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Disney Dish 2022-11-28_Chapek_Show
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OPENING

Normal Open: Welcome back to another edition of the Disney Dish podcast with Jim Hill. It’s me, Len Testa, and this is a special BREAKING NEWS show recorded on Tuesday, November 22, 2022.  

BCX Open: Welcome back to Bandcamp exclusive episode of the Disney Dish podcast with Jim Hill. It’s me, Len Testa, and today we’re.

ON THE SHOW TODAY

On the show today: Jim, was there any breaking news this week out of the Walt Disney Company?  You’re on mute, Jim.  He’s waving his arms.  No?  We’ll that’s going to do it for our show this week. We’re produced fabulously by Aaron Adams…

Wait, Jim is signaling to me that … hold on, he’s still on mute so I have to read his lips.  Pop Sheeping On Fire. Jim that makes no sense.  Aaron, can you fix Jim’s mic so I can hear what he’s saying?  And while you’re doing that, I’ll do Jim’s intro.

JIM INTRO

Let’s get started by bringing in the man who says to the person who stole his antidepressants: I hope you’re happy now.  It’s Mr. Jim Hill. Jim, how’s it going?

SUBSCRIBER ACKNOWLEDGEMENT

iTunes:  Thanks to new subscribers Max Falvey, James Vasquez, Tay Disch, and Adam Fortner, and long-time subscribers Elvin Torres, Jim Burmeister, and Mike DBO 523.  Jim, these are the folks now in line to head various Disney Theme Park Divisions such as “The Cabinet of Haunted Mansion Overlay Ideas”, “The Department of How Much Candy Can We Stuff in a Halloween Bag” and “No, really, what are we doing with Stitch/Guest Services”. True story.

NEWS

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News

  • Jim and I are doing the second annual Gingerbread Challenge in Walt Disney World, starting Friday December 2, 2022.  
  • We’re doing a live podcast recording on December 2.  Tickets available at

    https://tinyurl.com/gingerbreaddish
  • We’ve got the preliminary schedule up at https://tinyurl.com/wdw-gingerbread
  • Topic: March of the Wooden Soldiers

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MAIN TOPIC

Jim, let me start with the positives.  Bob Chapek did recently announce that he was forming a cost-cutting committee and looking at potential staff reductions.  So he was kind of a visionary there.

Len’s points:

  • This started with November’s Earnings Call?
  • Christine M. McCarthy, Disney’s CFO, is reported to have told at least one board member that she lacked confidence in Chapek
  • Jim Cramer openly called for Chapek to be fired
  • Susan Arnold, the board chair, called Mr. Iger, 71, at 3 p.m. on Friday and asked him to return.
  • Activist investors were part of this:
  • Daniel Loeb and his Third Point hedge fund
  • Trian Fund Management purchased more than $800 million of Disney stock and started pushing for its own shake-up and cost cuts
  • Iger does not have a great history of developing successors.  
  • Does anyone know what Tom Staggs is up to?
  • He and Kevin Mayer, left Disney and are now running a start-up, Candle Media.  Apparently they were reached out to earlier this year, but it would’ve required Disney acquire Candle Media, which Chapek would’ve had to approve.
  • Kareem Daniel also out at Disney Media & Entertainment
  • In 2020, Mr. Chapek restructured Disney to give priority to the company’s streaming services (Disney+, Hulu and ESPN+). He took away profit-and-loss responsibility from the executives who run Disney’s movie and television studios, and gave it to a protégé, Kareem Daniel, who was named chairman of a new division, Disney Media and Entertainment Distribution.
  • The loss of that turf — along with control over when and how films and shows would be released — upset longtime Disney executives, including Alan Bergman, the chairman of Disney Studios Content. Making the situation more touchy, Mr. Daniel had little experience in the vast area he was given to oversee. Mr. Chapek repeatedly insisted that his deeply unpopular reorganization was, in fact, the opposite, with “100 percent buy-in” from Disney managers.
  • Mr. Daniel’s division is notably the one that contributed the $1.5 billion in “peak” streaming losses for the recent quarter, up from $630 million a year earlier, surprising investors.
  • Mr. Iger ousted Mr. Daniel on Monday. In a note to employees, Mr. Iger said a new company structure was on the way that “puts more decision-making back in the hands of our creative teams and rationalizes costs.”
  • That is a direct rebuke of the spreadsheet-and-hard-power approach of Chapek and Daniel.

