Disney reappointed Bob Iger as chief executive in a surprise move as the entertainment company ousted his hand-picked replacement, Bob Chapek, after less than three years in the role.
During Iger’s acclaimed 15-year reign, Disney made a series of significant acquisitions, including the Marvel film franchise, the Pixar animation studio and the Star Wars film franchise.
He retired as chief executive in 2020, after repeatedly delaying his exit to guide the company through the early stages of the coronavirus pandemic. He was replaced by Chapek, who previously led its theme parks division but remained executive chairman until late last year.
Iger returns to the CEO role effective immediately and will serve for two years, Disney said in a statement late Sunday. The company highlighted a five-fold increase in market value under his leadership, adding that he had a “mandate from the board of directors to set the strategic direction for renewed growth” as it once again sought a long-term successor.
Michael Antonelli, market strategist at Baird, an American asset manager, said Iger’s return was “probably the most significant corporate shake-up since [Steve] Jobs have returned to Apple” and the news sent Disney shares up more than 8% – or nearly $14 billion – when Wall Street opened on Monday.
“We applaud Disney’s board for the courage to make this change,” said Michael Nathanson, principal analyst at MoffettNathanson. “We have never made a secret of our affection for Mr. Iger and the work he has done to build Disney into the global powerhouse it has become.”
Chapek had overseen a tough time for Disney, with disruption from the pandemic – which forced its theme parks to close – followed by concerns about the profitability of its streaming service, Disney+. The platform competes in a crowded field and has spent billions of dollars creating new content as it takes on rivals Netflix and Amazon Prime Video. While Disney+ has grown subscribers rapidly, it has come at the cost of significant operating losses.
Disney has also come under pressure in Florida, where its Walt Disney World theme parks are based, over its public opposition to the state’s “don’t say gay” laws that prohibit classroom discussions of sexual orientation and gender identity at certain levels.
The company publicly opposed the laws, seen by many activists and teachers as repressive, prompting right-wing Florida Governor Ron DeSantis to try to strip it of its privileges in the state.
The company’s market value has fallen more than 40% in 2022, much worse than the 17% drop in the S&P 500 index of large US companies.
News of Iger’s return prompted the highly respected MoffettNathanson to raise his target price for Disney to $120 – it was trading below $100 – his first upgrade on the stock since early 2020.
Susan Arnold, President of Disney, said, “We thank Bob Chapek for his service to Disney over his long career, including guiding the company through the unprecedented challenges of the pandemic. The board concluded that as Disney enters an increasingly complex period of industry transformation, Bob Iger is uniquely positioned to lead the company through this pivotal period.
Iger said, “I am extremely optimistic about the future of this great company and delighted that the board has asked me to return as CEO.” Disney has not released a statement from Chapek.
His return comes weeks after Disney’s stock price took a hit after reporting a rare loss in revenue and profit, and a doubling of losses on its streaming business to $1.5 billion during the quarter preceding October 1.
Disney has spent about $9 billion to date on loss-making Disney+ and about $30 billion a year on content from Hollywood blockbusters and big-budget NFL football TV shows across its television and streaming businesses, which include ESPN and ABC.
The company said its streaming business has reached a “loss peak” and that Disney+ remains on track to become profitable in its 2024 fiscal year, when it will most likely be bigger than Netflix, although brought down subscriber expectations between 215 and 245 million. globally.
To achieve this goal, Disney is imposing price increases of up to 38% in the United States, with regions such as Europe likely to see increases in the near future, and will launch an ad-supported subscription tier from December 8 in the United States.
Analysts expect Iger to implement cuts in areas including content spending at Disney+ and pay-TV network ESPN.
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