I was fascinated by the reaction to last week’s announcement that Disney CEO Bob Chapek had fired Peter Rice, its chairman of entertainment and programming. If there was a common theme to the collective reaction, it’s that Chapek had done something wrong at a time when he can seem to do no right.
I don’t know if anyone outside the walls of Disney has enough information to determine whether that decision is “wrong” or “right”. Moreover, the reality is we may not know the impact of that decision for a long time.
I think the better questions to ask are, first, how much does the firing of Peter Rice reflect Chapek solving for the limits of Iger’s post-BAMTech vision for Disney? And, second, how much does it reflect the weaknesses of Chapek building out his own “One Disney” vision?
Iger’s Vision
Bob Iger wrote about his 2017 reorganization of Disney after acquiring 21st Century Fox in his autobiography, "The Ride of A Lifetime":
We would have three content groups movies (Walt Disney Animation, Disney Studios, Pixar, Marvel Lucasfilm, Twentieth Century Fox, Fox 2000, Fox Searchlight), television (ABC, ABC News, our television stations, Disney channels, Freeform, FX, National Geographic), and sports (ESPN). All of that went on the left side of the whiteboard. On the other side went tech: apps, user interfaces, customer acquisition and retention, data management, sales, distribution, and so on. The idea was simply to let the content people focus on creativity and let the tech people focus on how to distribute things and, for the most part, generate revenue in the most successful ways. Then, in the middle of the board I wrote "physical entertainment and goods," an umbrella for various large and sprawling businesses: consumer products, Disney stores, all of our global merchandise and licensing agreements, cruises, resorts, and our six theme-park businesses.
I stepped back and looked at the board and thought, There it is. That's what a modern media company should look like.
When Chapek was appointed CEO in February 2020, he inherited that corporate structure. According to the Fiduciary vs. Visionary framework, that means Chapek was effectively constrained by Iger's original vision for Dsiney because Chapek is "a skilled and determined operator", but not a proven visionary in digital media nor proven in content (one of Iger’s strong suits).
Both Rice and his now-replacement Dana Walden were part of that inherited post-merger content team: Rice was the former 21st Century Fox president, and Walden was the former Fox TV Group chairman.
Iger would stay on within Disney through the end of 2021 in an ad hoc executive chairman role and as chair of the board of directors. His role was to focus on helping to problem-solve the content pipeline during the pandemic. As CNBC’s Alex Sherman reported then, Chapek was unhappily navigating the unusual challenge of being a Disney CEO while his attention-loving predecessor stayed on as chair of the board.
After Iger stepped down from the board in December 2021, Chapek has only had both the optics and substance of “full” control over Disney since then.
Chapek’s "One Disney" Vision
In October 2020 Disney announced a restructuring:
Disney’s three content groups (Studios, General Entertainment, Sports) will be responsible and accountable for producing and delivering content for theatrical, linear and streaming; and,
The Media and Entertainment Distribution group, led by Kareem Daniel, its new Chairman, will be responsible for the P&L management and all distribution, operations, sales, advertising, data and technology functions worldwide for all of the Company’s content engines, and it will also manage operations of the Company’s streaming services and domestic television networks.
Back in March, I wrote a short essay “Chapek v Iger” on why and how Iger’s original restructuring, above, had resulted in "power struggles" between then Direct-to-Consumer & International Chairman Kevin Mayer and then-Disney TV studio head Peter Rice over who had the authority to decide which shows aired on Disney+.
Sherman reported that the structure required Iger "to solve the disputes by making control decisions on the fly." After Iger left, Chapek heard from both distribution and content executives that "the current arrangement had become dysfunctional". Those conversations led to the October 2020 restructuring.
Much of the attention since then has been on Daniels becoming unusually powerful but also a mystery to Hollywood - The Ankler has a good, long piece on Daniels, and my friends Tim Thompson and Keith Rauch have a good, clear-headed discussion about Daniels on a recent Hollywood Breaks podcast.
