Disney Under Siege | The ‘Bob’ of It All | 3

0:06I'm David Brown and this is Business Wars.

0:29The recent boardroom battles at Disney were intense, to say the least. Plenty of large and powerful personalities competing for their seat at one of the most influential tables in the whole media industry. And although Disney CEO Bob Iger prevailed once again, the house of Mouse is still on shaky ground. For years now, the company's stock has had more ups and downs than a roller coaster at one of their flagship theme parks. In 2023, the company pledged to cut 8 ,000 jobs as part of a$7.5 billion cost-cutting effort, which was supercharged by billionaire investor Nelson Peltz and his investment company Tryon when Peltz tried to take control of the Disney board.

1:09Now, as Bob Iger plans his final retreat from the Magic Kingdom in 2026, the board is tasked with finding his replacement while trying to avoid another Bob Chapek situation. He was the person ousted from the position of CEO after just two years when the board begged Bob Iger to step back in. Here to unpack the recent news from Disney and beyond, Sean McNulty. He's a reporter at The Ankler, where he covers the business of Hollywood. His newsletter, The Wake Up, shares commentary and analysis on the latest topics and trends in the entertainment world. Sean also co-hosts The Ankler podcast, where he's covered Disney and its CEO shakeups at length.

1:48And today, Sean's taking us deeper into the fallout of these proxy battles and exploring what a Disney without Bob Iger might look like. All that's coming up.

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4:10Sean McNulty, welcome to Business Wars. Thank you for having me. Tell us a little bit more about Nelson Peltz. Before the Disney battle, he seemed to have a reputation for, I think his critic would say, weaseling himself onto the boards of companies like Cisco, Procter & Gamble, Wendy's, that sort of thing. What were his goals at those previous companies? Sure. He calls himself a, quote, constructivist, not an activist. You can interpret that as you like personally, but as you said, it's a lot of CPG. So it's a lot of Pepsi, Wendy's, so kind of consumer-facing products. And then Procter & Gamble is a big one.

4:44Snapple was a huge one in his evolution there in Heinz. So no background in entertainment per se here. But he would say that I think he comes in to help these companies probably become more efficient. It's not for necessarily the good of the people, good of the company, but for the good of the stock. So he comes out on the other side of it with a much more valuable stake in the company and increases his wealth. Why did he set his sights on Disney? This is a good question. And I don't know that I actually really have an answer here other than he's part of a Palm Beach set in Florida there where certainly, you know, but there's a lot of media people down there.

5:20Perhaps that was where this originated from. Again, he doesn't have a history of doing this in the entertainment business. So presumably he saw an opportunity. He's looking at stock prices and companies that have a beleaguered stock price. And in 2022, Disney was falling into this category due to the cost increases from the streaming wars really taking their effect. 2022 was about their peak spending year for streaming there at Disney. So the stock wasn't doing great. They had a CEO battle or a contentious part of it, whatever you want to call it, between Bob Chapek and Bob Iger, which was not going well in 2022.

5:56So I think you saw an opportunity to come in at a company where he could get a stock price that was on the lower side of the historical low side of the stock price, get on the board and make a difference and get that stock price up and do what he usually has done at other companies. Why he wanted Disney per se, I don't know that was ever really expressed. Again, that wasn't really his background in corporate America. Well, it seemed like he really wanted to be hands-on here. I mean, he was offered an observer seat on the Disney board in 2023, kind of compromise, but he refused to take it. Why?

6:30He just wouldn't have enough sort of personal hands on. What do you think was going on there? I think, look, he's been on many boards throughout the years. All those companies we named, you know, it's part of his probably ego and image. Like, you know, he does not want to be consulted. He wants to have a seat at the table. You get people of that ilk in, you know, the hedge fund world. They're not looking to come in and get a phone call with Bob Iger every month. They're looking to really have a, I was voted on. They want to say I'm on the Disney board when they're at, you know, the fancy dinners in West Palm Beach.

