapek may interpret the meeting the wrong way, Schake told both the
board and Chapek about the meal. Chapek was perturbed, according to people
familiar with the matter. Schake was supposed to be his communications director,
and already she was dining with the enemy. 

The retired Iger, seen here on Dec. 6, 2022, privately continued to talk with
past and present Disney executives about Chapek and the company, with several
urging him to return to Disney, according to people familiar with those
conversations.
David Dee Delgado | Reuters

Still, although Chapek couldn’t shake his fear that Iger was plotting a return
as CEO, Iger both privately and publicly denied this. Earlier that year, he told
journalist Kara Swisher the notion was “ridiculous.” 

Things finally came to a head in the runup to Disney’s fourth-quarter fiscal
earnings report.

By 2022, Chapek and CFO McCarthy had a reliable pattern for earnings
preparation. Disney board meetings are highly choreographed, and executive
presentations are rehearsed ad nauseum. So, along with other executives, Chapek
and McCarthy would rehearse presentations for weeks. Then, when quarterly
numbers were released publicly, Chapek and McCarthy would quarterback a
conference call and question-and-answer session for equity analysts. The pair
would agree on all the numbers and divvy up topics for the Q&A. There were no
surprises.

In late September, Chapek and McCarthy prepped the board on what to expect for
the upcoming November 2022 quarter.

But this time, McCarthy began going off script. Not only did she reference
numbers and forecasts the two executives hadn’t discussed, she bluntly told the
board the quarter’s financials were on pace to be very bad, according to people
familiar with what was said at the meeting.

McCarthy told the board that Disney earnings that quarter would fall
dramatically short of Wall Street’s consensus estimate of 55 cents per share.
Quarterly revenue would be more than $1 billion lower than projected. The
quarter would be the company’s biggest miss relative to Wall Street consensus
estimates in a decade, she said. 

McCarthy attributed this grim outlook in part to the company’s failure to alter
its streaming strategy after the industry’s revaluation triggered by Netflix’s
first-quarter lack of growth. Disney now needed to prioritize profitability,
McCarthy argued. She thought Daniel was overhiring in DMED and that Chapek’s
restructure had created duplications that needed to be addressed by layoffs —
something Chapek would announce in November. 



Chapek was blindsided by McCarthy’s responses. He had no idea the numbers would
compare so poorly with Street estimates. McCarthy hadn’t told him she would be
sharing such a blunt assessment of the business, according to people familiar
with the matter.

“How could this happen?” asked board member Mark Parker, according to people
familiar with what was said during the meeting. Directors Safra Catz, Oracle’s
CEO, and Derica W. Rice, formerly president of CVS Caremark, peppered Chapek
with questions about Disney’s forecasting techniques and how division heads
shared finance information. Chapek struggled to answer and declined to blame
anyone in the formal board meeting setting.

In an executive session alone with the board, Chapek argued that if anything was
amiss, it was McCarthy’s poor financial management. After all, the division CFOs
reported to her. McCarthy either wasn’t sharing the numbers with him or hadn’t
grasped how bad earnings would be, he said, according to people familiar with
the discussions. Chapek shared his frustration over McCarthy’s surprising
diversion from the script with several of his colleagues. But he didn’t express
it to her directly, other than telling her she’d unnecessarily upset the board,
said people familiar with the interactions.  

Besides, Chapek didn’t believe the results were as dire as McCarthy was painting
them to be. He pointed out Disney+ was still adding customers at a torrid pace —
12.1 million that quarter. As long as the streaming service was on pace to meet
its goal of 215 million to 245 million subscribers by the end of 2024, Chapek
believed, the company was in good shape. Disney ended that quarter with 164.2
million Disney+ subscribers.

“Kareem [Daniel] says we’re killing it!” he told several colleagues, according
to people familiar with the conversations. In the previous quarter, Disney
shares had risen 5% after the company’s revenue and earnings exceeded analyst
estimates. By Chapek’s reasoning, even if the fourth quarter was a
disappointment, it was still just one quarter. 

McCarthy told colleagues she hoped her honesty with the board would jar Chapek
into realizing his rosy outlook of the business wasn’t based in reality.
McCarthy’s relationship with Daniel and his team’s finance leaders had broken
down. McCarthy told colleagues DMED was supplying her with unreliable
information, constantly changing its forecast, according to people familiar with
the matter.