Jim’s Notes:

and resigned

looking next hut down in late  also being forced to close in late about what apparent on

According to The New York Times, a person close to Disney’s board reached out to Kevin Mayer and Tom Staggs when Chapek’s contract renewal was under consideration. The person asked them:

“Would one or both be interested in returning to run Disney?”

It wasn’t just that some senior Disney leaders were aghast about the quarterly results and Mr. Chapek’s seemingly delusional delivery of them: Several began speaking openly about resigning if he remained, talk that swiftly reached the Disney board. Christine M. McCarthy, Disney’s well-regarded chief financial officer, directly told at least one board member that she lacked confidence in Mr. Chapek. “He irretrievably lost the room,” the leader of a Disney unit said on Monday.

On the afternoon of November 8, Disney delivered a dismal quarterly earnings report, missing Wall Street forecasts for revenue and profit by wide margins and causing its already battered stock to slide in after-hours trading. Making matters worse, Chapek came off as curiously sanguine during the company’s quarterly earnings call with analysts. Breezing past a much-wider-than-expected operating loss from streaming of $1.5 billion, Chapek declared the quarter a “turning point” en route to a more profitable future, but he didn’t come close to acknowledging the uphill climb ahead. Instead, the former theme parks division chief rhapsodized about “phenomenal” park events like the Oogie Boogie Bash and Mickey’s Not-So-Scary Halloween Party.

Earnings calls — especially Disney’s — tend to be exercises in spin, yet Chapek’s manner and remarks elevated concerns at the board level about his ability to right the ship. During the earnings call’s question-and-answer period with analysts, Chapek let CFO Christine McCarthy (a holdover from Iger’s tenure) field questions about the many challenges facing the company. Chapek’s performance on the call, in addition to getting panned by Disney potentates, was excoriated by CNBC pundit Jim Cramer. He called out Chapek’s “appalling” gloss about “how great they are” and faulted his lack of candor. “There is just no doubt that he has to go,” Cramer said. “The way he handled it, he made it sound like it was a four-star quarter. Delusional.”

A few days later came a memo from Chapek to Disney leaders outlining the need for austerity, including potential layoffs along with cost reductions. The memo blindsided a number of senior execs, multiple sources indicated to Deadline, exacerbating tensions with senior executives. Some staffers described the document as “tone deaf,” with its call for a “cost structure taskforce” consisting of himself, McCarthy and General Counsel Horacio Gutierrez. The move didn’t engender trust or sit well with rank-and-file employees, we hear.

He had first sent shockwaves at the company retreat in Orlando in the weeks leading to the earnings call. Instead of rallying the troops with messages of optimism and team-building, he proclaimed, with no context, that the company needed to rethink marketing and change its marketing strategy, turning the mood somber for most of the event, we hear.

And in a plot twist that was almost too delicious, former DGE Chairman Peter Rice — the highest-profile casualty of Chapek’s reign — was also at the concert, enjoying the show in every sense of the word.

Susan Arnold, the board chair, called Mr. Iger, 71, at 3 p.m. on Friday and asked him to return.

Chapek was expected to be at the Elton John concert, sources said, but canceled his appearance by midday Sunday. His top lieutenant, Kareem Daniel, Chairman of Disney Media and Entertainment Distribution, went to the stadium but left before the concert started as people around him were reacting to the bombshell announcement, we hear.

Meanwhile, discontent with Chapek built, hitting a tipping point with the most recent earnings call and a subsequent note to staff regarding a hiring freeze, layoffs and other cost cutting that set off profound anxiety within the company. Two high level sources — who felt they should have been given a heads-up — say they were totally blindsided by the memo and left scrambling to figure out what they could still spend money on and what was now off limits.

