Bob Iger Isn’t Having Much Fun

Bob Iger is under pressure.

Eight months after his return to Disney, which was sold as a triumphant second act by a savior CEO, reality is proving a lot more troublesome.

Iger has described himself to associates at recent private gatherings as stressed from cleaning up a mess that is more extensive than he realized. At the office, he joked in one meeting that it was the wrong time to come back, according to people familiar with the matter.

Since returning, Iger, 72 years old, has strained to put out fire after fire, from accumulating losses in the streaming segment to a steep decline in Disney’s traditional television business. He has clashed with the company’s CFO and an activist shareholder. 

The company is in the midst of painful layoffs and budget cuts. Crowds at Disney’s Florida theme parks thinned during summer holidays. Its Pixar animation studio continued a yearslong box office slump. And a legal and political battle with Florida has deepened as its governor, Republican Ron DeSantis, campaigns for president.

On Wednesday, Disney’s board said it was extending Iger’s contract two more years, through 2026, partly to “allow more time to execute a transition plan for CEO succession.” Iger is staying put at the board’s request, he said, and in a memo to staffers, he added that he would use the extra time to navigate a difficult economic environment and dramatic industry shifts. “I am committed to seeing this through,” he wrote.

Iger declined to comment for this article.

When Iger returned to the company, he said he had a “clear mission focused on creative excellence.” In private conversations with associates, he has blamed many of the company’s troubles on his predecessor, Bob Chapek, whom he picked as his successor and then played a role in ousting. But some of Disney’s biggest challenges are rooted in decisions Iger made during his first stint in the top job, from 2005 to early 2020, including the 2019 acquisition of Fox entertainment assets and his decision to enter an arms race over streaming.

Some Disney employees say Iger was dealt a tough hand, and is taking the right steps to address structural problems that plague not just Disney, but the entire entertainment business. He has also followed through on a pledge to empower creative executives at the company, they say.

“Bob’s been a strong strategic leader for decades and having him stay on is a huge plus not just for Disney but for our industry as a whole,” said Warner Bros. Discovery CEO David Zaslav.

Others have criticized the boss for overestimating how quickly he could transform Disney. And some said he has been tone deaf in how he has embraced the spotlight as CEO while presiding over thousands of staff cuts.

As layoffs kicked off this spring, he was photographed sitting courtside at NBA games. In May, Iger appeared at the Met Gala in New York wearing Donald Duck sneakers designed by the late couturier Karl Lagerfeld, which Disney’s consumer-products division had asked him to wear. He described the occasion to a red-carpet reporter as “a great excuse to get dressed up.”

A Disney spokesperson said Iger is a longtime season-ticket holder to both the Los Angeles Clippers and the New York Knicks and enjoyed attending NBA games even when he wasn’t CEO, and that he was invited to the Met Gala before coming back to Disney.

Since returning to the CEO’s office in Burbank, Iger has shown visitors a model of one of his yachts and enthused about the new superyacht he is building. The boat is expected to be 30 feet longer than Iger’s first superyacht, the 180-foot Aquarius, and built by the same Dutch custom shipbuilder Royal Huisman. Superyachts of that size and level of luxury can cost tens of millions of dollars, according to yachting experts and published sales listings. 

Streaming stress

Among the most pressing problems confronting Iger is the company’s streaming business. Disney has promised investors for nearly three years that Disney+ would be profitable by September of 2024. According to people familiar with the situation, some Disney executives have expressed doubts about whether the company can hit that target. 

The streaming business—which buoyed Disney during the pandemic when theme parks and movie theaters were closed—continues to lose money. Disney’s direct-to-consumer segment, which includes Disney+, ESPN+ and a controlling stake in Hulu, has lost more than $10 billion since it began reporting results in late 2019.

Listening to advice gleaned from conversations with major shareholders ahead of Disney+’s 2019 launch, Iger spent heavily on content, from the Star Wars-themed spinoff show “The Mandalorian” to Fox’s “The Simpsons,” so that Disney+ could better compete with the mass-market appeal of Netflix,

Last year, Disney’s spending on content reached $32 billion, nearly twice what Netflix spent to produce and acquire rights to shows and movies. That’s in part because Disney produces content for multiple platforms, including its film studios, streaming services and TV networks such as ESPN, ABC and the Disney Channel.

In exchange for shareholders’ blessing to spend heavily on streaming, Iger agreed to be more transparent with investors about the goals and outlook for the business. Each quarter, Disney made predictions about its subscription numbers and provided some granular detail about revenue in its earnings reports.

Chapek told investors in late 2020 that  its core streaming service, Disney+, would be profitable by the end of fiscal 2024.

Iger has told colleagues he’s eager to keep reassuring investors that Disney+ would start making money by September 2024, according to a person familiar with the matter. Other executives have voiced concern in internal business meetings in recent months that Disney’s stalling subscriber growth and high level of spending will likely make that target unreachable, people familiar with the matter said.

The streaming business’s fortunes were hurt in part by Disney’s failure to secure a major cricket rights package in India last year.

Subscriber losses, on top of declining revenue and profit margins, have prompted Disney to explore strategic options for the India business, which could include a sale or joint venture, the Journal reported.

Back home, Disney’s traditional TV business is also showing signs of strain. Once a workhorse that helped subsidize losses elsewhere, the TV business has declined faster than expected in recent quarters. On Thursday, Iger said in a CNBC interview that Disney was more challenged than he had anticipated, and that the company was considering selling off some of its TV networks to ease the pressure.  Hollywood actors on Friday joined writers on strike, halting production of new shows and films industrywide.