7:00So that was part of it. And secondly, you know, without a seat on the board, you don't have an official say. So otherwise, you're just a large, you know, stockholder or semi-large stockholder externally, but you have no, you know, official say. And you don't really know what's actually going on in the room. A board is a very official role. You're seeing official numbers where if it's just a phone call, it can be a very broad slate of information that you're getting there. So that's where I see that that was not what he was after. And once you get the eye on the prize, you don't want anything less at that range.

7:28Enter Ike Perlmutter. In March 2023, Ike Perlmutter, head of Marvel Entertainment and friend and neighbor of Peltz, was fired. Bob Iger, who had recently been reinstated as CEO, made it seem like Perlmutter was getting let go regardless of his involvement with Peltz in the proxy battle, but Perlmutter had his doubts. How much of a factor was Peltz in this decision, do you think? The friction between Bob Iger and Ike Perlmutter goes back years. So this is really a culmination of many things throughout the history of Marvel and Disney. Obviously, Iger, you know, was the architect of bringing the Marvel brand into Disney.

8:02And that was Ike's brand. It is Ike's brand. So they've not seen eye to eye on some matters throughout the 2010s. And I think this was just another log on the fire that probably burned brighter than even Bob Iger probably thought it would get in terms of Nelson becoming a real problem for Disney, in a sense, with his request. This was churning for a while, probably. Iger saw a window and probably took it to make his move and get rid of Ike from the company. I wonder how smart that was, though, because then you have Perlmutter, who'd been with Marvel for decades, joining forces with Pelts. And I wonder whether Iger saw that one coming, I guess.

8:39I think Ike and Nelson are well-known associates of each other. I don't think Iger would be caught flat-footed in that regard. Ike was already kind of a thorn in the side of Iger for quite a few years there. Whether he's on the inside or the outside, Ike still held his shares in the company, which is, you know, again, the seat at the table that he had. Again, not a great percentage of the company, but significant. But Ike's role at the company, he was, you know, he's the Marvel person, but he was really relegated by the time of his departure to running the comic book side of the business. It was pretty small.

9:09It wasn't, you know, he wasn't running Marvel films. He wasn't involved in any of that stuff. So his role there, and he probably had a pretty nice paycheck at Disney as well. And this was a time of austerity at Disney where they're looking for, you know, to cut costs and things like that. So I think that was Iger's opportunity to, I think, you know, excise Ike from the company. And Ike was going to team up with Nelson, I think, no matter what, in a sense. So this was not really a matter of like, oh, this will get rid of that situation with Nelson. Yeah. Okay. So at the end of 2023, Peltz tries to buy Disney again.

9:38It looks like an act of revenge. What was different in round two? So in February of 2023, Peltz never actually took the seat to a vote to be on the board. He kind of recanted his campaign at a certain point once Iger made larger changes at the company, namely large cost cutting and layoffs and things along those lines. So he comes back around again, yeah, in the end of 2023. And, you know, he's amassed a larger stake in the company. Clearly, this is something he wants. I mean, this is where, you know, again, back to why does he want to do this? You know, who knows? That's the big mystery here that I don't know that's ever really been answered as to what, why was he harping on this seemingly?

10:18He came back with about, I think, $2.5 billion stake in the company of owning Disney stock at that point, which is much larger than anything he had previously amassed. This is also where Iger had just come back in to run the company. So when Peltz came back into the picture, Iger had been running the company for about a year and the stock was still, you know, not doing great. Again, 2023 was a very painful year at Disney. You know, there were over 7 ,000 layoffs. There were$7.5 billion in cutbacks. So Wall Street was still not seeing the love on Disney. So we probably looked at the stock and was like, well, you know, it still hadn't really moved much.

10:54And that sense, the streaming business was still in disarray. Quite frankly, Hollywood was not doing great. The strikes were also in process at the time. So there are a lot of clouds around the Hollywood business at that time. So Nelson probably saw another opportunity again with a depressed stock price, the thing he saw a year ago, and an opportunity to come again, have a seat at the table. And it's also good for the Nelson Peltz business. He was on CNBC a lot. It gets his name back out there. Try on Partners. It was having some trouble with Unilever and had a really not great experience with its efforts at GE.