Rice had been more under the radar in his role than Daniel, but also was rumored as a future Disney CEO. In the meantime, Chapek has pursued a digital and technology-centric “One Disney” vision:
Ideally, Chapek would like consumers to experience a more unified digital Disney experience, whether it’s logging into Disney+ or buying merchandise from the online Disney store or managing theme park experiences with Disney’s Genie service, which is a kind of digital concierge. Internally, some employees informally speak of this grand challenge of unifying Disney technology and experiences as “One Disney.”
Meaning, Chapek’s strengths continue to be as a fiduciary around the operational foundations for Disney’s future, particularly theme parks. His obvious weakness/pain point is his relationship with the content groups and celebrity talent (I wrote about this in Scarlett Johansson v. Disney, Transparency & Incentives). The former is hard to replace (especially when it comes to Theme Parks), and the latter may be solved by someone who empathizes with Chapek’s challenges and is willing to solve them.
The Problem with Peter Rice
Peter Rice may not have been that someone. According to reporting from Insider’s Claire Atkinson, Natalie Jarvey, and Alison Brower, stories about Peter Rice clashing with another Disney executive have not been unusual:
Rice never fully adapted from the smaller company's scrappy, autonomous style to the larger company's more collaborative one, according to two people familiar with internal decision making.
"He was difficult to work with, ever since day one," said a high-level Disney insider, underscoring the cultural issues that came with acquiring Fox. "It's not an us-and-them" at Disney, the source continued. "You have to work together."
So, we have multiple signals from multiple sources that Rice wasn’t a team player under Chapek, and that may answer the “why” Chapek told Rice that he was not a fit in “the new Disney culture.”
Why Now?
What’s less clear is why Rice needed to be fired now.
I wondered if the firing might reflect Disney content poorly resonating with buyers at the recent Upfronts. But, Disney is reported to be “ahead of the market” and has “written some business with at least one major media buying agency”.
So, instead, I think this firing was about how the acrimonious split between Iger and Chapek is still playing out: Chapek is only six months into Iger-free reign after Iger effectively “completed” his role in December 2021, and he is also six months into a learning curve for the content side of the business without Iger around (and still seeking the spotlight). Also, the press and agents having a long memory of the Scarlett Johansson lawsuit (even thought it was settled).
Chapek needs help on content and with Hollywood talent, and Iger arguably may have stayed on too long to let him find help. Or, alternately, Iger solved the problems he needed to solve and Chapek miscalculated on his existing team. Either or both may be true, it's not clear yet.
That said, if Rice has not been a team player while Chapek is on a learning curve for the content side of Disney’s business - while also putting out fires related to culture wars and a slowing economy - why shouldn’t Rice be gone?
But the tougher question is, at whose feet do we lie the blame for leaving Chapek's vulnerable to whatever Rice was doing that got him fired? Is that on Chapek? Or is that on Iger, for not having left earlier and quieter?
Must-Read Monday AM Articles
]NOTE: I am adding a new theme this week, "The 200 vs. The 10 Million" after recent mailings]
* How Disney shrinking the theatrical window for Doctor Strange in the Multiverse of Madness down to 47 days may impact consumers
The Vibe Shift
* A quarter of the 12 million Netflix subscribers in the United States most at risk of churn are tolerant of advertising, according to Ampere Analysis.
* The FTC are in the process of investigating the Activision deal, as well as Sony's much smaller proposed acquisition of Destiny developer Bungie. While both deals are expected to proceed, antitrust experts say the FTC may ask for behavioral concessions from Microsoft and Sony on areas such as platform exclusivity.
The 200 vs. The 10 Million
* Five challenges advertisers and marketers will be tackling at Cannes Lions
* Microsoft has been telling TV networks and media buyers that it intends to bypass TV’s annual haggle for commercial inventory.
* GroupM has developed a roadmap for its audience measurement partners that it hopes will further drive the industry towards improvement measurement standards, and bridge the measurement gap. (free- registration required)
Aggregator 2.0 & Bundles
* Netflix is expected to launch nine new games later this year, with a “Queen’s Gambit” chess and puzzle game slated to launch this summer.
