Iger’s Big Disney Reorg Aims to Fix Problems He Helped Sow

Not even a full day after his surprise return to Disney, Bob Iger made his first move to reshape the House of Mouse and to undo the tenure of his successor-slash-predecessor, Bob Chapek.

In a memo to employees, Iger announced that he would re-reorganize the corporate structure Chapek implemented in 2020, which consolidated all content budgeting and release strategy under the Disney Media and Entertainment Distribution unit (DMED), headed by Chapek lieutenant Kareem Daniel.

The new restructuring seems designed to reassure Wall Street that Disney’s management of streaming will change. Chapek’s creation of DMED was seen as a move to accelerate and streamline the company’s direct-to-consumer strategy by placing responsibility for all streaming content under a single unit; investors certainly saw it that way.

As a result, DMED also shouldered responsibility for Disney’s massive losses on streaming, which more than doubled year-over-year, from $630 million to nearly $1.5 billion in the most recent quarter.

Now, as the Street shifts away from the “all in on streaming” mentality that dominated the last few years, Iger seems poised to give responsibility back to Disney’s separate content units, which could help convince investors that the Mouse House plans to keep its approach diversified.

The reinstated CEO plans to implement “a new structure that puts more decision-making back in the hands of our creative teams and rationalizes costs,” he wrote in the memo, adding, “This is a time of enormous change and challenges in our industry, and our work will also focus on creating a more efficient and cost-effective structure.”

That last part will be key to Iger’s success in his second go-round at the company. It’s clear that the Disney board is hoping the reinstated CEO can “fix” Disney’s streaming strategy, which has amassed a subscriber base to rival Netflix but racked up huge losses at the same time. With Wall Street having turned on streaming and its sky-high expenses, Iger’s first task will be to bring costs down as quickly as possible.

There’s obviously plenty of reason for the board to have confidence in Iger, who deserves credit for building Disney into the media colossus it is today. But at the same time, the turbulence of Chapek’s tenure and the problems caused by his restructuring have helped cloud the fact that the problems began under Iger.

Chapek’s org structure was unpopular among Disney employees and with Iger himself. Many creative executives reportedly resented having decision-making power taken away from them, and insiders groused that the hierarchy slowed Disney’s content pipeline, complicating the greenlighting process and creating widespread confusion.

Iger’s feelings about the structure were clear from his internal memo, in which he wrote, “It is my intention to restructure things in a way that honors and respects creativity as the heart and soul of who we are,” and announced that Daniel would exit the company.

In hindsight, aspects of Chapek’s strategy were certainly misguided, but it’s worth remembering that Chapek was trying to repair dysfunction caused by another reorganization, implemented by Iger before the launch of Disney+.

Late in his tenure, in 2018, the once-and-future CEO introduced a new corporate structure that created Disney’s first direct-to-consumer division. The reorg reportedly led to power struggles between Kevin Mayer, who headed the DTC unit, and then-Disney TV studio head Peter Rice over who had authority to greenlight shows for Disney’s streaming unit. Chapek’s subsequent restructuring was partly intended to correct those problems, according to multiple reports in the wake of the 2020 reorg.

Furthermore, while Chapek also made mistakes with regard to streaming — no one forced him to revise Iger’s modest subscriber projections for Disney+ to such high levels, which are now looking ever more unrealistic — he was, to a large extent, following a playbook set by Iger.

It was Iger who engineered Disney’s streaming strategy in the first place, and made no secret of the fact that it would lead to billions of dollars in losses. And though the media industry arguably should have foreseen that Netflix’s constant-growth model for streaming was unsustainable and that a market correction would come at some point, Chapek doesn’t deserve sole blame for that industry-wide error.

The fact is, no one has yet figured out how to organize Disney’s streaming operations and position the company for the future. No easy task, to be sure, but the board’s decision to bring back Iger can’t help but look a bit desperate, like an implicit admission that no one really knows how to navigate the current media landscape.

Iger will now get a second crack at it, but the fact that his first attempt helped lead the company here should not be ignored. If the board’s confidence in him is not misplaced, exactly, it at least should be tempered with a healthy dose of skepticism.