Disney has a new CEO: Bob Chapek. Wall Street breaks down the former parks boss' strengths and weaknesses.
Disney on Tuesday abruptly announced longtime Disney exec Bob Chapek as its new CEO, replacing Bob Iger, who is stepping into an executive chairman role until his planned retirement in 2020. While the investment community was somewhat blinded by the announcement, Wall Street analysts largely seem to believe that Disney made the best choice it could when faced with replacing a rockstar CEO during a tumultuous time for the company and industry. Chapek has a reputation as a leader who gets things done, having overseen the business' steadiest profit grower — the parks, experiences, and products division — and executing major expansions like the launch of Shanghai Disney and the Star Wars lands. He also has experience on the studio and home entertainment sides. With the succession issue out of the way, the big question left on analysts minds is whether Chapek can be the kind of bold, strategic leader that Iger was. "It's not a perfect choice, and not an easy choice, but I think they made the best choice," Tuna Amobi, media and entertainment analyst at CFRA Research, told Business Insider. Click here for more BI Prime stories.
Disney stunned Wall Street when it announced on Tuesday that Bob Chapek would immediately take over as CEO, while Bob Iger, one of the most respected and beloved chief executives in the US, would move into an executive chairman role — with 22 months still left to go in his contract. Shares of Disney fell 2.5% in after-hours trading following the announcement, and continued to tumble on Wednesday. Still, as the dust settles, many Wall Street analysts believe that Disney made the best choice it could when faced with replacing a rockstar CEO during a tumultuous time for the company and industry. Chapek has a reputation as a leader who gets things done, having overseen the business' steadiest profit grower, the parks division, and executing major expansions like the launch of Shanghai Disney and the Star Wars lands. He's also had a hand in many aspects of the business, including parks, products, studio, and home entertainment. "It's not a perfect choice, and not an easy choice, but I think they made the best choice," Tuna Amobi, media and entertainment analyst at CFRA Research, told Business Insider. "He has as broad an experience as you could hope for in a sprawling company like Disney — keeping in mind he has big shoes to fill." Chapek's appointment, while seemingly abrupt, had been in the works for a "number of months," Iger told The New York Times' Brook Barnes. Iger is now executive chairman, where he'll advise Chapek and take a heavier hand in shoring up the company's creative strategy. The shift comes one month before Disney's annual investor meeting on March 11, which will now likely focus on future plans rather than succession strategy. But it also arrives after a blockbuster launch of Disney Plus, which has some investors questioning whether the streaming service has already peaked before it even launches in more of Europe and in India in March. The 'right' choice, if not the perfect choice Chapek's strong track record at Disney made him a clear — if not the "perfect" — pick to replace Iger, who was due to retire in December 2021. Chapek had led the profitable parks, experiences, and products division since 2015, and held senior executive roles in the studio and home entertainment businesses. Having joined Disney in 1993, he also had a longer tenure than other would-be successors, like chairman of direct-to-consumer and international Kevin Mayer. "We had assumed Chapek was the front runner given broader experience and long-standing operational roles as well as his 27-year successful tenure at the company," JPMorgan Chase analysts wrote in an investor note on Tuesday. "Importantly, Chapek is also well known by Wall Street with a big presence over the years at many investor events." Not everyone had their money on Chapek. Some analysts thought the mantle might go to Mayer, who had a hand in key deals like the Fox, Lucasfilm, Marvel, and Pixar acquisitions as chief strategy officer and, more recently, executed the launch of Disney Plus as chairman of Disney's direct-to-consumer and international businesses; or Peter Rice, who joined from Fox to lead its TV business and cochair its media networks, including cable channels like FX and National Geographic. Both are overseeing major transformations within Disney. Chapek, meanwhile, has kept the core parks, experiences, and products business on course, and sailing to higher and higher profits. Under his leadership, the parks division has been "the most consistent and biggest profit grower over the last four years," the JPMorgan Chase analysts wrote. The division's operating income rose 11% to nearly $6.8 billion in 2019, contributing 45% of the company's total operating income. Chapek also oversaw massive park expansions like the opening on Shanghai Disney, and the new Star Wars lands at Disneyland and Walt Disney World. He has experience in other parts of the business as well. Before parks, Chapek led Disney's consumer products business from 2011 to 2015. And, earlier in his career, he ran the content distribution strategy for Disney's studios as president of distribution, and he executed