Disney’s 2022 management retreat in Orlando fell a few weeks before the November
earnings call, and members of the DMED and finance teams gathered to figure out
a strategy. General counsel Horacio Gutierrez told colleagues that people were
entitled to their own opinions but not their own facts. He half-invited,
half-forced McCarthy, Daniel, Schake, direct-to-consumer CFO Justin Warbrooke,
head of investor relations Alexia Quadrani, Bryan Castellani, DMED’s executive
vice president of finance, and several others to hole up in a conference room
for the bulk of the retreat. They missed most of the scheduled fun, such as
interacting with the animals at Animal Kingdom and getting to ride new theme
park attractions without the lines, according to people aware of the meetings.
Chapek had phased out the mandatory athletic activity from the Iger era.

Bob Chapek arrives at the premiere of “Pinocchio” at Walt Disney Studios in
Burbank on Sept. 7, 2022. When Chapek grew a beard, colleagues told him he
should keep it because it “humanized” him.
Michael Buckner | Variety | Getty Images

Chapek attended only a few minutes of the first strategy session. He spent most
of his time at the retreat participating in activities that would showcase his
personable side to employees. By this time, Chapek had grown a beard, which
colleagues told him he should keep because it “humanized” him. When several of
the executives locked in the conference room found out Chapek was having fun,
including petting a hippopotamus, their collective frustration with him grew,
according to people familiar with the matter.

Coming out of the meetings, Schake and Quadrani told Chapek the reaction to the
quarter could be devastating. Chapek began referring to Schake, Quadrani and
McCarthy as “the mean girls,” a reference to the 2004 Lindsay Lohan movie,
because he felt they were ganging up on him. Those who took a gloomy view of
Disney’s prospects he referred to as “Eeyores,” a reference to Winnie the Pooh’s
perpetually glum donkey friend, according to people familiar with the
conversations between Chapek and his staff.  

On the day of the earnings call, executives met at Disney’s West 66th Street
office in New York. The finance team advised Chapek to deliver a sober message
acknowledging that the streaming division’s net operating losses were more than
double that of the same period the previous year — while emphasizing that Disney
was playing a long game and would ultimately emerge stronger. 

Chapek refused to strike an apologetic note. McCarthy, in particular, was
appalled at how cavalier Chapek seemed about the state of the business,
according to people familiar with her thoughts at the time. She was particularly
annoyed that instead of frankly addressing the results, Chapek waxed on about
the promising ticket sales for Disneyland’s “Oogie Boogie Bash” Halloween
event. 

The day after the numbers were released, Disney’s share price dropped 13%, far
underperforming the broader market.

The following days weren’t kind to Chapek. Activist hedge fund Trian Partners,
led by founding partner Nelson Peltz, took an $800 million stake in Disney,
worrying board members that he may try to take a board seat and oust current
directors.

Separately, board member Catz privately told Chapek he was making a huge mistake
releasing the animated movie “Strange World,” which featured an openly gay
character. Catz, who was on former President Donald Trump’s transition team,
told him the movie was too polarizing and not up to Disney’s quality standards.
She warned a poor performance wouldn’t play well with the board.

Catz declined to comment. 

Disney’s “Strange World” features an openly gay character. Chapek and other
executives decided to release it despite a board member’s warning that it would
be polarizing and was not up to Disney’s quality standards. It was a box-office
flop, losing $200 million.
Disney

But Chapek and other Disney studio executives knew they’d have to release the
movie. The last thing Disney needed was to anger the LGBTQ community again.

Disney released the movie on Nov. 23, 2022. It was a giant flop, losing Disney
about $200 million. 

Chapek’s failure to heed the warnings of the people around him irked many
executives, including some previously sympathetic to him. Walden, Bergman and
others spoke privately to Iger, who advised them that if they wanted to make a
CEO change, they should speak to the board en masse. 

In a highly unusual move, board members also set up discussions with Disney
division heads, who rarely speak to directors outside formal meetings. Schake,
McCarthy, Gutierrez, Walden, Bergman and D’Amaro all told either Arnold, Mark
Parker or the entire board that they no longer supported Chapek as CEO,
according to people familiar with discussions. All declined to comment. 

