Disney's Bob Iger goes out on top

Disney shocked Wall Street at 4 p.m. EST on Tuesday, February 26th when it suddenly announced that CEO Bob Iger would step down and become executive chairman, handing the CEO reins to Bob Chapek, effective immediately.

“This was somewhat of a shock to us as shareholders,” said Timothy Lesko of Granite Investment Advisors. “They’re usually much more scripted than this.”

Iger, who became CEO in 2005, had twice extended his tenure in the role. He originally aimed to step down in 2018, but in March 2017 Disney (DIS) extended his contract through July 2019; then, in December 2017, Disney extended him through the end of 2021. In his book last year “The Ride of a Lifetime,” Iger revealed that he seriously considered a 2020 presidential run, but it was Rupert Murdoch who killed that plan when he told Iger he would only agree to sell 21st Century Fox if Iger committed to staying on as CEO through 2021.

Iger will still be at Disney through the end of 2021, but as chairman, and he told CNBC that in his new role he will focus on the creative side of the company.

“As we looked at the businesses, we felt we have a great set of assets, we have a great strategy,” Iger said. “What’s next? And what was next in terms of my own priorities is making sure that the creative pipeline of the company was really rich, that all of our creative engines were working extremely well, and I wanted to spend more and more of my time on that. The only way I was able to do that was to give up the day-to-day running of the company, to pass the torch on to Bob [Chapek].”

That makes it sound like Iger isn’t going anywhere—it sounds more like he will simply shift from being the most important to the second-most important executive at the company. But it’s Chapek, who ran Disney Parks for the past five years, who will be the face of Disney to Wall Street.

There were signs that the creative side was becoming Iger’s passion. Last year, he told Businessweek that he watched every episode of the Star Wars streaming series “The Mandalorian,” which was the creative anchor of the launch of Disney+, three times for quality control: “First, to give some notes. Second, to see the rough cut and the impact of the notes. And now, just recently, I watched all the final cuts so that I could be blown away by how it looks.”

Of course, the abruptness of Iger’s resignation has led to some to question whether there is a hidden reason, like his health or some kind of imminent personal scandal. Iger said on a Disney conference call on Tuesday that is not the case. Many onlookers will still wonder otherwise. (That was also the case when Nike CEO Mark Parker suddenly stepped down last year.) “It seems like there might be more to this story than we’re hearing so far,” said Lesko on Tuesday just after the Iger news broke, though he added, “This is not a turnaround story, it’s a transition story... we expect a good transition.”

A legacy of success

Whether or not there is any hidden reason for his early move to chairman, as far as his CEO legacy is concerned, Iger is going out on top.

His 15-year run as Disney CEO was objectively excellent, characterized by five ambitious acquisitions, four of which look absolutely brilliant in hindsight. The jury is still out on the fifth. Iger’s leadership and M&A decisions made Disney our Yahoo Finance Company of the Decade.

Those acquisitions were: Pixar in 2006 ($7.4 billion); Marvel in 2009 ($4 billion); Lucasfilm in 2012 ($4.05 billion); MLBAM Tech in 2017 ($2.58 billion total spend); and 21st Century Fox in 2019 ($71.3 billion). The acquisitions helped grow Disney’s market cap by $175 billion during Iger’s tenure.

Iger in his book details the assuaging and ego-pacifying he had to go through to make each of those deals happen.

For Pixar, he had to get Steve Jobs on board with the sale. For Marvel, he had to get cozy with the enigmatic Israeli billionaire Ike Perlmutter. For Lucasfilm, he had a testy haggling with George Lucas, who wanted “the Pixar deal” (in the end he would get $4.05 billion, a symbolically higher price tag than Marvel). And to buy Fox, Rupert Murdoch made Iger promise to extend his tenure as CEO to ease the transition. (Some analysts believe Disney overpaid for Fox; it will take a few years to judge that fairly.)

Prioritizing streaming

Apart from the acquisitions, the tail end of Iger’s CEO tenure has been characterized by pushing the direct-to-consumer endeavors, meaning streaming. That has included ESPN+ and Disney+ (both powered by the majority acquisition of BAM Tech, which had quietly been known for years as the best back-end video streaming company in the industry), and now Hulu.

Last year, Iger made it clear where the company’s future stands when he called streaming “our number one priority.”

That may have presaged his passion for the content side of things. Disney in 2018 and 2019 dominated the box office, smashing its own records. That run happened thanks to the breadth of its franchises, which grew thanks to Iger’s buying. Disney had seven billion-dollar movies in 2019, and they came from all over its intellectual property portfolio: two Marvel movies (“Captain Marvel” and “Avengers: Endgame”), two live-action remakes of Disney animated classics (“Aladdin” and “Lion King”), one Pixar sequel (“Toy Story 4”), one Disney Animation sequel (“Frozen 2”), and one Star Wars film (“Rise of Skywalker”).

Now, as Marvel enters “Phase 4” of the Marvel Cinematic Universe, and amid reports of Star Wars fatigue, there’s no guarantee Disney will be as successful at the box office in 2020 and beyond, but the streaming side of things is becoming as important, and that’s where Iger is focusing his energy.

That’s why Chapek makes sense, since he comes from Disney Parks, which remains the profit engine for the company, even if the content right now has all the glitz and buzz.

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Daniel Roberts is an editor-at-large at Yahoo Finance and closely covers Disney. Follow him on Twitter at @readDanwrite.