What Disney’s CEO Choice Reveals About Its Next Chapter

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0:59It is Tuesday, February 3rd. It finally happened. I feel like we've been talking about the Disney CEO succession issue pretty much since Bob Iger came back to run the company in late 2022. And now it's real. It was supposed to be announced Thursday, but they dropped it today. As expected, Josh DeMauro, the head of the Experiences division, that's parks and cruises and games, he'll take over for Iger on March 18th at the annual shareholder meeting. And somewhat of a surprise, Iger won't stay on until the end of the year. He's planning to become a strategic advisor instead, maybe to eliminate some of the problems that plagued Bob Chapek, Iger's previous successor.

1:37Felt like he was operating in the shadow of his old boss. We've talked about DeMaro a lot on the show. He's a career parks guy who's running Disneyland before being elevated to overseeing all 14 Disney parks around the world and the massive cruises business. It's so massive that Disney brought in$10 billion in revenue from just the Experiences division in the last quarter. They're investing$60 billion in the unit over the next decade, expanding to Abu Dhabi, more cruise ships, and Avatar Land and Anaheim, a bunch of stuff. Disney is not expanding its investment similarly in the TV and streaming business, at least not outside of sports, which I think is why this CEO job did not go to Dana Walden, the TV chief and a Hollywood favorite candidate, much better known in LA than DeMauro, who lives in Orange County.

2:25But interestingly, Dana is staying on at the company as president and chief content officer, now overseeing film as well as TV and streaming. Board chair says they nixed the idea of doing a co-CEO thing. So why did this arrangement happen? And more importantly, what does it mean for the future of Disney? Lots of challenges ahead for Josh DeMauro, and we're going to get into them with Rich Greenfield, the longtime analyst and Disney watcher. Today, it's a quasi-emergency pod. It's the new boss at Disney and what it all means for the company and for everyone who works there. From The Ringer and Puck, I'm Matt Bellany, and this is The Town.

3:01This episode of The Town is presented by the Walt Disney Animation Studios' Zootopia 2, now nominated for the Academy Award for Best Animated Feature. The Hollywood Reporter hails Zootopia 2 knocks it out of the park with this dazzling visuals sophisticated humor, and genuine emotion. For your consideration for best animated feature.

3:25All right, we are here with Richard Greenfield, analyst at Light Shed Media and regular contributor to the town. Welcome back, Rich. You are wearing a very nice YouTube equals TV shirt. Why are you wearing that?

3:41Rich Greenfield:Because I think we're at a point in time now where every single day I wake up and somebody else is launching their show on YouTube. And I think you might be. I think you might be. Okay, so no, and it's not because you're shilling for the Netflix side of the hearing today in Washington, D.C. over whether Netflix's acquisition of Warner Discovery is anti-competitive.

4:07Rich Greenfield:Matt, all I have to say is I would love to see the court case where the government actually sues to convince consumers that YouTube is not competing against Netflix, CBS, ABC, and ESPN. That is gonna be an amazing - Well, I'd like to talk to many different showrunners who cannot sell their shows to YouTube, but that's a different show. We're not talking about Netflix's antitrust problems today. We are talking about Disney. Big news, Josh DiMauro, new CEO of Disney. The head of the Disney board, James Gorman, he says that they interviewed 100 people for this job. Do you believe that? And how did they land on Tomorrow?

4:47Rich Greenfield:You know, I think, you know, look, I have no idea how many they interviewed, but I actually said there were 100 candidates. I don't know what that means. If there was a dartboard, if there was some spreadsheet, we don't know what that means. No, no, but Matt, seriously, let's go back to the T-shirt because it relates to this. You know, the TV landscape has changed dramatically. And I think even Disney has very much altered its ambitions in TV. It was very aggressive during the pandemic, really trying to gun Disney Plus and even Hulu. And there was a dramatic acceleration in spending. And I think if you look at Disney today, they have very much shifted.

