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The Economist
The Economist

Disney brings back a star of the past. But its real problem is the script

FILM CRITICS often complain that the box office is overrun with sequels. Now so are studios’ head offices. On November 20th Disney announced that Bob Iger, who ran the company for 15 highly successful years until he stepped down in 2020, would go back into the spotlight for a second act as chief executive. Bob Chapek, who lasted less than three years in the role and had presided over a 40% drop in Disney’s share price this year, was sent sloping back to his trailer.

As any producer knows, a good leading man can make all the difference. Mr Chapek turned out to be a B-lister; Mr Iger, who transformed Disney’s fortunes, is a megastar. But the creatives in Hollywood and the investors on Wall Street expecting a rapid turnaround at Disney should think again. The main problem is not at the top, but in the fundamental changes to the movie industry brought about by streaming, which have hurt every studio. It will take every bit of Mr Iger’s star power to turn the business back into a blockbuster.

Mr Chapek was pelted with rotten tomatoes from the beginning. The pandemic, which shut cinemas and theme parks, was hardly his fault. But he frequently fluffed his lines. Unlike Mr Iger, a sunny former weatherman who charmed actors and directors, Mr Chapek, who rose through Disney’s theme-parks division, annoyed Hollywood’s highly strung creatives, some of whom threatened to sue when their films went straight to streaming. He was no better at handling politicians. When Florida passed a law muzzling talk of sexuality and gender identity in classrooms, Mr Chapek at first took no position, then opposed it—managing to infuriate liberals and conservatives alike. Relations with investors soured; this month a poor set of earnings blindsided Wall Street. Disney’s stock rose sharply on news of Mr Iger’s return.

Yet for the most part Mr Chapek was following the script left to him by Mr Iger, who had hand-picked him as his successor. The priority of both was to shovel premium content onto Disney+, the streaming service launched in 2019 under Mr Iger. The approach has paid off, winning Disney more streaming subscriptions even than Netflix, which entered the business 12 years earlier. But it has proved far less profitable than the theatrical and cable-TV industries that historically sustained Disney, along with its parks. Consumers can easily switch once they have binged on the latest series, meaning that ever more content is needed to keep them on board. Meanwhile, new rivals like Apple and Amazon have bottomless budgets. Last quarter Disney’s streaming division lost $1.5bn, twice as much as a year earlier.

These problems are being felt across Hollywood. Netflix has lost more than half its market value this year. Indeed, Disney is better placed than most of its rivals. For now Disney+ is subsidised by the still-profitable parks and cable networks (the latter fast declining). And the company expects its streaming business to break even in 2024. It is sure to be among the survivors of the streaming wars. For others things look dicier. Warner Bros Discovery told investors earlier this month that streaming was proving tougher than expected. NBCUniversal, part of Comcast, and Paramount Global are unlikely to survive in their current form. (Some speculate that they may even be swallowed by Disney—if Disney itself is not first swallowed by Apple.)

As households and advertisers tighten their belts, things will only get harder in Hollywood. Mr Chapek may not be the last corporate leading man to bite the dust as things worsen. Having a star chief executive can certainly help. But studios are in for disappointment if they think that a change at the top is going to alter the brutal reality of Hollywood’s new economics.

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