Disney shares, which rose about 8% in premarket trade Monday, have fallen more than 40% this year, including slumping on weak fiscal fourth-quarter results earlier this month.
The Disney board’s choice to replace Chapek with Iger speaks to it having more confidence Iger will deliver better results. Iger has disapproved of several of Chapek’s changes to Disney despite handpicking him as his successor in early 2020, according to people familiar with the matter, as CNBC reported earlier this year.
The biggest point of contention may be Chapek’s reorganization of the company, which established a new division called Disney Media and Entertainment, or DMED, and consolidated budgetary power for Disney’s content and distribution divisions under Kareem Daniel. Undoing a complete restructure of a company would be messy and time consuming, but it’s hard to imagine Iger will keep Chapek’s organization in place. Daniel’s position at the company also becomes more tenuous. He has close connections to Chapek.
Iger also believed Disney+ should underprice competitive streaming services to maximize its price-value perception among consumers. Chapek decided to raise Disney+’s price to $10.99 without ads as of Dec. 8, making it more expensive than other no-ad streaming services, such as Paramount+ and NBCUniversal’s Peacock. Given Dec. 8 is just weeks away, it may be too late for Iger to walk back that price increase — or the decision to price Disney+ with ads at $7.99 per month rather than a lower price — but it’s possible.
The two leaders don’t disagree on everything. Both have long championed the value of ESPN and Hulu, which are both majority controlled by Disney. Disney has the option to buy Comcast’s 33% in Hulu in January 2024. Chapek expressed a desire to move forward with that transaction. Given Iger’s support for a three-pronged streaming strategy of Hulu, ESPN+ and Disney+, it’s likely he would choose to do the same.
But Iger clashed with Chapek’s initial handling of how Disney reacted to Florida’s controversial “Don’t Say Gay” legislation, privately expressing angst about how the Disney brand may be affected. It wouldn’t be surprising if Iger’s first order of business, before unwinding any of Chapek’s structural changes or reeling in direct-to-consumer spending, is to bring a sense of pride back to the company’s culture.
WATCH: Bob Chapek and Bob Iger’s strained relationship