Inside story of Iger and Chapek

But Iger figured the timing was right. He was getting close to 70 and he’d been CEO for almost 15 years. The company’s recently launched streaming service, Disney+, was an instant success. And Iger was convinced Chapek was the right caretaker to continue his legacy.

Chapek grew up in Hammond, Indiana, “the son of a World War II veteran and a working mother,” as he has described it. His family took annual trips to Walt Disney World when he was young, seeding his genuine love for the company’s theme parks. He studied microbiology at Indiana University and got his MBA from Michigan State University. He joined Disney in 1993 and by 2015 had risen to become chairman of the parks division. 

For more than two decades, Chapek earned Iger’s respect as a shrewd cost-cutter and a low-drama manager. Iger especially valued Chapek for his integrity and operational expertise. At each of the divisions Chapek led at Disney — home video, consumer products and parks — profit and revenue soared under his watch. He also benefited from some good timing, running the home video division when Disney animation hits such as “The Little Mermaid,” “Aladdin” and “Beauty and the Beast” were first sold on VHS and piloting consumer products just as “Frozen” launched. 

Chapek cemented his reputation with Iger and the board during the construction of Shanghai Disney, the $5.5 billion theme park that opened in 2016 after months of delays. Iger and Chapek traveled to Shanghai, China, together more than 10 times as Chapek got the cost overruns and construction headaches under control. His success helped Iger move on from former Chief Operating Officer Tom Staggs, who was then in line to take the CEO job after Iger. Staggs left the company just before Shanghai Disney finally opened.

It was Iger’s experience with Staggs — who didn’t secure Disney’s top job after being promoted to COO specifically to be Iger’s heir apparent — that made Iger decide Chapek should start as CEO immediately. He told board members he didn’t think Chapek needed to audition for the role. 

Years later, Iger would tell others he mistook Chapek’s stellar operational track record for leadership skills.

This was a striking admission for Iger, who prides himself on his emotional intelligence. He is charming with co-workers and at ease with celebrities — a Hollywood star in his own right. These traits paid dividends over the years. He convinced Steve Jobs to sell him Pixar, cajoled Ike Perlmutter into selling him Marvel, and persuaded George Lucas to sell him “Star Wars” and its bounty of associated intellectual property. In 2017, he struck a deal with Rupert Murdoch to buy most of Fox. 

Some Disney executives have privately speculated that Iger chose Chapek because he wouldn’t rival him in either charisma or celebrity — or, more cynically, because he was unlikely to eclipse Iger’s glittering record at the company. 

What’s clear is Iger didn’t know Chapek as well as he should have. On a day-to-day basis, Iger worked far more closely with Mayer and Staggs. Iger doesn’t mention Chapek once in his 2019 autobiography outside of the prologue — even though by then Chapek was at least tentatively in line to be Iger’s preferred successor. For comparison, Iger spends more than five pages of his 236-page book discussing “Twin Peaks.”

The entire process of naming a successor was bumpy. For a start, Iger kept delaying his retirement: In 2013, 2014 and then twice in 2017, he renewed his contract after saying he intended to walk away.

In 2017, according to people familiar with the matter, Iger first told Chapek he was in the running to be his potential successor. The vetting process for CEO would begin with Chapek flying across the country to meet one-on-one with board members — not unlike contestants’ hometown dates on Disney’s hit reality show “The Bachelor.” Iger had gone through a similar process, taking 15 meetings with directors before securing the CEO position in 2005.

But Chapek never did the meetings. Iger agreed to buy the majority of Fox’s assets in a $71 billion deal and renewed his contract as a condition of the purchase, pushing back any talk of succession.

In January 2020, Iger told Chapek the plan was back on. This time, Iger told him that instead of the one-on-one board interviews, Disney’s lead independent director, Susan Arnold, would be in touch. Days later, Arnold delivered the news to Chapek over lunch at The Rotunda, Disney’s executive dining room. She and Iger had both recommended Chapek for the job, and the board had approved. Chapek sat on the secret for six weeks before the public announcement.

In choosing Chapek, Iger and the directors had passed over Mayer and Peter Rice, then head of Disney’s TV entertainment business. The board felt the leadership styles of both men were too brash, according to people familiar with some of the directors’ thinking. Also, Mayer had never run a business of scale, and Rice had joined the company from Fox less than two years earlier.

However, Iger never consulted anyone who worked directly for Chapek in the runup to naming him CEO, according to people familiar with the matter.  

He had pegged Chapek as someone who would accept his somewhat unusual succession plan, in which Chapek would serve both as CEO and CEO-in-training while Iger remained his boss and ran “creative endeavors” for 22 months as executive chairman. 