The board decided Disney needed to make a CEO change. There was only one clear
replacement.

Dana Walden, seen here on April 29, 2022, replaced Rice to lead Disney’s TV
division. Walden asked Iger in November 2022 if he would consider returning to
Disney as CEO.
Rich Polk | Getty Images

Walden and Bergman both live near Iger. On Nov. 12, each took a walk with him in
the neighborhood and told him they’d voiced their concerns to Arnold, according
to people familiar with the matter. Walden asked Iger if he’d be open to
returning. By this time, several other past and present Disney executives had
also urged Iger to come back. Iger told Walden he’d consider it, although he
didn’t tell his wife, according to a person familiar with the matter.

Early the next week, according to people familiar with the matter, Walden
planned another walk with Iger for 3 p.m. on Nov. 19. Shortly before their
scheduled stroll, Walden called to tell Iger she’d never had any intention of
taking that walk: She had made the appointment to ensure he’d be available for a
call from Arnold, who formally asked him to return. Walden declined to comment.

Iger and Bay talked it over. She told him that if the board was asking him to
come back, he should say yes.

The following day, Disney shocked its employees and Wall Street yet again. The
board had fired Chapek, who wasn’t even allowed to send a goodbye email. Less
than three years after he gave up his job, Iger was once again the CEO of
Disney.

Around Christmas, Schake, Quadrani and McCarthy received presents from a
colleague: pink sweaters, an homage to their “mean girl” history.

In a reference to the 2004 Lindsay Lohan movie, Chapek began referring to CFO
Christine McCarthy, top communications executive Kristina Schake and head of
investor relations Alexia Quadrani as “the mean girls,” because he felt they
were ganging up on him. A colleague later sent the three women pink sweaters in
tribute.
Getty Images


IGER’S ROCKY RETURN

Michael Eisner and Bob Iger have been two of Disney’s most storied CEOs, and
there are some striking similarities between them. Neither wanted to leave the
company. Both had trouble naming a successor. 

Eisner declined to comment for this story.

After 21 years in the job, Eisner lost his grip on the board and Disney’s
shareholder base. Disney’s stock plummeted, and Eisner resigned. That would once
have seemed an unthinkable fate for Iger, who is now in year 16. 

And yet Disney is arguably facing more problems than at any time in its history.
The linear TV advertising market is collapsing as subscribers cancel cable TV by
the millions each year. ABC has finished last among the major broadcast networks
in prime-time ratings for the past two years. The collapse of cable is even
worse for ESPN, which derives most of its revenue from affiliate fees from pay
TV distributors. Customers of Charter Communications, the second-largest U.S.
pay-TV provider after Comcast, last week learned that all Disney-owned broadcast
and cable networks were dropped from Charter’s Spectrum service amid a fight
over programming fee increases. Attendance at Walt Disney World slipped this
summer.

On May 5, 2005, Disney CEO Michael Eisner and CEO-elect Bob Iger pose with
Mickey Mouse during the kickoff of Disneyland’s 50th anniversary celebration.
Mark Rightmire | MediaNews Group | Orange County Register via Getty Images

In the past few months, Disney has laid off 7,000 people. The company is paying
down nearly $45 billion in debt — much of which stems from the 2019 acquisition
of Fox, which appears to have been a giant overpay by Iger and his strategy
team. In August, Disney shares closed at their lowest point since 2014.  Since
Iger returned as CEO in November, shares have slumped more than 11%. The S&P 500
is up more than 13% over the same period.

Since returning, Iger has undone Chapek’s streaming reorganization, fired
McCarthy as CFO, and put Bergman and Walden back in control of budget and
distribution decisions for their content. But those moves haven’t been, and are
unlikely to be, a quick fix for the company’s woes. Under Bergman’s watch,
Disney has had a string of movie failures. This year, the live-action “The
Little Mermaid,” “Indiana Jones and the Dial Of Destiny” and “Haunted Mansion”
have disappointed at the box office. The Hollywood Reporter called the latter
“one of the worst starts ever among Disney’s live-action reimaginings of theme
park attractions or classic animated films.” 