When the end came for Chapek, even a Disney-connected source who is not a Chapek fan expressed shock at the way it went down. “He didn’t get to say goodbye or say, ‘I’ve decided to step down,’” this person says. Reminded of reports that Rice had likewise been unceremoniously dismissed following his own brief meeting with Chapek, this person adds, “I bet you it broke Chapek’s record of firing Rice in seven minutes. They called [Chapek] and said, ‘You’re out. Our lawyers will call your lawyers.’ No statement from him, no comment from him, no grace. It’s fucking insane.”

At public events over the past year — and in conversations with confidants as recently as this month — Mr. Iger repeatedly insisted that he had no intention of returning to Disney. At the same time, he had been privately railing against Mr. Chapek, according to several people who spoke with him.

He lamented what he said was Mr. Chapek’s seeming lack of empathy and emotional intelligence, which resulted in an inability to communicate with or relate to Hollywood’s creative community. Disney seemed to be losing its soul, he confided to one associate.

But the more Mr. Chapek floundered, the more Mr. Iger’s reputation suffered. Mr. Iger handpicked Mr. Chapek for the job, believing that Mr. Chapek’s blunt, unsentimental business style would help Disney continue its transformation into a streaming superpower. According to three people briefed on the matter, Mr. Chapek was privately told that he was heir apparent as early as 2018, much earlier than initially realized, and so Mr. Iger had ample time to train him. The final piece of Mr. Iger’s legacy — a successful and smooth handoff of power — had been denied.

In 2020, Mr. Chapek restructured Disney to give priority to the company’s streaming services (Disney+, Hulu and ESPN+). He took away profit-and-loss responsibility from the executives who run Disney’s movie and television studios, and gave it to a protégé, Kareem Daniel, who was named chairman of a new division, Disney Media and Entertainment Distribution.

The loss of that turf — along with control over when and how films and shows would be released — upset longtime Disney executives, including Alan Bergman, the chairman of Disney Studios Content. Making the situation more touchy, Mr. Daniel had little experience in the vast area he was given to oversee. Mr. Chapek repeatedly insisted that his deeply unpopular reorganization was, in fact, the opposite, with “100 percent buy-in” from Disney managers.

CNBC reports it was CFO Christine McCarthy that led the charge to oust Chapek.

Apparently he was positioning to make her the scape goat for bad earnings.

Which is exactly what Chapek unfairly did to Catherine Powell, making her take the fall for Galaxy’s Edge opening troubles.

She reinvigorated Disneyland Paris, was given the position "President, Disney Parks, Western Region" in 2018, where she was in clear contention with Chapek for CEO. Chapek blamed her for the Galaxy's Edge opening.

Walt Disney executives staged revolt against ousted chief Bob Chapek on twitter (opens in a new window)

Senior Walt Disney executives led a rebellion against chief executive Bob Chapek in recent weeks, which resulted in his ousting and replacement with predecessor Bob Iger, according to people familiar with the matter.

The covert campaign to overthrow Chapek, which began in the summer, came after the outgoing chief executive lost the confidence of some members of his top team during a tumultuous 33 months at the helm of the media empire.

“A lot of people were approaching the board, Iger loyalists who felt marginalised,” said one person with knowledge of the talks.

Shares in Walt Disney rallied 6.3 per cent on Monday as investors wagered that Iger, one of America’s most celebrated media executives, could lift morale and boost returns at the company’s costly streaming unit. By Monday afternoon Iger had dismissed Kareem Daniel, a trusted Chapek ally who ran the group’s streaming strategy.

Disney executives began approaching the board, which is chaired by Susan Arnold, a few months ago to express concerns about Chapek’s leadership. Christine McCarthy, chief financial officer, was among the executives who complained, three of the people said. Disney declined to comment.

“[The board] were clueless about what to do,” one person added.

The final straw was Disney’s bruising earnings release on November 8, during which Chapek reported the company’s streaming business had lost $1.5bn during the most recent quarter. Three days later, Chapek announced job cuts, telling staff in an email: “We are going to have to make tough and uncomfortable decisions.”

Iger, who ran Disney for 15 years before leaving in 2021, stunned Hollywood on Sunday night by agreeing to replace Chapek. Iger had handpicked Chapek as his successor after he won plaudits for his management of Disney’s theme parks division.