“Any of the big creative decisions that have to be made, I fully intend for Bob [Chapek] to be at my side,” Iger told CNBC’s Julia Boorstin on the day of the announcement. “What this is about, really, is, we believe, a really good succession process and a really smart transition process.”

WATCH: Bob Iger steps down as Disney CEO and announces Bob Chapek will take his place

Iger needed full buy-in from the board for his plan, but that did not prove difficult. Over the past 15 years he had become the gold standard of legacy media and entertainment CEOs. From the time he’d taken over at Disney to the end of February 2020, Disney’s share price increased about 420%, far outpacing the S&P 500 index, which gained about 150%.

By 2019, Iger had personally selected every member of the board, which is surprisingly lacking in media and entertainment experience. Iger is personally close with several of them, including Nike Executive Chairman Mark Parker and General Motors CEO Mary Barra. In addition, the wife of another director, Michael Froman, then vice chairman of Mastercard and now president of the Council on Foreign Relations, had been housemates with Iger’s wife, Willow Bay, at the University of Pennsylvania.

It was from Parker that Iger got the idea for his succession plan, according to people familiar with the matter. In October 2019, Parker, who was then CEO of Nike, announced he would remain as executive chairman of Nike while passing the torch to John Donahoe.

That structure also happened to be nearly identical to one that Iger’s predecessor Eisner tried and failed to secure for himself. In 2004, Eisner floated a plan in which he would step down but remain as chairman, while Iger would take over as CEO. 

But unlike Iger, Eisner had lost his grip on the board. Directors Roy Disney, a nephew of Walt Disney, and Stanley Gold resigned their seats and in a blistering letter objected to the notion of Eisner remaining as chairman. “[His] ‘succession plan’ is for a company led by Michael Eisner and his obedient lieutenant, Bob Iger, to be handed over to … Michael Eisner and Bob Iger,” they wrote. “Any arrangement that permits Mr. Eisner to remain as Chairman after relinquishing his position as CEO is contrary to best governance practices.” 

Eisner relinquished his chairman role in March 2004 after 43% of Disney shareholders withheld their votes to reelect him to the board the year before. He resigned as CEO in September 2005. Iger assumed leadership of the company without anyone hovering over his shoulder. This allowed him to move quickly on decisions that Eisner might not have agreed with, such as buying Pixar. Iger describes the acquisition process at length in his autobiography.

Chapek wouldn’t have nearly the same degree of freedom. 

In “The Ride of a Lifetime,” Iger recalls watching Eisner leave the Disney lot on his last day at the company: “It’s one of those moments, I imagine, when it’s hard to know who exactly you are without this attachment and title and role that has defined you for so long.” 

Just weeks after Iger announced his departure, Chapek began to wonder if Iger had regrets, according to people familiar with his thinking. Equally soon, Iger started to think he’d made a mistake. 

At first, the signals were tiny. When Iger announced his departure to staff on Disney’s Burbank studio lot, he jokingly called himself “Big Bob” and Chapek “Little Bob,” a light reminder to employees about who was still the boss.

On March 10, 2020, about two weeks after the handoff, Chapek, Iger, Chief Financial Officer Christine McCarthy and a small handful of other Disney executives flew from Los Angeles to Raleigh, North Carolina, for Disney’s annual meeting. 

At the front of the plane, Iger and Chapek were going over logistics and fretting about coronavirus. Iger caught Chapek off guard with some news. Chapek, not Iger, would lead the question-and-answer portion of the meeting, an annual ritual Iger called “stump the CEO.” 

During his 27 years at the company, Chapek had only attended one annual meeting — as a guest in the audience. 

At some point, amid the chaos, McCarthy suggested to Chapek that they do their first weekly CEO-CFO meeting. They were around the third agenda point when Iger snapped. It was disrespectful to conduct this meeting right in front of him, he complained curtly, according to a person familiar with the exchange. 

It was rare for Iger to show Chapek a side of himself that wasn’t “Disney nice” — the term many executives use for a corporate culture that emphasizes kind and respectful interactions. Chapek and McCarthy quietly finished their meeting, but Chapek told others after the flight he left with the distinct impression that Iger was having second thoughts about relinquishing the job he’d held for 15 years. 

These dueling perceptions that manifested themselves on that March round-trip flight — Chapek as bumbling and isolated; Iger as unwilling to give up control — would define the next 2½ years.

After Iger left the call, the board brought back Chapek and asked him if employees were aware of how bad things had gotten between the two men. Chapek said he didn’t think so, but he knew Iger had been complaining about him to Disney confidants and Hollywood executives and agents. 