Halle Bailey stars as Ariel in Disney’s live-action “The Little Mermaid.” In
2023, Disney movies including “The Little Mermaid,” “Indiana Jones and the Dial
Of Destiny,” and “Haunted Mansion” have disappointed at the box office.
Disney

Meanwhile, Disney’s streaming division lost $512 million in the quarter ended
July 1. The company still aims to break even on streaming by the end of 2024. It
hasn’t readjusted its target, which was reset in August 2022, of having 215
million to 245 million Disney+ subscribers by the end of next year — 135 million
to 165 million excluding India.

Still, one person who helped set those targets said “lightning would have to
strike five times” for Disney to reach them. At the end of the most recent
quarter, Disney+ had 146.1 million subscribers — 105.7 million excluding India.
That’s about 16 million fewer Disney+ customers than the company had on Oct. 1,
2022, a sign that Disney has deprioritized adding streaming subscribers,
especially in India, and that overall growth has slowed.

Disney in August announced a 27% hike in the price of Disney+, to $13.99 per
month, in order to accelerate streaming profitability. In late July, Atlantic
Equities analyst Hamilton Faber pushed back his projected date for Disney to
break even in streaming to 2026. Consensus analyst estimates call for Disney to
end 2024 with about 50 million fewer Disney+ subscribers than the low end of its
2024 goal.

“With Iger-led Disney raising Disney+ pricing to push toward profitability, the
Chapek era sub goals appear unattainable,” said LightShed media analyst Rich
Greenfield. “However, with content engines all sputtering at the same time, sub
growth is the least of Disney’s problems.”

WATCH: Disney CEO Bob Iger’s exclusive July 2023 CNBC interview

VIDEO40:0040:00
Watch CNBC’s full interview with Disney CEO Bob Iger on streaming wars and
future of media business
Squawk Box



TAKE THE ‘A’

During Chapek’s tenure as CEO, Disney lost more than a quarter of its market
value. The pandemic clearly played a role in that. But Chapek should, in his own
words, “take the A” — accountability — for some of his failures. 

Breaking with Iger was clearly not a sound strategy. Iger had nominated every
member of the board, built the company in its modern form, and repeatedly
struggled to walk away from the job. Had Chapek been able to better
compartmentalize his insecurity over his job status, it’s possible he could have
brokered a peace with his boss. 



But Iger must also take some blame for Disney’s botched succession. Maybe Chapek
was never the right person to run Disney — but Iger was the one who picked him.
For the majority of Chapek’s tenure as CEO, Iger’s public and private attitude
toward him wavered between neutrality and active disapproval. Right from the
start, he failed to champion the CEO he’d chosen. If Iger, consciously or not,
undermined Chapek at every turn, that’s on Iger, too.

Iger agrees he bears responsibility, according to people who know him. That’s
part of why he returned to the job, the people said. In July, at a private panel
at the Allen & Co. conference in Sun Valley, Idaho, Iger told the crowd that he
had failed to vet his successor properly and that he won’t confuse operational
track record for leadership again, according to people in attendance.

The entire episode has also revealed the limitations of “Disney nice.” Avoiding
face-to-face conflict, at least at the CEO and board level, fostered an
environment where Iger and Chapek couldn’t hash out their differences.
Executives who openly challenged others — Mayer, Rice, McCarthy — were
ultimately dinged for their frankness. Iger never went directly to Chapek with
his concerns, even though Iger was Chapek’s boss. Chapek largely avoided
bringing up his fears with Iger rather than confronting the two men’s issues. 

The systematic nature of the Disney board meetings didn’t help. Directors have
recently realized that meetings are dominated by unnecessary formality, which
has been a detriment to candid discussion, according to people familiar with the
matter. Board members have pushed for more free-form dialogue, the people said.

Succession planning is one of the few responsibilities that fall squarely on
corporate boards. Turning Disney over to a CEO without giving him control of
creative — the heart of the company — led to confused leadership and a
near-inevitable power struggle. By skipping the one-on-one meetings with Chapek
before appointing him, the board didn’t know how his personality would mesh with
Iger’s if leadership clashes arose. 