5:24Rich Greenfield:They now are very focused on their movie output. The TV ambitions have scaled back dramatically. Obviously, linear TV is something they don't even talk about outside of sports. Obviously, ESPN and sports. They don't even report numbers anymore. They don't. But so I think in a world where YouTube is now the dominant place and where the whole TV landscape has shifted dramatically, I think it makes a lot of sense when you look at the Walt Disney Company that TV is not the stepping stone to being CEO. And so I think when you look at Josh DeMauro, look at what he oversees. The theme park and experiences and cruise ships, this is the lifeblood of what really drives the Walt Disney Company today.

6:03Rich Greenfield:I don't talk to any investors who don't believe that the theme park business is not the driver of growth over the course of the next decade. $10 billion in experiences revenue last quarter, a new record. But it's also where they're of the CapEx. $60 billion in investment over the next decade. They're certainly not pouring$60 billion extra into their TV and streaming content. Now, they do pay that much, but a lot of it is sports rights and they are pulling back on the entertainment content. So do you believe that that that this was a strategic decision and not a referendum on the particular leadership styles of both Dana Walden and Josh tomorrow?

6:46Rich Greenfield:Look, I don't know their leadership styles well enough. So I know both of them a little bit. I know Dana a lot better. And Dana is a very competent manager, has managed to, you know, rise up from being a publicist at Fox to running this huge empire of TV and streaming. very well known and liked within Hollywood. And if this was even five years ago, where the company was five years ago, I agree with you. She would have had a leg up because they would have seen figuring out the streaming world to be their highest priority. Now, I think figuring out the next steps for the experiential business is their highest priority.

7:27And games, which DeMaro oversees as well. And look, I would take it a step further, Matt.

7:33Rich Greenfield:you know is this step one to altering the company you know Iger has had said he didn't want to you know actually let's go back in time when Iger first came back you know for let's just say for you know the Iger sequel it's really one of his first public appearances if you remember that Sun Valley discussion sure he where he was pretty open that maybe we shouldn't be in traditional linear TV anymore. Non-core. Maybe they're non-core. Correct. I mean, he was very open and transparent. And he said, he went further than that. He said, Gemara Entertainment is not our forte. It's very competitive. Maybe we shouldn't be there.

8:11Rich Greenfield:And so, you know, while he backtracked on that, and it's obviously very difficult to separate ESPN and ABC, now that you have a theme park executive who has massive, you know, oversight over the whole portfolio now. I think it raises the question of, is this the beginning, especially with Iger leaving earlier than expected, meaning March, 2027, you're going to see Iger leave. No, March, 2026. March, 2026, sorry. Like six weeks from now. It is when Iger transitions out rather than December 31st, 2026. Does that create the opening for Josh to do a re-evaluation of the whole portfolio? I mean, look at the value that's been created.

8:51Coincidentally, Iger leaving at the beginning of yacht season. So he'll have a nice summer of yacht season, yachting around the world.

8:58Rich Greenfield:But Matt, just think about it. Regardless of what happens with Warner Brothers, there is no doubt that the announcement of splitting the company certainly increased value to shareholders, has led to all of these M &A conversations. I just wonder whether, you know, if you think about over the next year, if you're Josh tomorrow. How do you not look at this and go, why does Disney need to be in the linear TV business? Yeah, well, Iger was very careful and deliberate in praising his Fox acquisition on the earnings call earlier this week, saying it was very well priced. And the Warner deal is showing how well priced it is.

9:35A lot of analysts disagree with that and say that Disney should have not doubled and tripled down on general entertainment at the exact moment that an arms race was brewing for general entertainment. They have not. And Disney has had hits. I'm not saying Dana did not generate hits at Hulu and at ABC, but they have not had the kind of platform defining success at either platform from her leadership. They have shows like Only Murders. They have shows like Paradise, Percy Jackson. They do not have a Yellowstone. They do not have a Stranger Things. And Bluey, their biggest hit is something Disney doesn't know.

10:14Rich Greenfield:And I really think to just extend on that, because I think what you wrote last night was really well written and thoughtful on this point. Disney's really shifted. How they think about Disney Plus is an outlet for their movies. So they want to create massive movies that drive consumer products, that drive their theme parks, create rides. But they think of those big movies as the thing that drives. They want Zootopia to drive attractions inside the theme parks. frozen land is opening up like that's how they think about it so it's the movies are the driver of streaming not tv content well it's the branded content i think they would surely still like to have the marvel and the pixar and that kind of stuff on the service but those the branded content the most success they've had has been in movies and hulu the big acquisition that they got from the fox deal and had to pay tens of billions of dollars to comcast to get full ownership of they're folding that into Disney Plus later this year.