Iger and Chapek never participated in a face-to-face mediation about their working relationship. The board never demanded it. Privately, Arnold counseled Chapek to be patient, something she’d continue to do for months to come in a series of coaching sessions. Let Iger run creative, she said. In 18 months, Chapek would have control of everything. Until then, don’t engage in turf wars.

In less than four months, Iger’s plan for a managed succession had gone up in flames. 

But box-office returns weren’t driving investor sentiment — streaming was. And during the early months of Covid, Disney had limited inventory because production on new TV series and movies had ground to a halt. Chapek wanted to put premium programming on Disney+ as soon as possible. 

His idea was to implement a “make-sell” model, a phrase Chapek borrowed from Iger, who had discussed it with former YouTube executive Bob Kyncl in 2018. The idea was to create a clear division between people who make shows and movies and people who sell them. Studio heads and content division leaders would still choose which projects to greenlight, but someone else would have the authority to bring needle-moving content to Disney+ or Hulu.

Companies such as Netflix, Amazon and Apple also separate distribution divisions from content creation, and Chapek hoped that adopting a similar structure would move Disney away from its legacy media habits. Investors valued Netflix far higher than legacy media because of its growth profile; if Chapek could get investors to view Disney as a technology company, they might reward him with a share price multiple bump. 

To this end, Chapek created a new group called Disney Media and Entertainment Distribution, or DMED. To lead the division, he chose Kareem Daniel, then a 46-year-old executive who had worked closely with Chapek for years, first as a Stanford MBA intern in home entertainment and later in both distribution and theme parks. The reorganization gave Daniel — and Chapek — veto power over movie and TV show budgets.

Chapek had a series of meetings with Iger to discuss the restructure, including conversations in Iger’s Brentwood house and walks around the neighborhood. Despite the unaddressed tensions between the two, the conversations were cordial, according to people familiar with their interactions. 

Iger didn’t try to stop Chapek’s plan, but he also didn’t give it his full endorsement. His opaque communication style frequently confused Chapek, according to colleagues. Chapek couldn’t tell whether Iger’s questions were a passive-aggressive way to signal disapproval or a genuine attempt to get more information.

Inside Disney, many executives saw the reorganization as a way for Chapek to shift the power balance away from Iger’s base — TV and movie executives. Chapek had long felt that Disney’s culture, under both Iger and Eisner, treated non-creative executives like him as second-class citizens, according to people familiar with his thinking.

But Daniel rankled many company leaders, who thought he lacked the industry experience or humility for the job. Daniel was known for his intelligence, but he was prone to harshly shooting down opinions with which he disagreed, according to colleagues who worked with him. Chapek tried, unsuccessfully, to coach him to be more “Disney nice.” 

Daniel declined to comment for this story.

As agents and major Hollywood players realized Daniel was Disney’s new power broker, his inexperience in the entertainment world surfaced in ways that embarrassed some colleagues. He’d enlist several members of his communications team to help him navigate the red carpet at premieres, causing some executives to chuckle about his self-importance. His team would also prepare documents advising him how to act during these events, complete with talking points for impromptu conversations with celebrities, press or producers on the carpet. The DMED communications division eventually ballooned to more than 100 employees, which some on the team felt was wildly excessive. Given DMED’s importance to the future of the company, Chapek didn’t intercede. 

Still, some of Daniel’s colleagues felt veteran Disney executives were being unfairly dismissive of him. It was Daniel’s responsibility to set cost controls, so irritating studio executives was practically a requirement of his job. Chapek adjudicated dozens of conflicts between Daniel and Bergman, according to people familiar with the matter. Both men got used to walking away frustrated.

Bergman declined to comment.

Directors, producers and actors panned the reorganization. In a town where relationships matter, they didn’t know Daniel. They wanted clarity on whether their movie would go straight to streaming or get a theatrical release, and their usual contacts on the creative side could no longer give them straight answers. 

When it came to TV, there was less resistance to the organizational changes, because streaming wasn’t associated with inferior quality. While creative executives were cut off from important data they used to judge the performance of their shows, in an era of declining broadcast ratings, landing on a streaming service often increased the total audience and extended the lifetime of TV series.

One exception was ESPN. Rights deals are the sports network’s lifeblood, and ESPN executives were used to hammering them out directly with leagues. After the reorganization, ESPN executives lost their budget power and gained layers of bureaucracy.

Chapek was trying to rearrange the company at a time when nearly all employees were working from home. Virtual meetings ballooned in size. Conversations became unwieldy. Junior executives from Daniel’s distribution team, who were involved in meetings because ESPN+ was being sold alongside Hulu and Disney+, asked questions of league officials that exposed their lack of business knowledge. 

