What Rich Ross' Exit Means for Disney and CEO Bob Iger (Analysis)
This story originally appeared in the May 4 issue of The Hollywood Reporter.
Surely Disney CEO Robert Iger could not have wanted to swing the ax quite yet. His pick to run the company’s film studio, Rich Ross, had only been in the chair since October 2009. Forcing him out would be a blunt admission of failure and would require Iger to find a more promising replacement. Given Iger’s plan to leave the CEO job in March 2015, many rivals have assumed that he is simply marking time and hoping to avoid headaches. “He’s got two more years and he’s done,” said a top film exec at a rival studio just days before news of Ross’ exit April 20. “He’s kind of checked out.”
That perception is consistent with Hollywood’s narrative about Iger: that he’s a television guy who dislikes the movie business and expressed that disdain by hiring an inexperienced executive who drove out veterans including studio president Mark Zoradi and casting chief Marcia Ross and replaced them with outsiders, notably the now-fired marketing chief MT Carney; and that Iger, 61, is looking to run for political office and simply hopes to exit Disney with his reputation as a leading CEO intact.
But the Ross debacle comes at an awkward time for Iger both inside and outside Disney. Sources say there have been insistent complaints from two internal players: Pixar’s John Lasseter and the demanding Marvel Entertainment chief executive Ike Perlmutter. Despite Iger’s backing, Ross became increasingly marginalized. He was slow to put material into the pipeline and all but absent from the fall negotiation to lower the budget on Johnny Depp’s The Lone Ranger, the only Disney film now shooting. Those negotiations werehandled by Iger and studio president Alan Bergman.
Ross’ poor performance could shake confidence in Iger when other issues are swirling around him as well. Iger raised hackles in October by announcing plans to retire as CEO several years in advance and to take both the chairman and CEO titles in the interim. (Corporate governance groups believe the jobs should be kept separate.) Some large shareholders opposed the move at the company’s March annual meeting, where there also were remonstrances against Iger’s pay, which had risen to $31.4 million for 2011. Iger and the other board nominees were easily elected, but the company’s pay plan attracted 57 percent of the vote, down from 77 percent the previous year.
Then John Carter landed with a thud March 9. To some, it seemed obvious that Iger would be forced to make a change given the resulting $200 million write-down. But now that he has acted, some analysts are not satisfied.
“We don’t feel that it taints Iger’s legacy, at least not yet,” says Stifel Nicolaus analyst Drew Crum. “But let’s see who is picked to fill the position. After the flops for the studio, he needs to get this one right.”
More ominous was a comment that Needham & Co. analyst Laura Martin made to the Los Angeles Times: “There are real problems in Disney’s core content business — Disney Studios and ABC — that are both troubled, and Iger hasn’t fixed them,” she said. “If Iger loses another $200 million, his job could be on the line.”
But Iger can boast that Disney’s successful cable networks and parks are far more important to the company than the studio, which is part of a unit that brought in revenue of $6.4 billion in the last fiscal year, just 15.5 percent of the conglomerate’s $40.9 billion total. “A mistake in leadership at the cable networks or parks would be devastating,” says Sanford Bernstein analyst Todd Juenger. “A mistake at the theatrical studio is not as big a deal. Nobody invests in Disney because of the studio.”