So what happens now? Iger does want to retire at the end of 2026, according to
people familiar with his thinking, and has said he’s worked harder in the past
nine months than at any time in his career. He doesn’t want his legacy to be
marred by a failure to choose a worthy successor.

Disney is likely to choose its new CEO around the beginning of 2025, according
to a person familiar with the matter. Iger has begun vetting candidates already,
the person said. The board and Iger are considering processes in which Iger
first names a chief operating officer as his heir apparent and sticks around as
CEO or, once again, moves to an executive chairman role in 2025 to help with the
transition. Either way, this would leave a little less than two years for Iger
to hand the reins to a new leader — about the same amount of time he had with
Chapek.

The job description for the CEO of Disney is one of the most complex in
corporate America. The person who leads Disney must identify hit movies, balance
theme park pricing with attendance, run a news division, fuse intellectual
property throughout the company’s divisions, sell consumer products, tangle with
governors, understand sports media rights and make major acquisition decisions. 

A new CEO will also have to make difficult decisions about how to transition
Disney into its next phase. Building new businesses at scale often leads to
billions of dollars in losses before they become profitable. It’s unclear
whether Disney investors or the board would be willing to tolerate hemorrhaging
cash. In 2019, Iger said Disney was “all in” on streaming, but it’s unclear what
that means today.

There are no obvious choices within the company as Iger’s next successor.
Walden, Bergman and ESPN boss Pitaro have never run theme parks and have limited
international experience. D’Amaro, the parks chief, has no media experience.
Iger has built the entire company around him; he may be the only person capable
of running it in its current form.

Disney could bring back Mayer and Staggs, the duo Iger once passed over, by
acquiring their company, Candle Media. But this would be a tacit acknowledgment
by Iger that he made an error in judgment the first time. While Iger has relied
on Mayer and Staggs for strategy advice in recent months, he did not seek their
input as a precursor for succession, according to people familiar with his
thinking. 

Bob Iger, seen here on July 11, 2023, in Sun Valley, Idaho, is now in his second
stint as Disney CEO.
David A. Grogan | CNBC

It might be easier to choose Disney’s next CEO by simplifying the company. Iger
suggested to CNBC in July he might be open to divesting the legacy cable
networks and ABC. Disney could also decide to spin off ESPN. Advisors to Iger
have pushed him in this direction for more than five years, according to people
familiar with the matter. 

Divesting assets may also make Disney easier to sell, much as Rupert Murdoch
sold the majority of Fox to Disney. More than a dozen past and present Disney
executives said privately they believe Iger’s desired end game is to stay as CEO
for as long as possible and then sell the company to Apple — Iger’s ties to the
tech giant date back to his close personal relationship with co-founder Steve
Jobs. But it’s less clear that regulators would allow a deal — or that Apple,
which has never acquired any company of significance, would even want to buy
Disney.

Whatever materializes, the contract extension Iger got in July likely means he’s
going to be Disney’s CEO for years to come. For now, internal candidates will do
their best “Disney nice” to win over Iger and the board. And yet it’s entirely
possible they’ll spend the bulk of their careers working and politicking and
pining for a job they’ll never get. 

Just as it has since 2005, the magical world of Disney once again revolves
around Iger. Everyone else is on his ride.

The ride of a lifetime.

Disclosure: Comcast is the parent company of NBCUniversal, which owns CNBC.

WATCH: Disney’s succession mess: The inside story of Iger and Chapek

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VIDEO5:1305:13
Disney’s succession mess: The inside story of Iger and Chapek
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   example, to limit the number of times an ad is presented to you).
   
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 * CREATE PROFILES FOR PERSONALISED ADVERTISING 445 PARTNERS CAN USE THIS
   PURPOSE
   
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   Information about your activity on this service (such as forms you submit,
   content you look at) can be stored and combined with other information about
   you (for example, information from your previous activity on this service and
   other websites or apps) or similar users. This is then used to build or
   improve a profile about you (that might include possible interests and
   personal aspects). Your profile can be used (also later) to present
   advertising that appears more relevant based on your possible interests by
   this and other entities.
   
