Whether you love him or hate him, Bob Chapek will continue to be Walt Disney's (DIS -0.04%) Big Cheese. The media giant's board extended Bob Chapek's contract on Tuesday. He will now be CEO through 2025. Support for giving the polarizing helmsman another three years was unanimous in the boardroom.
Chapek's had a rough run since being tapped as the successor to the universally liked Bob Iger on Feb. 25, 2020. Disney shares have gone on to surrender 25% of their value since then, but that can be said about a lot of market bellwethers. He had to hit the ground running, as within a month of his arrival all of Disney's theme parks and most of the world's movie theaters had been shuttered in the wake of the COVID-19 crisis.
Some of the knocks on Chapek are valid. Some of the social disses are off the mark. Either way, Chapek -- whose initial CEO deal would've ended in February of next year -- is going to be behind the wheel for what promises to be a challenging time for Disney. He'll have to steer the House of Mouse through a potential global recession in fiscal 2023, high expectations for Disney+ to grow its subscribers and achieve profitability in fiscal 2024, and the arrival of major competition in Florida when rival Comcast (CMCSA 1.48%) adds Epic Universe to its Universal Orlando resort portfolio in fiscal 2025. In short, he's going to have to his hands full as he proves himself worthy of his extension.
Image source: Disney.
To infinity and beyond
It's fair to say that theme park enthusiasts generally aren't fans of Chapek. When Disney's gated attractions began to open up after months -- or in some cases more than a year -- of being closed, things weren't the same. Annual passes became more restrictive. All guests had to acquire limited park reservations, a platform that favored those more lucrative visitors who were on one-day tickets or staying at a Disney-owned resort hotel. The once complimentary FastPass system by which guests could secure access to expedited queues followed the path carved out by most national theme park and regional amusement park operators, becoming a premium-priced option.
It's easy to see why pass holders aren't happy. It takes more planning to secure park reservations for desired visits, and the FastPass system they have mastered is now a more level pay-to-play system. But these moves have been financially successful. Per capita spending is soaring, and Disney's domestic parks are achieving record revenue and operating profits with fewer guests. It's telling that when social media campaigns tried to get Chapek booted from the board earlier this year, every director -- Chapek included -- was renewed with at least 94% of the vote. There's a disconnect between park regulars and the investment community on the barometers of success.
However, Chapek's hit a couple of more snags since Disney's shareholder meeting that could have financial ramifications. His flip-flopping in response to Florida's "Don't Say Gay" bill made both camps unhappy. His initial reluctance to speak out against the anti-LGBT classroom bill triggered employee walk-outs, and when he did take a stand, it angered some of the more conservative fans of the company. The financial impact of losing special jurisdiction status at Disney World remains to be seen, but Lightyear's soft box office showing raises the stakes for making sure that its next family-friendly film that's on the right side of history in terms of inclusion and representation is a financial success.
Then we have the Peter Rice fiasco. Chapek reportedly abruptly fired the well-respected chairman of entertainment and programming at Disney earlier this month. It's one segment that has been resilient, and some believe that Chapek cut Rice loose merely because he was seen by many as next in line for the throne at Disney. As Hollywood Reporter notes, this Mufasa maneuver isn't an unusual move by a Disney helmsman. Michael Eisner nudged out Jeffrey Katzenberg. Bob Iger reportedly pushed out COO Tom Staggs six years ago. The difference here is that Eisner and Iger already had years of success at the top of the media giant. Chapek still has a lot to prove as the head of the entertainment stock behemoth. He has three years to earn the extension, but every year seems to have a trapdoor just waiting to swing if he doesn't watch his step.
