56 Business The EconomistFebruary 29th 2020
“I
don’t knowif the word disrupter was the right word to use
back then, but I’ve always been willing to take some chances.”
That is how Bob Iger recently explained his approach to running
Disney. In his 15-year tenure Mr Iger’s bets have turned the Ameri-
can entertainment company from a moderately profitable busi-
ness threatened by digital upstarts like Netflix and Amazon into
one of the world’s most formidable content-and-technology pow-
erhouses. Profits quadrupled from $2.5bn in 2005 to $10.4bn in- Disney’s market capitalisation rocketed from $48bn to over
$230bn. This track record has made Mr Iger one of the most lion-
ised (and best-paid) corporate bosses on Earth.
On February 25th Mr Iger once again displayed a fondness for
disruption by announcing his departure from the corner office, ef-
fective immediately. He had toyed with the idea of retiring several
times, only to change his mind. In 2016 his heir apparent was
pushed out. Mr Iger has extended his own contract twice since
then, and was expected to remain ceofor another couple of years.
He will remain as executive chairman, focusing on the firm’s cre-
ative process, until the end of 2021 but has handed day-to-day run-
ning of the firm to Bob Chapek, a safe pair of hands who most re-
cently ran Disney’s amusement parks.
The abrupt move sent the firm’s share price tumbling by 4%. To
ease investors’ nervousness, Mr Chapek would be wise to heed
three lessons from his predecessor. Other executives, in Tinsel-
town and elsewhere, should pay attention, too.
Mr Iger’s first insight was that quality products matter—or, in
Hollywood lingo, content is king. Mr Iger had no truck with the no-
tion, espoused by some pundits, that content would become com-
moditised as power shifted irreversibly from creators to distribu-
tors. This belief in content led Mr Iger to collect one beloved
franchise after another, in a buying spree that verged on the fool-
hardy. Soon after taking over in 2005 he spent $7.4bn to buy Pixar,
the animation studio famous for “Toy Story” movies. Three years
later he bought Marvel Entertainment, with its stable of comic-
book superheroes such as the Avengers, for $4bn. In 2012 he
pipped Rupert Murdoch, boss of the Fox media empire, by acquir-
ing Lucasfilm, home of “Star Wars”, for another $4bn or so. The
three acquisitions alone have so far earned Disney revenues of
$36bn. Last year alone Disney’s billion-dollar blockbusters includ-
ed “Avengers: Endgame” (Marvel), “The Lion King” (Walt Disney
Pictures), “Frozen 2” (Pixar) and “The Rise of Skywalker” (Lucas-
film). They helped Disney grab over a third of the American film
market, and global box-office takings of over $10bn. His fourth
purchase, of Mr Murdoch’s 20th Century Fox in 2019 for $71bn, is by
far his most ambitious (and potentially most problematic).
The second thing to learn from Mr Iger’s reign is to trust ac-
quired talent. At most firms in most industries, when a big com-
pany buys a small, nimble one, the buyer’s managers defend their
turf and foist headquarters culture onto the acquisition. Mr Iger’s
Disney instead let Pixar lift its middling in-house animation team.
This hands-off approach and respect for the achievements of oth-
ers helped persuade control freaks like George Lucas, the founder
of Lucasfilm, and Isaac Perlmutter, the reclusive chairman of Mar-
vel, to hand over their cherished possessions.
The third lesson is also the most important. A bit of paranoia
can be productive. No boss succeeds without supreme self-confi-
dence, and Mr Iger is no exception. However, he has shown time
and again that he is willing to question his own judgment and to
revise strategies as the business landscape evolves. When on a vis-
it to Disneyland in Hong Kong around the time he took over as ceo
Mr Iger noted that Chinese crowds preferred newer Pixar charac-
ter’s to Mickey Mouse, he set reverence for Walt Disney aside and
went about modernising the firm’s roster.
Nowhere was this clearer than in his embrace of digital stream-
ing. Convinced that digital disruption was “not a speed bump” but
an existential threat, he bet Disney’s future on a shift from its his-
toric business-to-business model of distribution to the fast-grow-
ing direct-to-consumer model pioneered by Netflix. This shift was
driven in part by the decline in the traditional approach of bunch-
ing content into pricey bundles for pay television, a trend that has
hit Disney’s espn sports division hard. But it was a huge gamble.
He needed to persuade his board, which had to accept putting ex-
isting profitable businesses at risk, and investors, who had to
swallow big outlays today in exchange for uncertain digital divi-
dends tomorrow.
On November 12th the firm launched Disney+, a streaming ser-
vice, in America and a handful of other markets. By the end of the
day it had 10m subscribers. Since then it has chalked up another
20m. Add a further 30m people who pay to watch Hulu, an older
streaming service Mr Iger took control of in 2019, and more people
fork over money to Disney every month than pay for cable tv from
Comcast or at&t.The Iger sanction
Mr Iger leaves his successor a company in good shape, but also in
the midst of two transformations: digital and, with 20th Century
Fox to fold in, organisational. Both will soon test whether Mr Cha-
pek has learned Mr Iger’s lessons. He certainly appears to share his
mentor’s belief in the importance of brands and content, dating
back to childhood visits to Walt Disney World. A big test of his re-
spect for talented types with strong opinions will be convincing
Kevin Mayer, the go-getting head of Disney’s direct-to-consumer
business whom many expected to get the top job, to stay put. The
even greater challenge of integrating a behemoth like 20th Cen-
tury Fox, a bigger acquisition than Pixar, Marvel and Lucasfilm
combined, will require a degree of adaptability that would have
strained the old boss himself. As it is, Mr Iger has bowed out before
his most epic plot has unspooled. 7Schumpeter Bob Iger’s magic kingdom
Three lessons from one of Hollywood’s most successful bosses