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 * USE PROFILES TO SELECT PERSONALISED ADVERTISING 439 PARTNERS CAN USE THIS
   PURPOSE
   
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   Advertising presented to you on this service can be based on your advertising
   profiles, which can reflect your activity on this service or other websites
   or apps (like the forms you submit, content you look at), possible interests
   and personal aspects.
   
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 * CREATE PROFILES TO PERSONALISE CONTENT 202 PARTNERS CAN USE THIS PURPOSE
   
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   Information about your activity on this service (for instance, forms you
   submit, non-advertising content you look at) can be stored and combined with
   other information about you (such as your previous activity on this service
   or other websites or apps) or similar users. This is then used to build or
   improve a profile about you (which might for example include possible
   interests and personal aspects). Your profile can be used (also later) to
   present content that appears more relevant based on your possible interests,
   such as by adapting the order in which content is shown to you, so that it is
   even easier for you to find content that matches your interests.
   
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 * USE PROFILES TO SELECT PERSONALISED CONTENT 179 PARTNERS CAN USE THIS PURPOSE
   
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   Content presented to you on this service can be based on your content
   personalisation profiles, which can reflect your activity on this or other
   services (for instance, the forms you submit, content you look at), possible
   interests and personal aspects, such as by adapting the order in which
   content is shown to you, so that it is even easier for you to find
   (non-advertising) content that matches your interests.
   
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 * MEASURE ADVERTISING PERFORMANCE 622 PARTNERS CAN USE THIS PURPOSE
   
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   Information regarding which advertising is presented to you and how you
   interact with it can be used to determine how well an advert has worked for
   you or other users and whether the goals of the advertising were reached. For
   instance, whether you saw an ad, whether you clicked on it, whether it led
   you to buy a product or visit a website, etc. This is very helpful to
   understand the relevance of advertising campaigns.
   
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 * MEASURE CONTENT PERFORMANCE 316 PARTNERS CAN USE THIS PURPOSE
   
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   Information regarding which content is presented to you and how you interact
   with it can be used to determine whether the (non-advertising) content e.g.
   reached its intended audience and matched your interests. For instance,
   whether you read an article, watch a video, listen to a podcast or look at a
   product description, how long you spent on this service and the web pages you
   visit etc. This is very helpful to understand the relevance of
   (non-advertising) content that is shown to you.
   
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 * UNDERSTAND AUDIENCES THROUGH STATISTICS OR COMBINATIONS OF DATA FROM
   DIFFERENT SOURCES 391 PARTNERS CAN USE THIS PURPOSE
   
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   Reports can be generated based on the combination of data sets (like user
   profiles, statistics, market research, analytics data) regarding your
   interactions and those of other users with advertising or (non-advertising)
   content to identify common characteristics (for instance, to determine which
   target audiences are more receptive to an ad campaign or to certain
   contents).
   
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 * DEVELOP AND IMPROVE SERVICES 475 PARTNERS CAN USE THIS PURPOSE
   
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   Information about your activity on this service, such as your interaction
   with ads or content, can be very helpful to improve products and services and
   to build new products and services based on user interactions, the type of
   audience, etc. This specific purpose does not include the development or
   improvement of user profiles and identifiers.
   
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 * USE LIMITED DATA TO SELECT CONTENT 94 PARTNERS CAN USE THIS PURPOSE
   
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   Content presented to you on this service can be based on limited data, such
   as the website or app you are using, your non-precise location, your device
   type, or which content you are (or have been) interacting with (for example,
   to limit the number of times a video or an article is presented to you).
   
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 * TARGETED ADVERTISING COOKIES
   
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   These Cookies are used to collect data about your browsing habits, use of the
   Services, your preferences, and your interaction with advertisements across
   platforms and devices for the purpose of delivering targeted advertising
   content, both on our Services and on third party sites. Third-party sites and
   services also use Targeting Cookies to deliver content, including
   advertisements relevant to your interests on the Services. If you reject
   these Cookies, you will see less relevant advertising.

 * CONTENT SELECTION COOKIES
   
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   This group is so Content Selection IAB group can have an id

 * SOCIAL MEDIA COOKIES
   
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   These Cookies are set by social media platforms on the Services to enable you
   to share content with your friends and networks. Social media platforms have
   the ability to track your online activity outside of the Services. This may
   impact the content and messages you see on other websites you visit.

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