ESPN Chairman Jimmy Pitaro was so demoralized he contemplated leaving the company, according to a person familiar with the matter.

Pitaro declined to comment. 

Throughout all this, executives who had lost power under the new structure were frantically complaining to Iger, who told them he didn’t agree with the reorganization — an assessment Chapek heard only indirectly — but that there was little he could do.

Many veteran Disney creative executives viewed the reorganization as an example of poor decision-making. Chapek loyalists saw it as a necessary change to modernize Disney, which they felt was being sabotaged by petulant TV and movie executives, with Iger’s tacit backing, according to people who were directly involved in the reorganization.

Around this time, in late 2020 and into 2021, Disney executives throughout the company started to feel increasingly awkward about the Iger-Chapek relationship. McCarthy warned Chapek that Iger’s criticism was reaching an increasingly wide audience.

McCarthy declined to comment for this story.

Most tried to ignore the rift and just do what they were told. 

Zenia Mucha, who had been Disney’s head of communications since 2002, before Iger started as CEO, took a more active approach. Reminding Chapek of his predecessor’s legacy and stature, she urged him to portray a united front with Iger. 

But Chapek didn’t trust Mucha, who was so close to Iger that some at Disney referred to her as his second in command. Chapek felt she was Iger’s communications advocate and not his. Others close to Chapek felt Mucha wasn’t championing him as much as a communications head should be celebrating a new CEO. Mucha argued the country was being ravaged by coronavirus and it wasn’t the right time for puff pieces in Hollywood trade magazines, according to people familiar with the matter. 

Chapek felt he couldn’t fire Mucha with Iger still lurking as chairman, according to people familiar with the matter. On the advice of the board, who agreed that Chapek needed communications help, Chapek began soliciting advice from external communications firm Brunswick Group in early 2021 — without informing Mucha. He hoped Brunswick could improve his image in Hollywood, where he was growing increasingly unpopular with frustrated content creators and agents. 

Mucha declined to comment. 

There was one hitch: Johansson’s contract stipulated that her compensation was based on an exclusive theatrical release for up to four months. Since her contract was negotiated before Covid, this type of issue hadn’t arisen before. Her agent, CAA partner Bryan Lourd, spent months negotiating with Disney executives throughout the organization, warning Bergman and Chapek that Johansson would sue for remuneration if they proceeded with their plan, according to people familiar with the discussions. 

Chapek viewed Johansson’s contract as a creative issue and therefore Iger’s territory. Iger had a long relationship with Lourd and knew Johansson. This was his arena.

Iger, however, wasn’t involved in any of the conversations with Lourd, who thought Iger would have quickly resolved the situation given the value he historically placed on creative relationships, according to people familiar with the matter.

Lourd declined to comment.

If Chapek wanted to be CEO, he should be CEO, Iger reasoned. To Iger, this was a clear business matter — a contract dispute — and not a “creative endeavor,” according to people familiar with his thinking.

By this time, Chapek and Iger were barely speaking to each other.

In July, after multiple warnings from Lourd, Johansson sued. Disney’s lawyers walked through the company’s options in a virtual meeting attended by about 20 executives, including Iger and Chapek. Iger didn’t speak, but he felt the meeting was “amateur hour” — a meeting “run by children” — with far too many people weighing in on how the company should respond, according to a person familiar with his thoughts. 

Iger and Chapek both signed off on an aggressive public statement that accused Johansson of “a callous disregard for the horrific and prolonged global effects of the Covid-19 pandemic” and revealed her $20 million salary for the film. The clear implication was that she was only seeking more money out of greed.

Mucha argued Disney needed to have a forceful response because the lawsuit specifically named Iger and Chapek as financial beneficiaries from a stronger Disney+.

Yet, both Iger and Chapek disagreed with the tone of the statement, according to people familiar with the matter. Neither one stopped its release because each believed the other should be in charge. 

Iger called Chapek and told him he should issue a public apology, according to people familiar with the call. Chapek refused, said the people. Iger never even considered apologizing, according to people familiar with his thinking.

Hollywood talent and agents largely blamed Chapek for the statement. Chapek suspected Mucha was pushing this narrative to the press. To defend himself, Chapek solicited other members of the communications team to help him call reporters, without informing Mucha.

Disney settled the lawsuit in October 2021.

That November, Iger threw himself a goodbye party at his Brentwood house. After 26 years, he was finally leaving Disney. He invited about 70 guests, including director Steven Spielberg, famed sports broadcaster Al Michaels, ABC broadcasting anchors David Muir, Robin Roberts and Michael Strahan, and many former and present Disney leaders.