the "vault strategy" to release Disney films on home video for limited times to reignite interest, as president of the home-entertainment business. Some analysts see Chapek's appointment as a move to protect Disney's profit center during the huge direct-to-consumer transition that Mayer is spearheading. "They needed someone who will face the least amount of learning curve without necessarily changing the core strategy," Amobi at CFRA Research said, "which is to transition the company to direct-to-consumer, while feeding off the content engine and making sure the core business, where the company continues to derive most of profits, is protected." Analysts at Rosenblatt Securities noted that the announcement came as the Coronavirus is spreading globally. The virus forced the temporary closures of Disney's Shanghai and Hong Kong parks, which will hit the company's second quarter. If spread more widely, damage control could demand more of the CEO's attention, at a crucial moment when Iger needs to focus on laying the foundation for the next phase of the Marvel Cinematic Universe, the next slate of Star Wars film, and Disney Plus' programming. "This could have ultimately taken away from Bob Iger's focus on content creation, a specialty of his," Rosenblatt analysts wrote on Wednesday. "Leaving Bob Chapek, a Disney veteran with 27 years with the company including most recently as chairman of parks, experiences, and products, to run the day-to-day business while Bob Iger is still in the building seems like a good reallocation of resources to us." What will Chapek's legacy be? With the succession issue out of the way, the big question left on analysts' minds is what kind leader Chapek will be. "Iger's legacy is that of a builder," Wells Fargo analysts wrote on Tuesday, citing the acquisitions of Pixar, Marvel, Lucasfilm, BAMTech, and Fox. "Perhaps the biggest question for Chapek is whether he's willing to part with any assets and in particular ESPN and ABC." Disney's media networks, once the company's crown jewel, have been somewhat of blight on the business as viewers abandon traditional TV for cheaper, streaming alternatives. While media networks still bring in the most revenue and operating income, the division hasn't grown as steadily or heartily as others. It's a big reason Disney launched the streaming services Disney Plus and ESPN Plus, and took full control of Hulu. Some analysts have pushed for Disney to sever the legacy TV business by spinning off networks ESPN and ABC. But it seemed unlikely under Iger's reign. He came up in the TV business, having started his career at ABC before it was bought by Disney. Chapek doesn't have such ties, but some analysts question whether he has what it takes to make such a move. "The challenge is that Chapek, while not emotionally tied to ESPN/ABC, is not the strategy guy, he is the execution/operations exec," LightShed Partners analysts wrote on Wednesday. "We would have expected bolder strategic shifts such as spinning off ESPN/ABC or collapsing windows with Kevin Mayer as CEO vs. Chapek." That said, analysts and industry experts were skeptical of Bob Iger when he first took the job as well, and he more than exceeded their expectations. It'll be up to Chapek to prove he can be a bold strategic thinker. One way or another, he will have to solve Disney's media networks problem, while completing the pivot to streaming, and continuing to integrate Fox's assets.Join the conversation about this story » NOW WATCH: Documentary filmmaker Ken Burns explains why country music is universal
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The winners and losers among 11 Disney businesses, as its credit rating takes a hit over park closures and production shutdowns (DIS)
Disney's credit rating was downgraded by S&P Global Ratings on Thursday, because of uncertainty around when...Disney's credit rating was downgraded by S&P Global Ratings on Thursday, because of uncertainty around when its theme parks, and TV and film productions, will be allowed to reopen. Previously in April, Wells Fargo analysts projected that Disney's parks will remain empty for the rest of the company's fiscal year, which ends in September, and be filled to half capacity to limit crowding next fiscal year. "Until the time at which there is significantly improved testing and/or a widely available vaccine it's tough for us to imagine long lines for 'Rise of the Resistance,' no matter how much folks might want to go to [Walt Disney World] deep down," the Wells Fargo note said. The Wells Fargo report also broke down the impact of lockdown measures on 11 of Disney's businesses, including Disney Plus, which it estimates will become more valuable. Click here for more BI Prime stories. This post was originally published on April 9 and has been updated to reflect Disney's changed credit rating. Disney's credit rating is taking a hit as its theme park, and TV and film productions, remain halted. On Thursday, S&P Global Ratings downgraded Disney's credit rating to an A-, citing the massive disruptions to the entertainment company's theme park, TV, and film operations. "Most importantly, theme parks and film and TV studios remain closed by government-mandated social distancing orders and it's unclear when they will be allowed to reopen," the firm said in the April 23 