11:27It could use a win. And he probably saw this as an opportunity to do so. So never never neglect the PR factor for anybody in these players and private equity takeovers or in board seat proxy battles. Yeah. Yeah. OK, so, of course, Peltz is making this second run for Disney and he's getting a lot of pushback from Disney's board for not understanding the business. But of course, you know, he's saying, well, look, I have billions of dollars worth of holdings across multiple industries. I understand business. Right. I'm curious, what do you see as the real reason Disney didn't want Peltz on their board?

12:01From an outside point of view, I don't see the added value. I mean, if you have a board member at that point, they had a wide variety of people, you know, from the different industries. They didn't need anybody from a business that was not involved in entertainment at that point. And Peltz, you know, had this famous manifesto, Restore the Magic, 133 pages of ideas. And a lot of them were, when he came back around the second time, Iger had already done them. And that was the thing. It was, you know, cut spending on streaming, cut down on sequels, you know, fix animation. This is all Iger year one things he was already instituting.

12:35So it wasn't like there was fresh ideas here. But Disney has structural issues that I don't know that Nelson Peltz adds any value other than just to maybe be a detriment and quite frankly, divert focus from getting the job done. So I think that's the main thing as to what the thinking was there. Yeah. Well, you mentioned the Restore the Magic campaign from Peltz and his camp. But both sides of this battle were staging campaigns with social media ads, websites, all sorts of industry media blitzes. It makes you wonder how much of a threat did Disney see from Peltz? I mean, this was, at least in the public space, a rather ugly, nasty looking battle.

13:18It really escalated there in the first quarter of 2024. Over$65 million was spent cumulatively on both sides, between the two sides being Nelson and Disney on this, which is a lot of money for a board seat proxy fight. I mean, it's a little ridiculous. and the headlines just kept going. It had a little bit of a snowball effect, I think, where maybe they were hoping this would just go away for a little while and then it was clear that it wasn't and the media was really picking up on it. And then you had people like Michael Eisner and Lorraine Powell Jobs and Al Bigale Disney coming out. And then you had shareholder advisory firms like Egan Jones and ISS supporting Nelson.

13:56The narrative kept building and this wasn't gonna be something that had to go away as to why the big spending in the ads. I mean, it just got a bit of a life of its own at some point, and it was going to build to a crescendo with the vote there for the board, which was going to be in April. So you had to take it more serious than they probably wanted to there at Disney. But the other side of it is, you know, if you don't spend the money, the negative consequence outlies whatever the negative of spending the money to fight it would be. But if for some reason they didn't spend and Nelson's campaign worked, I think the downside they figured was much larger there.

14:34So they figured it was worth, you know, investing the time and money into it. Yeah. Well, ultimately, Peltz lost out again, second time. And Disney's board voted in favor of Bob Iger and the old guard remaining in charge. When he was asked about the result on CNBC, here's what Iger had to say. I remain confident and very optimistic about what we're doing. And I just didn't think it was necessary to essentially bring Nelson Peltz onto the board, nor did the board feel that, given the fact that he didn't bring any new ideas and he wasn't going to have an impact on the company that we've deemed was going to be positive.

15:08Anything, there was a belief that it could be a distraction. All right. You think that's a full story? It's hard for me to think of anything here that a logical answer is to say what value added Nelson Peltz will bring to the table. There's zero industry expertise. And if anything, you have a big personality, which, you know, Disney is a very conservative and quiet company. They do not like people, you know, going out in the press every day and talking about what's going on. I mean, who knows if he was in board meetings, what he would be saying in the public, you know, that's a loose cannon. And I think if anything in that campaign certainly only reinforced that sentiment.

15:45So I have a really difficult time seeing, thinking about what would be different if he was on the board, you know, at this point. I've yet to think of anything in this whole process other than Nelson really wanted it. And yet that's that's really the mystery here. I mean, at least to me, it's that if it wouldn't have made much of a difference if he were allowed on, why risk the ugly battle? Why risk the brand equity, you know, using your own Disney characters in this battle? Good night. I mean, the stakes seemed inordinately high. If all it was was he wouldn't bring much to the table. It's not bringing ideas to the table.