Iger reluctantly invited Chapek. When he found out Chapek had a speaking engagement at Walt Disney World set for that day, he was relieved, according to people familiar with his mindset at the time. He didn’t want Chapek to attend — and the feeling was mutual. Chapek’s first impulse was to decline. But he knew it would look terrible if he didn’t attend, so he canceled his plans in Orlando. 

At the party, the tension between the two was palpable. Iger sat next to Spielberg, while Chapek sat far away at the opposite table, visibly miserable. It did not escape attendees that Iger thanked dozens of people in his speech — but not Chapek. It was humiliating, but Chapek told friends he felt relieved the tension was out in the open. 

With Iger gone, Chapek could finally run Disney his way. He moved into Iger’s larger office, the one with the private bathroom — but he never actually used the shower, as Iger predicted, according to people familiar with the matter.

Chapek turned to some executive housekeeping that Iger’s presence had prevented. He combined government relations with media communications, naming former BP communications boss and onetime Defense Department press secretary Geoff Morrell as chief of corporate affairs. That decision effectively forced out Mucha, as well as general counsel Alan Braverman, whom Chapek viewed as a diehard Iger loyalist. 

Other veteran executives left to coincide with Iger’s departure. They included Alan Horn, Disney’s chief creative officer and chairman of Walt Disney Studios from 2012 to 2020, and Jayne Parker, the head of human resources who had been at Disney for more than 30 years. Chapek also fired Rice, the well-respected head of TV, in June, telling him that he wasn’t a cultural fit. Rice had been at Disney for about three years after coming to the company via Disney’s acquisition of 21st Century Fox.

To combat the outflow of institutional knowledge, Chapek worked overtime to make sure he retained McCarthy, the CFO. McCarthy, who had joined Disney in 2000 and who was in her late 60s, was a master of internal politics and had close ties to the board, according to colleagues. Chapek jokingly offered McCarthy a lifetime contract after he found out she had bought a house in Montana, a sign she was thinking about retiring, according to people familiar with the matter. 

By this point, Chapek’s inner circle had shrunk to a handful of senior executives. He didn’t trust most of the existing leadership, largely because of their ties to Iger, and primarily relied on Daniel, Bochner (later replaced by Claire Lee), Chief Human Resources Officer Paul Richardson, McCarthy and the new head of parks, Josh D’Amaro.   

Chapek did feel he had an ally in Arnold, who had become the new board chair, according to people familiar with his thoughts. Arnold represented the post-Iger power center of Disney, and she was now also Chapek’s boss. It wasn’t long, though, before she found herself in the center of a firestorm.

He additionally hoped to determine a job for Disney within the metaverse and employed 50 workers to concentrate on “subsequent era storytelling,” consciously avoiding the time period “metaverse” to discourage derision. A number of Disney executives privately mocked the trouble anyway, given the vagueness surrounding your complete idea. They puzzled if Chapek was attempting too arduous to tell apart himself from Iger, in keeping with individuals accustomed to their pondering.

With out Iger on the board, Chapek additionally felt emboldened to rethink ESPN and Disney’s different TV properties. Particularly, he needed to contemplate spinning off or promoting ABC and ESPN — an idea Iger had constantly dismissed (however later floated in a July 2023 interview with CNBC). When Iger was chairman, Chapek was so reluctant to broach the topic of promoting legacy media belongings that he’d rigorously therapeutic massage the language in slide displays to keep away from annoying Iger, in keeping with individuals accustomed to the matter.

Chapek argued that ESPN, underneath Disney, may have a future as a standalone digital enterprise, unbundled from conventional pay TV — “the hub of all streaming sports activities,” as he and Pitaro put it. Chapek needed followers to have the ability to watch any recreation on an ESPN app, regardless of who owned the rights. To make that occur, Disney would wish to strike partnership offers with each the leagues and competing companies resembling NBCUniversal’s Peacock, Apple TV+, Amazon Prime Video and Paramount+, which can or could not have been possible. 

Chapek was additionally beginning to acquire traction with the Hollywood group. He’d brokered peace on Johansson with Lourd and repaired that relationship. Dana Walden, who changed Rice to guide Disney’s TV division, invited Chapek to her home to fulfill A-list showrunners and administrators.

A majority determined Chapek deserved extra time to implement his personal imaginative and prescient, and he obtained a comparatively brief contract extension, till July 2025. The message was clear: We consider in you — so long as you retain delivering outcomes.

Chapek interpreted the contract renewal as a certified victory, in keeping with individuals accustomed to his ideas on the time. He could not assist however view it within the lens of what it meant for Iger. On the one hand, an extension till 2025 would definitely make Iger’s return much less doubtless. On the opposite, Chapek instructed colleagues, he feared Iger would possibly flip up the warmth in opposition to him — particularly now that Iger was now not certain by any fiduciary duties as chairman. 