report. Analysts at Wells Fargo previously forecasted that Disney's theme parks, which are closed globally, wouldn't reopen until next fiscal year, and could take two years for attendance to fully recover. The Wells Fargo report from April 7 also broke down 11 of Disney's businesses are being impacted by lockdown measures around the world. The firm, which said it had been bullish on Disney since the media company unveiled its streaming strategy in 2017, said in the April 7 report that it was tweaking its view in light of the severe global disruption to Disney's theme-park business, an impeding "ad recession," and a challenging theatrical environment. Wells Fargo is now targeting an enterprise value of $244 billion for Disney over the next 12 months, 26% less than before the coronavirus outbreak. Disney's current enterprise value is about $234 billion after the stock took a beating amid coronavirus concerns and as the company took on more debt. The biggest cuts from Wells Fargo's valuation came from Disney's theme-park business, which was once a reliable profit driver. Other businesses, like streaming services Hulu and Disney Plus, became more valuable in Wells Fargo's analysis. Disney announced on April 8 that Disney Plus had reached 50 million paid subscribers globally. The service is available in the US, Canada, eight Western European countries including the UK, and India, where it's bundled with another Disney streaming service, Hotstar, and has about 8 million subscribers. "We've thought the value creation from Disney Plus (and later on Hulu) would be enough to more than offset a declining environment for media networks," the note said. "We still believe in that, but we didn't foresee this unique and severe downturn for parks." The analysts expect "zero park attendance" and no revenue for the rest of Disney's fiscal year, which closes on September 30, since Disney's theme parks are now closed. Even when the parks reopen, it'll take time for attendance to ramp up again. Wells Fargo projects Disney parks will be filled to half capacity during the company's next fiscal year to limit crowding. It could take two years for attendance to recover, the firm said. "Until the time at which there is significantly improved testing and/or a widely available vaccine it's tough for us to imagine long lines for 'Rise of the Resistance,' no matter how much folks might want to go to [Walt Disney World] deep down," the note said. "We see the limiting factor as healthcare technology as assets like Walt Disney World will either need to operate with social distancing in-place — significantly limiting capacity — or a vaccine will need to be widely enough available that the population will again feel safe in such a gathering. Testing may also improve, allowing customers with immunity/antibodies to behave a bit more freely." Disney executives seem to be realizing that as well. Bob Iger, Disney's executive chairman and former CEO, told Barron's that Disney was discussing whether it would need to implement temperature checks at its parks, similar to the way it checks visitors' bags. "One of the things that we're discussing already is that in order to return to some semblance of normal, people will have to feel comfortable that they're safe," Iger said in the interview. "Some of that could come in the form ultimately of a vaccine, but in the absence of that it could come from basically, more scrutiny, more restrictions. Just as we now do bag checks for everybody that goes into our parks, it could be that at some point we add a component of that that takes people's temperatures, as a for-instance." Here's the breakdown of Wells Fargo's valuation for each of Disney's businesses, based on company reports and Wells Fargo's estimates: Company asset Target Enterprise Value before April 7 Target EV after April 7 Studios (Marvel, Pixar, Lucasfilm, Disney, 20th Century Fox) $94.8 billion $73.8 billion Parks $66.7 billion $22.9 billion Disney Plus (excluding India AVOD) $46.7 billion $54 billion Consumer products $36.3 billion $14.8 billion Hulu $22.2 billion $27.1 billion ESPN $17.6 billion $11 billion Other cable networks (e.g. FX) $14.9 billion $14.2 billion Broadcast networks and studios $12.2 billion $8 billion International networks $9.2 billion $7.6 billion BAMTech $5.1 billion $5.1 billion ESPN Plus $5 billion $5 billion TOTAL $330.6 billion $244 billion For more about how the coronavirus pandemic is affecting media, see our coverage on BI Prime: 40 advertising execs who manage $90 billion in spending describe how they're shifting their 2020 budgets in a new report. Here are 4 key takeaways for the TV industry: Connected-TV platforms like Roku and Hulu are expected to see the biggest gains in TV advertising, and Disney is the best-positioned cable-network group. The key factors analysts are watching at 5 major media companies including Disney and Fox to help determine whether their stock will keep falling or rebound: Combined, Disney, Fox, ViacomCBS, Discovery, and AMC Networks lost $92 billion in market value since the last market high on February 19, largely thanks to Disney. Disney has closed its US parks 'until further notice' and risks losing $1.5 billion in revenue per month they are shut, analysts say: Disney is extending "until further notice" its closures of its US theme