After Swift Return, Iger Faces Disney’s Long-Term Challenges

Robert A. Iger moved at light-speed on two fronts in his first 24 hours as Disney’s new-old chief executive. He sought to restore stability — getting the core executive team working together again, exuding a patriarchal sense of security in a companywide email — while also announcing organizational and operating changes designed to “honor and respect” the company’s creative engines, its movie and television studios.

So what comes next?

Mr. Iger, 71, had been fully retired from the Walt Disney Company for only 11 months. He passed the chief executive job to his handpicked successor, Bob Chapek, in February 2020, but stayed on until the end of last year as a very active executive chairman. He had spent his last two years deeply focused, as he put it before he stepped away, “on the creative side of our business,” making sure “our creative pipelines are vibrant.”

But he has returned to a very different Disney.

Morale has rarely been lower, people inside the company say, the result of a stock price that has fallen to about $96 from $197 over the last 20 months, devastating the stock options given to some senior Disney executives as part of their compensation. During Mr. Iger’s 15 years as chief executive (2005 to 2020), Disney got used to winning and winning and winning. In 2019, the company served up seven movies that each collected more than $1 billion at the global box office. No other studio had more than one; most had none.

Several of Mr. Iger’s most trusted lieutenants and enforcers have retired, including Alan N. Braverman, Disney’s longtime general counsel, and Zenia B. Mucha, who spent 19 years as Disney’s chief communications officer and its top brand protector. Disney is loaded with debt — more than $45 billion — because of the pandemic and because of the $71.3 billion acquisition of 21st Century Fox assets in 2019, making it hard for Mr. Iger to pursue new acquisitions. (Some analysts think Disney would be well suited by adding a gaming company like Roblox to its portfolio.)

Hollywood, too, is not the same.

When Mr. Iger was last in charge at Disney, media investors were hyperfocused on streaming subscriptions: Sell as many as possible around the world as fast as possible, and worry about profitability later. That mind-set abruptly changed in April when Netflix said it lost more subscribers than it signed up in the first three months of the year, reversing a decade of steady growth.

Investors now want to see old-fashioned profit in streaming. Mr. Chapek, who was fired on Sunday, and Disney’s chief financial officer, Christine M. McCarthy, repeatedly promised that the Disney+ streaming service would be profitable by 2024. Wall Street and even some Disney executives remained skeptical.

Unlike most of its rival media conglomerates, Disney can rely on its theme park business for profit and growth — unless a recession hits. But cable television, long the safety net for these companies with its steady growth through rising payments from cable suppliers, has been dying at a faster rate than expected.

All of which leaves Mr. Iger in a very difficult position.

“He cannot simply continue on the path he laid out before he left, as the landscape has changed materially,” Richard Greenfield, a founder of the LightShed Partners research firm, wrote with two colleagues in a client note on Tuesday.

Disney declined to comment.

Mr. Chapek was tossed from the proverbial castle tower in part because senior leaders at the company, including Ms. McCarthy, let it be known to the board of directors that they no longer believed he could lead Disney through its problems. Those challenges start with streaming but are perhaps far greater than most outsiders realize.

And the problems can’t all be laid at Mr. Chapek’s feet.

One area that seems to need intensive focus is animation, which Mr. Iger and others have described as the heart of Disney — the content that powers everything else, including theme park attractions and consumer products. Pixar’s last movie, “Lightyear,” bombed in theaters even though it was connected to the blockbuster “Toy Story” franchise.

On Wednesday, Walt Disney Animation Studios, a separate division, will release “Strange World,” centered on a farmer on an alien planet who is tasked with finding a solution to dying crops. “Strange World” is expected to take in about $35 million over the five-day Thanksgiving holiday in the United States, a terrible result for a film that cost $180 million to make and tens of millions more to market.

Notably, these are among the first animated films that have come off the Disney assembly line without creative input from John Lasseter, the Pixar founder who resigned from Disney in 2018 after complaints about unwanted workplace touching.

Disney’s current streaming strategy was in many ways established by Mr. Iger: Disney would build not one, not two but three streaming services. Disney+ would be aimed at families and core fans of Disney franchises like “Star Wars,” “The Avengers” and “The Simpsons.” Hulu would focus on broader entertainment offerings and more risqué programming. ESPN+ would carry live sports.

Mr. Iger and his executive team will have to decide whether to continue with that plan or shift gears.

“Do they envision a world with just one ‘everything’ Disney service, combining Disney+, Hulu and ESPN+?” Mr. Greenfield and his colleagues asked.

ESPN and Disney’s broader portfolio of cable networks (Disney Channel, FX, Freeform, National Geographic, Disney Junior) raises another complex problem. More people are canceling cable hookups, resulting in lower carriage fees and advertising revenue for companies, like Disney, that program cable networks. But costs keep rising, especially at ESPN, which has been caught in a frenzy for sports TV rights, with new bidders like Amazon and Apple joining the fray.

“We would expect deep cost-cutting at ESPN, which should include a review of all the upcoming sports rights to more adroitly adapt to these new times,” Michael Nathanson, a leading media analyst, told his clients on Monday. Should ESPN, for instance, sit out negotiations for a renewal of its package of National Basketball Association rights? It currently pays about $1.3 billion per year for them, according to Mr. Greenfield.

Disney’s theme parks in Florida and California have bounced back nicely from the pandemic, when they were closed for long periods. Mr. Chapek has been widely credited as a savvy operator of the theme park division, which he ran before ascending to chief executive.

But the parks, too, have their problems. Mr. Chapek and his team leaned heavily on price increases for admission, food, merchandise, parking, hotel rooms and line-shortening perks to offset spending at Disney+ and other streaming initiatives. The price increases have resulted in a cascade of negative news coverage and may not be sustainable, analysts worry, if the U.S. economy continues to worsen.

Shanghai Disneyland, the founding of which in 2016 was one of Mr. Iger’s signature achievements, has been opened and closed and opened and closed by Chinese authorities trying to control the spread of the coronavirus. Hong Kong Disneyland has also struggled. Complicating operations for Disney in China is the frosty relationship between the Chinese and American governments.

There’s more. Matters that will require Mr. Iger’s attention also include an activist hedge fund, Trian, led by Nelson Peltz, that has accumulated a large stake in Disney and plans to push for a board seat as part of an operational shake-up. Hollywood is headed toward rancorous contract negotiations with its major labor unions, and most studios believe that a springtime strike by the Writers Guild of America is likely.

And there is the not-so-little matter of identifying and grooming another successor, which Disney’s board said on Sunday was part of Mr. Iger’s mandate — and by the end of his contract in two years.

In an email on Sunday night to Disney’s 190,000 employees, Mr. Iger struck an upbeat tone about what lay ahead, even though “these times certainly remain quite challenging.”

“I am an optimist,” he wrote, “and if I learned one thing from my years at Disney, it is that even in the face of uncertainty — perhaps especially in the face of uncertainty — our employees and cast members achieve the impossible.”

Wall Street seemed to agree, at least initially, sending Disney shares up 10 percent the next morning.

Since then, the difficulty of Mr. Iger’s second stint at Disney has started to sink in. Shares have since eased down 4 percent.