Disney CEO Bob Iger steps down; company veteran Bob Chapek takes reins

Walt Disney Co. Chief Executive Bog Iger abruptly stepped down Tuesday, sending shock waves throughout Hollywood, Wall Street and Silicon Valley.

Bob Chapek, who has served as chairman of Disney Parks, Experiences and Products since its creation in 2018, was named Iger’s successor, effective immediately.

Chapek’s jolting promotion, which sent Disney shares DIS, -3.62% down 2% in after-hours trading Tuesday, ended years of speculation over who would succeed Iger at the world’s largest entertainment company.

“With the successful launch of Disney’s direct-to-consumer businesses and the integration of Twenty-First Century Fox well underway, I believe this is the optimal time to transition to a new CEO,” Iger, 69, who has been at the helm for 15 years, said in a statement. “I have the utmost confidence in Bob and look forward to working closely with him over the next 22 months as he assumes this new role and delves deeper into Disney’s multifaceted global businesses and operations, while I continue to focus on the Company’s creative endeavors.”

Iger assumed the role of executive chairman through 2021, where he will also direct the company’s creative endeavors. Chapek, 60, has been employed at Disney for 27 years. Iger said Chapek had been identified as his successor for some time.

In response to an analyst’s question during a conference call about the sudden, unexpected timing of his departure, Iger said that with the company’s $71 billion acquisition of Fox’s entertainment assets last year and a strategic plan in place, it was best for him to spend more time on the creative side. “Getting everything right creatively should be my No. 1 goal,” Iger said. Managing that while overseeing all the properties of Disney, he added, was unrealistic.

When pressed about his plans after 2021, Iger told CNBC he would “use my imagination.”

Wall Street was caught flat-footed by the timing of the announcement, which comes just three months after Disney launched its streaming service, Disney+, which competes with Apple Inc.’s AAPL, -3.39% Apple TV+, Amazon.com Inc.’s AMZN, -1.82% Prime Video, Netflix Inc. NFLX, -2.34% , Comcast Inc.’s CMCSA, -3.21% upcoming Peacock, and other services.

“It was the right time for a new CEO to lead the company in the next pivotal period,” Iger said during the conference call.

Several analysts, summarizing the tone of the hastily arranged call, expressed shock at the timing of Iger’s announcement. It was Iger who oversaw the acquisitions of Pixar, Marvel and Lucasfilm to build the most successful studio in Hollywood history. At the same time, Iger postponed his retirement multiple times.

See also: Disney CEO Robert Iger might be sticking around even longer

“Disruption is inevitable in this industry,” said Chapek, who takes the reins at a particularly crucial time for Disney. Two of the company’s parks — in Hong Kong and Shanghai — are closed because of the coronavirus, while concerns linger over the virus’ affect on Disney Cruise Line business.

Additionally, the company faces high-profile competition for the eyeballs of millions of consumers with questions about what’s left in the creative tank for the venerable Marvel catalog. For now, at least, consumers are lapping up Disney+ content: 26.5 million people subscribed in its first quarter of availability, and another couple of million have joined in 2020.

See also: Disney+ subscriptions have topped 28 million, earnings beat expectations

“In the near-term, we expect subscriber growth to come primarily from outside the U.S., with the next meaningful phase of domestic subscriber growth likely to coincide with the release later this calendar year of highly anticipated original content, including episodic series from Marvel and season two of ‘The Mandalorian,’” Chief Financial Officer Christine McCarthy said in a conference call with analysts in February.

Chapek, who will report to Iger for the next 18 months, has overseen major projects such as the $5.5 billion Disney Shanghai resort, and two “Star Wars”-themed lands that opened last year in California and Florida. He’s raised ticket prices at Disney’s parks on peak travel days to manage capacity.

Disney earlier this month reported operating profit of $2.34 billion on revenue of $7.4 billion from its theme-parks business, beating average analyst expectations for profit of $2.32 billion on revenue of $7.32 billion. The TV-networks business produced operating profit of $1.63 billion on revenue of $7.36 billion, exceeding average analyst expectations for operating income of $1.53 billion on sales of $6.93 billion.

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