parks, Disney World and Disneyland, because of the coronavirus pandemic, the company announced on March 27. Analysts lay out the financial damage each of Disney's businesses could face, as it closes parks 'until further notice' and delays films: Disney is one of the media companies most exposed the impact of the coronavirus because of its large theme-park and theatrical businesses. Why analysts say Disney and Discovery are the media giants most threatened by the coronavirus, but Comcast could fare better: Companies that generate significant shares of their revenue from theme parks, films, and advertising are most sensitive to the pandemic and the economic downturn it could ignite. Why Netflix's business could take a hit from the coronavirus, despite reports that 'stay at home' stocks could benefit: Much of Netflix's revenue growth is international, including markets like Europe and Asia, which are especially vulnerable to the virus. Disney's surprise CEO change makes sense because of the coronavirus' growing impact on its business, according to a Wall Street analyst: The day-to-day pressures of the Disney CEO may mount if the coronavirus continues to spread outside of China, drawing former chief Bob Iger's focus at a crucial creative moment. Join the conversation about this story » NOW WATCH: A cleaning expert reveals her 3-step method for cleaning your entire home quickly
The former C.E.O. thought he was riding into the sunset. Now he’s reasserting control and reimagining...The former C.E.O. thought he was riding into the sunset. Now he’s reasserting control and reimagining Disney as a company with fewer employees and more thermometers.
Disney CEO Bob Iger has lived by 3 distinct principles throughout his career, from his time as a janitor to his role leading a $256 billion colossus
Bob Iger has served as CEO of The Walt Disney Co. since 2005. The company's stock...Bob Iger has served as CEO of The Walt Disney Co. since 2005. The company's stock has risen 492% since Iger assumed the role. Analysts have predicted Disney Plus could help catapult the company's stock price as much as 20% this year. Here's how Iger's leadership strategies shaped the upward trajectory of his career and the beloved brand. Click here for more BI Prime stories. Bob Iger bet big with the launch of Disney Plus, but his legacy extends well beyond the streaming service and the internet-breaking debut of Baby Yoda. While the Mouse House suspended its theme-park operations in China and Hong Kong amid this year's coronavirus outbreak, it recently debuted "Star Wars"-themed areas in two US locations. Disney parks alone are valued at about $133 billion, according to a February 5 Bernstein client note. Banking analysts predict that the company's coming projects and Disney Plus could catapult its stock price as much as 20% this year, per Markets Insider. Since Iger, who is also the company's chairman, officially became CEO on October 1, 2005, the company's stock has risen 492%. He is known for major acquisitions like Pixar in 2006, Marvel in 2009, and 21st Century Fox's entertainment assets last year. Time magazine named him its businessperson of last year, likening his tenure to "one long CEO highlight reel" but listing 2019 as his best year yet, with Disney movies grossing more than $10 billion in the global box office. As CNBC noted, the release of films like "Frozen 2" and "Avengers: Endgame" helped Disney account for nearly 40% of the US box office in 2019. Iger's streaming endeavor, Disney Plus, debuted November 12 and attracted roughly 28.6 million sign-ups in less than three months. And a recent US survey recorded half of consumers saying Disney Plus was "just as good as Netflix." Disney's 2020 film-release schedule includes "Mulan" and Marvel's "Black Widow," though some analysts say it'll be less dominant compared with the past few years given the lack of a full Avengers or "Star Wars" addition. Yet expecting massive success wasn't always the situation. A $256 billion market cap is not to be assumed. Flash back to 2005 When Iger took the helm nearly 15 years ago, Disney was in a tough spot. "We had been through a rough five-year period, with a hostile-takeover attempt, a shareholder revolt, and a battle with two prominent board members," Iger told Harvard Business Review in 2011. His first task, then, was mending relationships with the board members and allowing for internal peace. Then it was all about balancing the traditional with the contemporary and carving a place for Disney in modern times. Iger plans to step down in 2021. His contract was extended for the fifth time in 2017. It is unknown whether Disney will once again push back the CEO's retirement date. Nevertheless, he'll be remembered for more than the quantifiable achievements that benchmark his career. Underneath it all lies a solid leadership strategy, one that allowed Disney to build on the success it experienced in the 20th century to secure a foothold in the 21st. Business Insider previously reported that Iger allowed his work ethic to propel his career forward. His 4:15 a.m. wake-up time, morning workouts in near darkness, and arrival at the office early enough to make coffee for everyone speak volumes to the kind of leader he is: disciplined, focused, and strategic. He's had to be. Iger's leadership strategy