Almost immediately after Disney renewed the contract of struggling CEO Bob Chapek in June, a revolt began.
According to the corresponding reports of both of them The Wall Street Journal swear Financial Times citing people familiar with the matter, senior members of the company’s top management, including Chief Financial Officer Christine McCarthy, began warning boardroom directors this summer that the entertainment giant was on the wrong track and pushing for his departure.
Chapek took over in February 2020 after fifteen years at the helm of Bob Iger and presided over ballooning losses in his streaming division – called Direct-To-Consumer (DTC) – the largest in the industry with 235 million subscribers across Disney+, Hulu and ESPN+.
To make matters worse, Chapek angered morale by firing the popular TV boss in June while failing to properly respond to Florida Gov. Ron DeSantis’ “Don’t Say Gay” bill, which led to his exit in March. Relations with Iger, meanwhile, had long since soured due to the latter’s continued interference from the boardroom.
The campaign to undermine Chapek’s authority ultimately bore fruit after the CEO announced earlier this month “difficult and uncomfortable decisions” that would include staff cuts after the DTC division reported losses more than doubled to $4 billion for the fiscal year just ended October 1, along with rising material costs. .
On Friday, Iger got a call from chairman Susan Arnold, and two days later, the veteran Disney executive agreed to return for two more years to steer the ship back on course.
“Many were approaching the board, Iger loyalists who felt marginalized,” said a source quoted by Financial Times.
Chapek’s firing came just days after Disney’s McCarthy vowed that DTC’s loss would improve by at least $200 million in the current first quarter over a $1.5 billion loss in the final three months of 2022.
She predicted an even bigger drop in red ink in the second quarter after price increases for Disney+ fed into full-year results.
“We believe that this [fiscal fourth] quarter we report is the low and it will improve from here,” the group’s chief financial officer said in a call with investors on November 8.i.e.
Spreader arm to go
The first step Iger took after being reinstated as CEO this week was to roll back Chapek’s signature strategy that separated decision-making about content creation from its marketing on the group’s various platforms such as streaming and cable.
The new arm, known as Disney Media & Entertainment Distribution, was given responsibility for profit and loss. This took it out of the hands of the group’s creative minds and placed it in the care of more traditional business school administrators.
Iger also cleared Chapek lieutenant and DMED chief Kareem Daniel, a former Goldman Sachs banker who, like Chapek, did not come from the creative side of the company but rose through the ranks of Disney’s Consumer Products retail and licensing division.
In a letter to Daniel’s staff seen by CNBCIger asked McCarthy to work on the design of “a new building that puts more decision-making back into the hands of our creative teams and streamlines costs.”
She is assisted by the three Chief Content Officers, Studios General Manager Alan Bergman, Television Director Dana Walden and Sports Director Jimmy Pitaro.
“I fundamentally believe that storytelling is what fuels this business,” Iger wrote, “and it belongs at the center of how we structure our business.”
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