Homecoming

The Disney Iger returned to in November was little like the company he left. Under Chapek, price increases at theme parks and an intense focus on streaming subscriber growth had replaced Iger’s old regime, which gave priority to expanding Disney’s library of characters and stories.

Iger quickly set about remolding Disney according to his vision of an entertainment giant led by creative executives rather than number-crunchers. He fired top executives who were seen as loyal to Chapek and restructured Disney’s studio and streaming businesses to put more decisions in the hands of content chiefs.

Those decisions were welcomed by many executives in Disney’s creative businesses, who felt they had been undermined in the previous regime.

In February, Iger fended off a proxy battle launched by activist investor Nelson Peltz, who had teamed up with Isaac “Ike” Perlmutter, the former chairman of Marvel Entertainment. Perlmutter, with 30 million shares to his name, is one of Disney’s largest individual shareholders, and helped with Peltz’s unsuccessful effort to pressure the company into adding him to Disney’s board of directors. 

Peltz backed down from a boardroom battle after Iger announced a reorganization and cost-cutting plan. The plan included $5.5 billion in budget cuts and reducing head count by 7,000, including thousands of layoffs. Perlmutter thinks the cuts to TV and movie budgets haven’t gone far enough and that the company needs to lay off more high-paid managers, according to a person familiar with his thinking.

In an interview with the Journal after he was terminated from his role at Marvel earlier this year, Perlmutter said one major point of contention between Peltz and Iger was the $71.3 billion 2019 purchase of 21st Century Fox entertainment assets, which Iger spearheaded. The deal, which brought “Avatar” and the tens of millions of Indian streaming subscribers into the Disney fold, also saddled the company with billions in debt.

“This decision brought Disney to the brink of financial disaster,” Perlmutter said in the interview. 

Disney said earlier this year the transaction “was critical to better positioning Disney to address key secular shifts in the media sector” and helped the company compete against streaming rivals. 

Disney announced in June that Christine McCarthy, the company’s chief financial officer who had clashed with Iger over the restructuring of the company and earlier, with his top entertainment deputies over spending cuts, would leave the company.

Over the years, McCarthy had pushed for the company to take additional write-downs of some of the assets acquired from Fox beyond the $5 billion it took on international TV channels in 2020. As the two companies’ businesses became further entwined after the merger, that proved too difficult, people familiar with the matter said.

Disney said McCarthy was leaving the company after more than two decades to take a family medical leave. McCarthy hasn’t had any significant changes to her family health situation in recent months that would require her to step back, people familiar with the matter said.

Iger’s budget cuts and layoffs have so far failed to win over investors, and quarterly losses continue to stack up. Wall Street has grown impatient with how long it’s taken traditional entertainment companies to embrace streaming, and investors are clamoring for profitability. 

Disney’s theme parks, which are typically reliable cash engines, logged lower attendance rates over the usually-mobbed July 4 holiday. And on the big screen, Disney’s heavyweight animation division Pixar, has hit a multiyear rough patch.

Once the undisputed champion of children’s’ movies with titles including “Toy Story” and “The Incredibles,” Pixar is losing box-office battles with competitors, especially Universal’s “Minions” and “Super Mario” movies. The unit’s latest movie “Elemental,” a romantic comedy that cost around $200 million to produce, earned just $29.5 million in its debut, the studio’s worst-ever opening weekend result.

For much of this year, Disney’s share price has traded under $100 per share and in recent weeks has hovered below $90, around its lowest level in nearly a decade. Just two years ago, Disney shares hit $190.

The biggest challenge for Iger is that fixing Disney’s issues is going to take time, and Wall Street is impatient, said media analyst Michael Nathanson with MoffettNathanson. Between fixing the content strategy, finding the best structure for the streaming business and figuring out what to do with ESPN and the TV networks, there is a lot to be done.

“Given the structural headwinds hitting the sector, Wall Street is not willing to wait for solutions,” he said.

Legacy building

Disney’s board met for its regular meeting in Anaheim, Calif., the last week of June, with streaming profits one of several important priorities. Managers from Disney’s television division made a presentation to the board about how best to distribute shows that air on both regular TV and the streaming services, people briefed on the meeting said.

Even with an extended contract, the issue of CEO succession remains. Mark Parker, a Nike executive who serves as chairman of Disney’s board, is leading a committee to find a successor to Iger.

Although no clear front-runner has emerged, rumors have swirled inside the company that Dana Walden and Alan Bergman, co-chairs of Disney’s entertainment and studio business, and parks chief Josh D’Amaro are all being strongly considered.

In recent months, the board had hired Heidrick & Struggles, a prominent executive search firm, to help examine external candidates, according to a person familiar with the matter. A spokeswoman for the recruiting firm declined to comment.

Analyst Doug Creutz of Cowen wrote Wednesday that keeping Iger on as CEO, while understandable, “also reinforces the notion that Disney continues to have serious succession planning issues.”

“He’s a brilliant CEO and no one will out hustle him,” said former ESPN CEO Steve Bornstein.

—Suzanne Vranica and Emily Glazer contributed to this article.

Write to Robbie Whelan at [email protected], Joe Flint at [email protected] and Jessica Toonkel at [email protected]