* AT&T has quietly dropped HBO Max as a bundled perk for new customers on its highest-tier unlimited wireless plan.
Sports & Streaming
* The sports streaming evolution halftime report from former NBA executives Ed Desser and John Kosner
* Len Blavatnik’s DAZN has spent huge sums into sports streaming, but it keeps getting knocked to the canvas ($ -paywalled but with three free articles permitted
* Apple has closed a pact to acquire an untitled Formula One racing movie that has “Top Gun: Maverick” filmmaker Joseph Kosinski directing and Brad Pitt attached to star, and the movie would have an exclusive — and global — run of at least 30 days (one source says it could even go as high as 60 days) before heading to the Apple TV+ platform.
* Amazon withdrew from a heated competition for the rights to stream Indian Premier League cricket matches ($ - paywalled), and the implications for Disney's Hotstar are unclear if it loses.
* Both Apple and Amazon are reportedly in the running to secure the NFL Sunday Ticket package beginning in 2023, and The Streamable’s Matt Tamanini dove into the market implications of these possible outcomes.
* Warner Bros. Discovery picked Luis Silberwasser to manage its billions of dollars of sports rights and usher the company’s sports programming further into the streaming era
Creator Economy, Platforms & Transparency
* Pearpop, a creator content and collaboration platform, is launching a subscription comedy series hosted by the creator Jericho Mencke that will stream exclusively on TikTok’s live events platform.
* The Johnny Depp v. Amber Heard trial attracted law YouTubers, or "lawtubers," and they earned hundreds of thousands of dollars from fan donations toward their Depp-Heard streams and legal commentary
* Spotify brought in “close to” €200 million, or roughly $215 million, in podcast revenue last year, and expects podcasts to turn profitable in the next one to two years.
* Maya Prohovnik, most recently the director of research and development for talk content at Spotify, has been named the head of talk. Prohovnik will oversee Spotify’s efforts to court creators, including podcasters, and build features that will bring them to the platform
Original Content & “Genre Wars”
* A bearish take on Netflix’s future despite the success of Season 4 of Stranger Things
* Why improving the quality of translated content has become a priority for streamers increasingly tapping into their international resources for the next big hit
* Netflix has either reached or surpassed the required 30% local content quotas in major markets in Europe, ranking ahead of its global streaming rivals, according to a new study by Ampere Analysis.
* Disney is taking a stance versus the recently revised French windowing system - which favors both Netflix and Canal Plus - opting to bypass theatrical on animated action adventure Strange World in France and sending it directly to Disney Plus.
* The future of DC Films and Walter Hamada, the current president of DC Films production, are up in the air after a Warner Bros. leadership change
* HBO canceled J.J. Abrams’ science fiction drama series “Demimonde” and HBO Max canceled Raised by Wolves after two seasons
* The podcast-to-TV trend kicked into high gear earlier this year with the release of shows like Hulu’s The Dropout, Apple TV+’s WeCrashed, Peacock’s Joe vs. Carole and NBC’s The Thing About Pam — all of which were prestige, limited series based on podcasts of the same name.
* The Hollywood Reporter's Richard Newby looks at the latest installment of the Jurassic Park franchise and asks, Why go bigger?
AVOD & Connected TV Marketplace
* Chatter within Roku it could be an acquisition target of Netflix (NOTE: through the lens of the PAROR hypothesis, I think the move gets Netflix closer to being more like Comcast)
* Some 17% of ads shown on televisions connected through a streaming device—including streaming boxes, dongles, sticks and gaming consoles—are playing while the TV is off, according to a study by WPP PLC’s ad-buying giant GroupM and ad-measurement firm iSpot.tv Inc. ($ - paywalled)
* Variety VIP’s Gavin Bridge argues Peacock shouldn’t be seen as an SVOD play but a CTV-maximizer push from Comcast ($ - paywalled)
Other
* A healthy disagreement between Roku and Plex executives on a recent panel as to whether consolidation in the OTT space is imminent.
* Netflix's top exec for scripted original shows in the U.S. and Canada said the streaming giant will stick with its "binge model," the strategy of releasing entire seasons of series all at once.