Nonetheless, though Chapek could not shake his concern that Iger was plotting a return as CEO, Iger each privately and publicly denied this. Earlier that yr, he instructed journalist Kara Swisher the notion was “ridiculous.” 

Issues lastly got here to a head within the runup to Disney’s fourth-quarter fiscal earnings report.

By 2022, Chapek and CFO McCarthy had a dependable sample for earnings preparation. Disney board conferences are extremely choreographed, and government displays are rehearsed advert nauseum. So, together with different executives, Chapek and McCarthy would rehearse displays for weeks. Then, when quarterly numbers had been launched publicly, Chapek and McCarthy would quarterback a convention name and question-and-answer session for fairness analysts. The pair would agree on all of the numbers and divvy up subjects for the Q&A. There have been no surprises.

In late September, Chapek and McCarthy prepped the board on what to anticipate for the upcoming November 2022 quarter.

However this time, McCarthy started going off script. Not solely did she reference numbers and forecasts the 2 executives hadn’t mentioned, she bluntly instructed the board the quarter’s financials had been on tempo to be very dangerous, in keeping with individuals accustomed to what was mentioned on the assembly.

McCarthy instructed the board that Disney earnings that quarter would fall dramatically wanting Wall Avenue’s consensus estimate of 55 cents per share. Quarterly income can be greater than $1 billion decrease than projected. The quarter can be the corporate’s greatest miss relative to Wall Avenue consensus estimates in a decade, she mentioned. 

McCarthy attributed this grim outlook partially to the corporate’s failure to change its streaming technique after the business’s revaluation triggered by Netflix’s first-quarter lack of progress. Disney now wanted to prioritize profitability, McCarthy argued. She thought Daniel was overhiring in DMED and that Chapek’s restructure had created duplications that wanted to be addressed by layoffs — one thing Chapek would announce in November. 

Chapek was blindsided by McCarthy’s responses. He had no thought the numbers would examine so poorly with Avenue estimates. McCarthy hadn’t instructed him she can be sharing such a blunt evaluation of the enterprise, in keeping with individuals accustomed to the matter.

“How may this occur?” requested board member Mark Parker, in keeping with individuals accustomed to what was mentioned through the assembly. Administrators Safra Catz, Oracle’s CEO, and Derica W. Rice, previously president of CVS Caremark, peppered Chapek with questions on Disney’s forecasting strategies and the way division heads shared finance data. Chapek struggled to reply and declined accountable anybody within the formal board assembly setting.

In an government session alone with the board, Chapek argued that if something was amiss, it was McCarthy’s poor monetary administration. In spite of everything, the division CFOs reported to her. McCarthy both wasn’t sharing the numbers with him or hadn’t grasped how dangerous earnings can be, he mentioned, in keeping with individuals accustomed to the discussions. Chapek shared his frustration over McCarthy’s stunning diversion from the script with a number of of his colleagues. However he did not specific it to her instantly, aside from telling her she’d unnecessarily upset the board, mentioned individuals accustomed to the interactions.  

In addition to, Chapek did not consider the outcomes had been as dire as McCarthy was portray them to be. He identified Disney+ was nonetheless including prospects at a torrid tempo — 12.1 million that quarter. So long as the streaming service was on tempo to fulfill its aim of 215 million to 245 million subscribers by the top of 2024, Chapek believed, the corporate was in good condition. Disney ended that quarter with 164.2 million Disney+ subscribers.

“Kareem [Daniel] says we’re killing it!” he instructed a number of colleagues, in keeping with individuals accustomed to the conversations. Within the earlier quarter, Disney shares had risen 5% after the corporate’s income and earnings exceeded analyst estimates. By Chapek’s reasoning, even when the fourth quarter was a disappointment, it was nonetheless only one quarter. 

McCarthy instructed colleagues she hoped her honesty with the board would jar Chapek into realizing his rosy outlook of the enterprise wasn’t primarily based in actuality. McCarthy’s relationship with Daniel and his workforce’s finance leaders had damaged down. McCarthy instructed colleagues DMED was supplying her with unreliable data, always altering its forecast, in keeping with individuals accustomed to the matter.

Disney’s 2022 administration retreat in Orlando fell a couple of weeks earlier than the November earnings name, and members of the DMED and finance groups gathered to determine a technique. Normal counsel Horacio Gutierrez instructed colleagues that individuals had been entitled to their very own opinions however not their very own details. He half-invited, half-forced McCarthy, Daniel, Schake, direct-to-consumer CFO Justin Warbrooke, head of investor relations Alexia Quadrani, Bryan Castellani, DMED’s government vice chairman of finance, and several other others to gap up in a convention room for the majority of the retreat. They missed many of the scheduled enjoyable, resembling interacting with the animals at Animal Kingdom and attending to journey new theme park points of interest with out the traces, in keeping with individuals conscious of the conferences. Chapek had phased out the necessary athletic exercise from the Iger period.