11:13So where's the value there? Around the world, Disney Plus is home to everything. So is the Hulu deal, like, what is that? And there's a big reorg going on and Dana's group is going to change significantly. But the question for the leadership is, do you think DeMauro pulls the trigger on some kind of big change to the company this year, next year? Because remember, Chapek tried that stuff. Bob Chapek, when he came in, And he tried to make some pretty big organizational changes. And this company rejected it. They just absolutely did not like it. He had to fire Peter Rice. He basically paved the way for Iger to come back.

11:53Does DeMauro make that same mistake? Or does he have a little bit more momentum cachet to do what he wants without Iger looking over his shoulder?

12:01Rich Greenfield:Look, if I was sitting in Josh's shoes, I would take three to six months, really evaluate these businesses. you know, you're stepping into this role in March. I don't think there is, you know, look, while I think there's urgency, I mean, Disney stock is down over the last 10 plus years, they clearly need to be shaken up and something needs to be done. And I think if you look at like, what are the high profile things Josh needs to do? Number one, he has to figure out, is this the right corporate structure? Do you need to have all of these assets? Is there really a flywheel to having ESPN and ABC under the same umbrella?

12:37Rich Greenfield:And how do you really prove that that makes sense? And two, and I think you touched on this, Matt, because he does have purview of this in a world where the younger generation is obsessed with gaming and interactive experiences. And if you look at what the theme parks are, what is theme parks in a digital world? And Like, what is Disney's way of winning? Is it, you know, they have this investment and they're working on this thing with Epic, you know, where that's part of Fortnite. That's small in the scheme of Disney. Do they need to own Epic? Should they own Roblox? Like, what does the future of the Walt Disney, they didn't buy EA, obviously, but like, what are the big transactions?

13:18Rich Greenfield:You know, if you think about when Iger started the first time, the first set off events by buying Pixar. So that strategic move was career-defining for Bob Iger. I think we're going to look for what is the career-defining move for Josh DeMaro over this coming year. Yeah, it seems like games would be the obvious thing for him to make a big splash in. And it's funny, I've said on the show before that Disney needs to figure out how to make Disney Plus the center of the Disney fans universe in experiential, in games, in content, in everything. And I got a lot of feedback when I said that from people at the company and say, you don't think we know that?

13:59We know that. But every time we talk about that, it comes down to cost. And these executives have not been willing to pull the trigger on the cost required to make Disney Plus the center of everybody's life. And maybe now that someone like DeMauro, who's an experiences guy in the top job, will invest in that area to get it right.

14:20Rich Greenfield:Well, I'll tell you one. I'll go a step further. I mean, I will give Iger credit. He brought in Adam Smith. He hired him from YouTube, actually. I know we keep coming back to YouTube. But he hired a key tech executive from Google YouTube. And if you look at Disney Plus today, I think the technological interface, the actual how you interact with Disney Plus, it's changed pretty dramatically over the course of the last few months. It actually recommends content, very personalized. Like the graphical look of it is - You don't shop there. You don't plan your day at the parks. You don't play games against other Disney fans around the world.

14:56It's not there yet. Look, I am not saying, I'm just saying, just in terms of getting what I would consider

15:03Rich Greenfield:an acceptable streaming interface that hadn't changed in basically since launch in any meaningful way, they are finally embracing change. Yes. Is it too slow? Sure. But at least they're stepping into the right direction. I think now the question is, now that you have assembled some really high-quality tech executives inside of Disney, can you empower them and actually invest aggressively to build this far beyond just TV and movies, to your point? Yeah. And Dana Walden has agreed to stay on. She's getting an elevated title, president and chief content officer. Are you surprised? No, I'm not surprised.

