Disney’s CEO drama explained, with Julia Alexander on this week’s DecoderPod
, where Marvel is a division of Disney and Lucasfilm is a division of Disney. There is redundancy in those decisions because they have their own accounting and marketing and whatever. But because they are able to make decisions faster, the efficiency overcomes the redundancy. They have their own P&Ls that generate the profits to cover up for the fact that they have these redundant functions inside of each division. That is the general theory.
This is my favorite example to talk to clients about. If you’re looking at your spreadsheet, and you’re just looking at numbers, moving something like a Pixar movie to Disney Plus might make sense. You might say, “Okay, there is value that we’re going to get from new subscribers coming in over a specific time period. We’re saving on marketing and printing costs and taking in between 85 percent and 100 percent of those signups, versus the 60 percent in theaters.
The thing I always like to compare it to is when you look at Warner Brothers Discovery. It is the idea of telling Casey Bloys, who is now the CEO of HBO and HBO Max, “Hey, we need you to start thinking about unscripted because we’re bringing in TLC content.” You can’t do that at HBO. You can’t. It takes 30 years to build up the brand of HBO and have that trust from consumers because they really like it. It takes a year to burn it down, and then they have to try to build that back up again.
There is a sense that he’s just an operations person, right? He was handed sort of a finished vision of Disney and he said, “Okay, here’s the vision, it’s Disney Plus. I’m going to relentlessly optimize the company for this product,” without realizing that relentlessly optimizing a company like Disney for profit or efficiency kills the magic of the company itself.
Julia and I actually text about football every week. Brady’s not having a great season. He should have stayed retired.Every executive you ever meet is obsessed with their legacy, and Bob Iger can’t leave that Bob Chapek blemish on it. I do think we get back to what he and Mayer kind of started doing in 2019, which is that you have full control over where things are going, but you have to focus on Disney Plus from a revenue standpoint. “We have to look really carefully at this.
That is just budgetary in its way. “We know people are going to be on their phones when they watch it, so we might as well stretch this out over 12 episodes instead of eight.” That seems like a real force in the streaming world. How does Iger overcome that when he’s like, “Okay, here’s the thing that we make, but I can’t destroy the brand and the quality of the product that we’re known for?”
I have three different rules for if you should put a movie in theaters to hopefully find an audience. One: do I have to see this right now? That is typically because of spoilers. There’s a conversation happening. Two: does it take advantage of technology that my really good TV and soundbar at home are not going to give me? This is why dramas have faltered in theaters and sci-fi has gone up.
I feel like when I talk to executives on the show, there is an element of clinicalness to these decisions. I ask people how they make decisions, and I ask them how they organize their companies. It feels like a lot of what you’re saying is there are some objectively right answers about how to structure Disney. But at the end of the day, Bob Iger had the touch and Bob Chapek didn’t. They are maybe three clicks apart strategically and organizationally from one another.
Iger does that even without being at the company. Think about Chapek just on his last earnings call, about his performances. The one side of things he did wrong, to your point, as we just talked about, it was the reorg and not knowing how to work with your direct reports. On the other end of the situation though is where you have him leaning into this stubbornness of, “Well, no, my way is right. I had every intention to quadruple our subscriber growth and we’re going to make that happen.
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