Chapek attended just a few minutes of the primary technique session. He spent most of his time on the retreat collaborating in actions that might showcase his personable aspect to workers. By this time, Chapek had grown a beard, which colleagues instructed him he ought to maintain as a result of it “humanized” him. When a number of of the executives locked within the convention room discovered Chapek was having enjoyable, together with petting a hippopotamus, their collective frustration with him grew, in keeping with individuals accustomed to the matter.

Popping out of the conferences, Schake and Quadrani instructed Chapek the response to the quarter may very well be devastating. Chapek started referring to Schake, Quadrani and McCarthy as “the imply women,” a reference to the 2004 Lindsay Lohan film, as a result of he felt they had been ganging up on him. Those that took a dismal view of Disney’s prospects he known as “Eeyores,” a reference to Winnie the Pooh’s perpetually glum donkey pal, in keeping with individuals accustomed to the conversations between Chapek and his workers.  

On the day of the earnings name, executives met at Disney’s West 66th Avenue workplace in New York. The finance workforce suggested Chapek to ship a sober message acknowledging that the streaming division’s internet working losses had been greater than double that of the identical interval the earlier yr — whereas emphasizing that Disney was enjoying an extended recreation and would in the end emerge stronger. 

Chapek refused to strike an apologetic word. McCarthy, specifically, was appalled at how cavalier Chapek appeared in regards to the state of the enterprise, in keeping with individuals accustomed to her ideas on the time. She was notably irritated that as a substitute of frankly addressing the outcomes, Chapek waxed on in regards to the promising ticket gross sales for Disneyland’s “Oogie Boogie Bash” Halloween occasion. 

The day after the numbers had been launched, Disney’s share value dropped 13%, far underperforming the broader market.

The next days weren’t variety to Chapek. Activist hedge fund Trian Companions, led by founding companion Nelson Peltz, took an $800 million stake in Disney, worrying board members that he could attempt to take a board seat and oust present administrators.

Individually, board member Catz privately instructed Chapek he was making an enormous mistake releasing the animated film “Unusual World,” which featured an brazenly homosexual character. Catz, who was on former President Donald Trump’s transition workforce, instructed him the film was too polarizing and lower than Disney’s high quality requirements. She warned a poor efficiency would not play effectively with the board.

Catz declined to remark. 

However Chapek and different Disney studio executives knew they’d need to launch the film. The very last thing Disney wanted was to anger the LGBTQ group once more.

Disney launched the film on Nov. 23, 2022. It was an enormous flop, shedding Disney about $200 million. 

Chapek’s failure to heed the warnings of the individuals round him irked many executives, together with some beforehand sympathetic to him. Walden, Bergman and others spoke privately to Iger, who suggested them that in the event that they needed to make a CEO change, they need to communicate to the board en masse. 

In a extremely uncommon transfer, board members additionally arrange discussions with Disney division heads, who not often communicate to administrators exterior formal conferences. Schake, McCarthy, Gutierrez, Walden, Bergman and D’Amaro all instructed both Arnold, Mark Parker or your complete board that they now not supported Chapek as CEO, in keeping with individuals accustomed to discussions. All declined to remark. 

The board determined Disney wanted to make a CEO change. There was just one clear alternative.

Walden and Bergman each reside close to Iger. On Nov. 12, every took a stroll with him within the neighborhood and instructed him they’d voiced their considerations to Arnold, in keeping with individuals accustomed to the matter. Walden requested Iger if he’d be open to returning. By this time, a number of different previous and current Disney executives had additionally urged Iger to return again. Iger instructed Walden he’d think about it, though he did not inform his spouse, in keeping with an individual accustomed to the matter.

Early the following week, in keeping with individuals accustomed to the matter, Walden deliberate one other stroll with Iger for 3 p.m. on Nov. 19. Shortly earlier than their scheduled stroll, Walden referred to as to inform Iger she’d by no means had any intention of taking that stroll: She had made the appointment to make sure he’d be accessible for a name from Arnold, who formally requested him to return. Walden declined to remark.

Iger and Bay talked it over. She instructed him that if the board was asking him to return again, he ought to say sure.

The next day, Disney shocked its workers and Wall Avenue but once more. The board had fired Chapek, who wasn’t even allowed to ship a goodbye e-mail. Lower than three years after he gave up his job, Iger was as soon as once more the CEO of Disney.