16:21And then it's a detriment to distraction from the company at a time when they were coming out of crisis mode there. And if you're running a board, you don't want disharmony on the board. Succession was a main thing. So is this person, do you want him really having a say in who the next leader of this company is? It could lead to him asking for more seats on the board. You know, once you start something, that opens a bigger door. You don't want to open that door on the board. And that, I think, is a wise tactic for Disney to have taken in that sense. So just let them in, you know, that also means somebody has to go.

16:54So someone you presumably like already. So again, you're maybe even detracting value from your board. So I think there are negative consequences to that other than, well, if he's one seat or two seats, you know, which is what they were asking for. Jay Rusulo, the former CFO of Disney was also running. Team Nelson was the two of them. So that's two seats they were kind of looking for there. That's, you know, could be a real detriment. And you're looking to, again, you don't want to have a lot of noise at a company that way. That's another headache that adds no value. You might want to spend the time and the money to really make sure that doesn't happen.

17:28Anyone else sense that maybe some egos may be at play? I'll tell you what, let's take a moment for a short break. Coming up, we're going to take a closer look at the Bob of it all and whether longtime Disney CEO Bob Iger is going to stick it out for another term. Stay with us.

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20:13Hey, welcome back to Business Wars. Our guest is Sean McNulty. He's author of The Wake Up, a newsletter from The Ankler covering Hollywood and the media industry. Sean, we have to talk about Bob versus Bob because this really catalyzed the first proxy battle. Bob Iger decided to step down as CEO of Disney in 2020. Somewhat good timing on his part, whether he knew it or not. What was the industry buzz surrounding that move at the time? Did folks really believe Iger would actually hand over the reins? There are still a lot of questions we hear over four years later to this activity that happened here in February 2020.

20:49Of course, pre-COVID, Bob Iger had been at the company, I guess we're talking 16 years, for 15 years at that point. And it happened really fast. And Bob Iger famously, succession's been even before the Chapek era of this, had been a problem. He extended his contract numerous times. So all of a sudden to be doing that and then be like, yep, I'm leaving. I'm going to give the keys to Bob Chapek. And, you know, that's thank you very much. You know, it was very abrupt. And everybody's like, what did he just do? But the thing is, he wasn't leaving. He was becoming executive chairman and he wanted to stay in charge of creative.

21:27So it was this kind of faux thing that was going on in that. Yes, he wouldn't be CEO, but he was never he was never leaving the picture at Disney. So that was even more baffling in the sense that, you know, how's this all going to work was really the question as well. So on top of that, again, this all happened to the backdrop of COVID and the parks shutting down and movie theaters going dark. You know, so it was just a tremendous amount of chaos going on. And you'd think you'd want a steady hand at that time. Not the best time to be transitioning leadership at a global pandemic on the doorstep there.

22:00So that even added more to it. And I don't know that anybody has ever gotten a real answer as to what the thinking was there exactly. Let's talk about the decision to name Bob Chapek as Iger's successor. I mean, you know, on paper and in some interviews, I mean, Chapek was like the foil to Iger. The two couldn't be more different. And I wonder, I mean, if you're Bob Chapek, I mean, looking back, you got to be thinking, wow, how fair was that? And how do you see it? I think it's a relationship that turned. I mean, Bob Chapek was there for over 20 years. This wasn't like some guy they brought in off the street or just had come in three or four years ago.

22:34So they worked side by side for, you know, for many, many years. And by all accounts, had a good relationship. Bob was promoted throughout his tenure. He was in home entertainment for his first spell there, moved over, you know, to consumer products and then moved up to run the theme parks ever since 2015. So until this era, he'd been running theme parks for five years, a rather large business at Disney. So, yes, Iger and Chapek knew each other quite well. And then, you know, the good news, you know, Bob Chapek, we're giving you the CEO role. But I'm not leaving. So that's not really instilling confidence.