started taking shape in his teenage years, when he worked odd jobs to help support himself. He started shoveling snow in the eighth grade and earned extra cash with babysitting gigs. At age 15, he worked as a summer janitor in his school district, where he scraped gums under desks, CNBC reported. "I am very lucky," Iger said at a September conference. "I was a lower-middle-class kid or middle class. My father had manic depression, so he had trouble holding a job. I started as a $150-a-week employee at ABC 45 years ago and rose up to be CEO of this company. It is a great story, but it is not necessarily because I was extraordinary." More than 45 years later, his strategy colors the highlights of his professional career. Iger often stressed that his success was a result of his outlook and approach — not his talent. Three leadership principles helped govern his career from a high-school janitor to one of the world's most influential CEOs. Practicing discipline at an early age helped build his leadership character With so many examples of how leaders can make disciples out of their employees, Iger stands apart with his discipline. From what he wrote in his 2019 book, "The Ride of a Lifetime: Lessons Learned from 15 Years as CEO of the Walt Disney Company," Iger seems to strive for an authentic presence, rather than a bigger-than-life one. "There's nothing less confidence-inspiring than a person faking a knowledge they don't possess," Iger wrote. "True authority and true leadership come from knowing who you are and not pretending to be anything else." Iger has humble beginnings: He started his career as a weatherman before pivoting to more than 20 positions within the studios of ABC Television, eventually including president of entertainment at ABC, president of ABC Television, and president and chief operating officer of Capital Cities/ABC. "As I grew older, I became more aware of my father's disappointment in himself," Iger wrote in his book. "He'd led a life that was unsatisfying to him and was a failure in his own eyes. It's part of why he pushed us to work so hard and be productive so that we might be successful in a way that he never was." With that in mind, Iger kept reaching. He joined Disney's senior management team in 1996, ascending to CEO as a Disney insider less than 10 years later. Innovation turned Disney brand into something more Even though Iger was personally familiar and steeped in the way Disney had historically done things, he wasn't afraid to explore the possibilities that the nearly century-old company hadn't developed. To him, innovation is not an end goal but a company focus. "You can't allow tradition to get in the way of innovation," Iger told Harvard Business Review. "There's a need to respect the past, but it's a mistake to revere your past." In that vein, Iger led the acquisitions of creative powerhouses such as Pixar to inject an influx of fresh thought. At the same time, he's attempted to maintain the aspects of Disney culture that keep people working there. This encompasses the overall purpose that goes into working at a company with a generations-long influence like Disney. Iger essentially wanted to preserve the feel of the brand while allowing for innovation within it — and this extends to the product level. "There's a culture and a way of life at the company that you've bought that sometimes can be integral to the creative process or the process of creating product at that company," Iger told NPR in September. "And if you go about it in too heavy-handed a way, you can destroy spirit and culture and a sense of purpose — and in doing so, destroy the very essence of what you bought, or reduce value." Optimism created a better workforce Iger says that failure should be kept in perspective as much as success is — and that it's the job of a leader to be an optimist regardless of the circumstances. "When you come to work, you've got to show enthusiasm and spirit," Iger said. "You can't let people see you brought down by the experience of failure. You don't have that luxury." In his book, Iger also points to qualities like courage, focus, decisiveness, curiosity, fairness, and thoughtfulness as essential to effective leadership. For example, Iger wrote that every leader should create an environment in which fairness flourished. "This doesn't mean that you lower your expectations or convey the message that mistakes don't matter," Iger wrote. "It means that you create an environment where people know you'll hear them out, that you're emotionally consistent and fair-minded, and that they'll be given second chances for honest mistakes." According to Iger, it's the CEO who cultivates the strategic vision of an organization. "It's the CEO who determines strategy, who is its major proponent, and who says, 'This is where we're going,'" Iger said. "You also set the standards that are applied to your company: how people behave, how they treat one another, what ethics are expected of your company and its products, and how it behaves in the world."SEE ALSO: Disney CEO Bob Iger was just named Time's 'businessperson of the year.' Here's how the media titan makes and spends his $690 million fortune. Join the conversation about this story » NOW WATCH: Taylor Swift is the world's highest-paid celebrity. Here's how she makes and spends her $360 million.