Round Christmas, Schake, Quadrani and McCarthy obtained presents from a colleague: pink sweaters, an homage to their “imply lady” historical past.

Up to now few months, Disney has laid off 7,000 individuals. The corporate is paying down practically $45 billion in debt — a lot of which stems from the 2019 acquisition of Fox, which seems to have been an enormous overpay by Iger and his technique workforce. In August, Disney shares closed at their lowest level since 2014.  Since Iger returned as CEO in November, shares have slumped greater than 11%. The S&P 500 is up greater than 13% over the identical interval.

Since returning, Iger has undone Chapek’s streaming reorganization, fired McCarthy as CFO, and put Bergman and Walden again accountable for finances and distribution selections for his or her content material. However these strikes have not been, and are unlikely to be, a fast repair for the corporate’s woes. Underneath Bergman’s watch, Disney has had a string of film failures. This yr, the live-action “The Little Mermaid,” “Indiana Jones and the Dial Of Future” and “Haunted Mansion” have dissatisfied on the field workplace. The Hollywood Reporter referred to as the latter “one of many worst begins ever amongst Disney’s live-action reimaginings of theme park points of interest or traditional animated movies.” 

In the meantime, Disney’s streaming division misplaced $512 million within the quarter ended July 1. The corporate nonetheless goals to interrupt even on streaming by the top of 2024. It hasn’t readjusted its goal, which was reset in August 2022, of getting 215 million to 245 million Disney+ subscribers by the top of subsequent yr — 135 million to 165 million excluding India.

Nonetheless, one one that helped set these targets mentioned “lightning must strike 5 instances” for Disney to achieve them. On the finish of the newest quarter, Disney+ had 146.1 million subscribers — 105.7 million excluding India. That is about 16 million fewer Disney+ prospects than the corporate had on Oct. 1, 2022, an indication that Disney has deprioritized including streaming subscribers, particularly in India, and that total progress has slowed.

Disney in August introduced a 27% hike within the value of Disney+, to $13.99 per 30 days, to be able to speed up streaming profitability. In late July, Atlantic Equities analyst Hamilton Faber pushed again his projected date for Disney to interrupt even in streaming to 2026. Consensus analyst estimates name for Disney to finish 2024 with about 50 million fewer Disney+ subscribers than the low finish of its 2024 aim.

“With Iger-led Disney elevating Disney+ pricing to push towards profitability, the Chapek period sub objectives seem unattainable,” mentioned LightShed media analyst Wealthy Greenfield. “Nevertheless, with content material engines all sputtering on the similar time, sub progress is the least of Disney’s issues.”

WATCH: Disney CEO Bob Iger’s unique July 2023 CNBC interview

Throughout Chapek’s tenure as CEO, Disney misplaced greater than 1 / 4 of its market worth. The pandemic clearly performed a job in that. However Chapek ought to, in his personal phrases, “take the A” — accountability — for a few of his failures. 

Breaking with Iger was clearly not a sound technique. Iger had nominated each member of the board, constructed the corporate in its fashionable type, and repeatedly struggled to stroll away from the job. Had Chapek been capable of higher compartmentalize his insecurity over his job standing, it is potential he may have brokered a peace along with his boss. 

It could be simpler to decide on Disney’s subsequent CEO by simplifying the corporate. Iger urged to CNBC in July he could be open to divesting the legacy cable networks and ABC. Disney may additionally resolve to spin off ESPN. Advisors to Iger have pushed him on this route for greater than 5 years, in keeping with individuals accustomed to the matter. 

Divesting belongings might also make Disney simpler to promote, a lot as Rupert Murdoch offered the vast majority of Fox to Disney. Greater than a dozen previous and current Disney executives mentioned privately they consider Iger’s desired finish recreation is to remain as CEO for so long as potential after which promote the corporate to Apple — Iger’s ties to the tech large date again to his shut private relationship with co-founder Steve Jobs. Nevertheless it’s much less clear that regulators would enable a deal — or that Apple, which has by no means acquired any firm of significance, would even wish to purchase Disney.

No matter materializes, the contract extension Iger acquired in July doubtless means he’ll be Disney’s CEO for years to return. For now, inner candidates will do their greatest “Disney good” to win over Iger and the board. And but it is totally potential they will spend the majority of their careers working and politicking and pining for a job they will by no means get. 

Simply because it has since 2005, the magical world of Disney as soon as once more revolves round Iger. Everybody else is on his journey.

The journey of a lifetime.

Disclosure: Comcast is the dad or mum firm of NBCUniversal, which owns CNBC.

WATCH: Disney’s succession mess: The within story of Iger and Chapek