The changes at the top come after the company’s stock had fallen nearly 40 per cent this year as Disney and others spent heavily to compete in streaming, a business that has been costly and less profitable than cable television or cinema.

Relations between the “two Bobs” quickly soured as Iger bristled over Chapek’s handling of Disney’s creative output and his management shake-up, which introduced more centralised decision making and empowered Chapek’s allies.

The decision to reinstate Iger, brokered by Arnold, came less than six months after Disney renewed Chapek’s contract for a further three years, quelling speculation of a potential exit. People close to Chapek said he became aware of the moves against him some weeks ago but was caught off guard by the speed of events.

The abrupt dismissal will entitle Chapek to a significant payout. Under his old contract, at the end of 2021 he was entitled to an estimated $54mn in cash and stock in the event of early termination. The company has not published the full details of his most recent contract.

Iger, 71, has agreed to stay on for two years to help steady the ship and choose another successor.

Iger, who delayed his retirement four times before finally leaving the company, said in a memo to staff on Sunday that he felt “a bit of amazement” that he was returning to the company.

As recession fears grow, investors have become increasingly concerned about the high costs of streaming, weighing on the valuations of all major US entertainment companies this year.

MoffettNathanson analysts expect Iger to “re-examine” Disney’s streaming strategy.

Steven Cahall, a Wells Fargo analyst, said: “While the announcement doesn’t solve all of Disney’s problems, we think investors will embrace it as it puts perhaps the best leader in media at the helm with a mandate to shake things up.”

In June, Disney delayed the opening of its Lake Nona business campus in Florida until mid-2026.  The new business campus was originally expected to open in 2023 and would be the new home for the Disney Parks, Experiences and Products (DPEP) division of the company.  Among operations being forced to relocate were Walt Disney Imagineering (WDI), which has historically operated in Glendale, California.  This controversial forced re-location of thousands of employees resulted in countless WDI and creative employees permanently leaving the company.  Chapek’s decision to move DPEP to Florida was primarily motivated by tax incentives and overall lower operating costs.   Disney’s delay on opening the Lake Nona campus resulted in numerous Disney employees backing out of home purchases in the area.  Disney has reportedly still not begun vertical construction on the Lake Nona campus.

First, we have undertaken a rigorous review of the company’s content and marketing spending working with our content leaders and their teams. While we will not sacrifice quality or the strength of our unrivaled synergy machine, we must ensure our investments are both efficient and come with tangible benefits to both audiences and the company.

Second, we are limiting headcount additions through a targeted hiring freeze. Hiring for the small subset of the most critical, business-driving positions will continue, but all other roles are on hold. Your segment leaders and HR teams have more specific details on how this will apply to your teams.

Third, we are reviewing our SG&A costs and have determined that there is room for improved efficiency—as well as an opportunity to transform the organization to be more nimble. The taskforce will drive this work in partnership with segment teams to achieve both savings and organizational enhancements. As we work through this evaluation process, we will look at every avenue of operations and labor to find savings, and we do anticipate some staff reductions as part of this review. In the immediate term, business travel should now be limited to essential trips only.

WRAP-UP

That’s going to do it for the show today.  You can help support our show and JimHillMedia by subscribing over at DisneyDish.Bandcamp.Com, where you’ll find exclusive shows never before heard on iTunes.

NOTE: You can find more of Jim at JimHillMedia.com, and more of me at TouringPlans.com.

PRODUCER CREDIT

iTunes Show: We’re produced fabulously by Aaron Adams, who’ll be taking on his creative rivals from the House of Knipschildt at the 2023 Big Island Chocolate Festival on Saturday, April 29, 2023, starting at 11 a.m., at the Waikoloa Beach Marriott Resort & Spa, in beautiful, beachside Waikoloa Beach, Hawaii.

CLOSING

While Aaron’s doing that, please go on to iTunes and rate our show and tell us what you’d like to hear next. And for each week in November, we’ll be giving away a free Disney Dish t-shirt to one lucky iTunes reviewer drawn at random.  

CONGRATULATIONS TO THIS WEEK’S WINNER..

Do me a favor, please, and send me a copy of that review so I have your email address: len@touringplans.com.  And thanks for those reviews.

For Jim, this is Len, we’ll see you on the next show.

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