15:44this is what Gorman did at Morgan Stanley when he ran the succession process there. I predicted it. Others have as well. You know, where is there for Dana to go? There's not a lot of jobs out there with this kind of cachet and power and empire. And by all accounts, she and Josh do get along pretty well. There's not a huge rivalry there because they do very different things. She's now reporting to him. So maybe that will change. But, you know, I hope he's smart enough to know things that he doesn't know. And he doesn't need to have a relationship with Ryan Murphy or John Fogelman or any of these top creators.

16:25The challenge, I think, is the film group now reports to Dana. And we've seen, you know, at Amazon, when they put a TV executive over film, didn't quite work out there with Jen Salky. you know, Donna Langley now has oversight of TV at Universal. She's a film executive. Bella Bajaria now has oversight of film at Netflix. She is a television executive. That seems to be the trend in the content world is to have these big, you know, global TV people over the film unit. But Disney is a very particular film unit. And very interestingly, Alan Bergman, the head of the film group was not mentioned in any of the releases today does that mean he's out does that mean that tomorrow's gonna need to you know powwow with dana and figure out who she wants to lead the film group there what do you think it means for disney film because that's where the franchises

17:21Rich Greenfield:are coming from i mean i will say david greenbaum's taken on an elevated role inside if he came from from searchlight so he's taken on an elevated role but but a year ago greenbaum was making you know 10,$20 million movies. I don't think they're going to put him in charge of all of the film group. I'm just saying it's interesting that you have two Fox executives that have sort of risen up inside of the creative side at Disney. Because Dana and David are both obviously from Fox. So I don't know what that means. Yeah, but my point is the top two executives at Disney are not film people. And film is the most potent franchise creator at the company.

18:02And I think if I was going to say one more big picture thing that Josh needs to figure out, and I'd say sort of this may be controversial, but Disney needs to stop being a brand manager.

18:14Rich Greenfield:They need to figure out how they develop new franchises. They need to take more risk. They literally need to take more risk to find those new franchises because milking, they've done a great job of milking existing franchises, probably better than anyone on the planet Earth. But if I think about the next 10 years, relying on and continuing to just go back to that well over and over again, I think that's going to prove to be a big mistake by Disney. And I think something that Josh, if he really is taking a long term approach, should be figuring out how they take more swings at new IP. Not something Disney's done really well.

18:50Why is he going to do that? He's the guy that's been exploiting these massive franchises for decades now at the parks. Like, you think he's going to prioritize big swings on unknown properties?

19:03Rich Greenfield:I think they need to. I agree. I think there's a kind of malaise. Now, they would argue they do have new animated movies coming. They have a new Pixar movie coming in a few weeks. They have another Disney animation movie in the fall. I look forward to your prediction on that new animated movie, Matt. I'm looking forward to what you predict for that one. Well, let's just say that neither Hoppers or the fall Disney movie made it into the draft this year for our box office draft. Oh, I noticed. Neither of us thought that it would gross$400 million. This episode is brought to you by The Home Depot.

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20:18Rich Greenfield:Like Like an expert coach, TaxAct offers step-by-step guidance and guaranteed accuracy when filing taxes. Get tips along the way, add expert assist to talk to tax experts, and let our experts do your taxes for you with expert full service. TaxAct helps you find the deductions and credits you deserve so you can get them over with. Visit TaxAct.com to learn more. Conditions apply. See TaxAct.com for details. So what does this mean for the overall kind of culture at Disney? Do you think this signals that the power structure at Disney has now shifted fully to the parks? Do you think that this is a moment for reflection on Iger's legacy and what he has been able to do and not do?

21:09I know he's very frustrated about the stock price. I know that he knows all of the media coverage when he steps down is going to lead with one thing. Amazing executive, botched succession, and the stock has been down since he returned.

21:26Rich Greenfield:Look, they need to grow faster, right? And I think that gets back to if I'm Josh and I'm looking at this openly, and honestly, I'm going, you know, linear TV, it's a great cash flow business, but it is not a growth business. And Jimmy Pataro is doing as best as he possibly can with ESPN. But, you know, running a sports streaming and linear TV business is no easy task. No, the rights are getting way more expensive and there's no path forward. They know. I mean, they just did this deal with the NFL, the valued ESPN at$30 billion. Great. Some speculation, by the way, that they did that in part to get that big valuation in case they want to spin ESPN off.