New Disney CEO takes on a crisis from every direction

By Christopher Palmeri and Kelly Gilblom

Walt Disney Co. Executive Chairman Bob Iger began his memoir published last year with the sad tale of his trying to open the company’s new Shanghai theme park in 2016 while suddenly having to deal with a mass shooting in Orlando, Florida, and the unrelated death of a child at the company’s Walt Disney World resort nearby.

Iger and theme-park chief Bob Chapek huddled on how to handle the crisis. “We’re on it,” Chapek assured him.

“The bond you form in high-stress moments like this, when you’re sharing information that you can’t discuss with anyone else, is a powerful one,” Iger wrote.

Chapek, who took over from Iger as Disney’s chief executive officer last month, faces another set of formidable challenges today. The world’s largest entertainment company has been as hard hit as almost any business by the coronavirus sweeping the globe.

Disney’s theme parks worldwide are now closed or closing. The company’s cruise ships have suspended new departures. On Thursday, Disney postponed the opening of three of its upcoming films, including “Mulan,” the live-action update of the 1998 animated hit that was expected to be one of its biggest releases this year.

Meanwhile, Disney’s ESPN sports network is scrambling to find programming to fill time slots left open when the NBA and other leagues cancelled their games.

Lower outlook

S&P Global Ratings lowered its outlook for Disney’s credit rating to negative on Thursday, citing the virus. “While we are uncertain as to the long-term economic impact of this pandemic, we believe there is increased risk to our 2020 forecast,” the rating agency said in typical understatement.

It added that related earnings shortfalls could limit the company’s ability to reduce its debt, much of it taken on along with Disney’s $71 billion acquisition of Fox entertainment assets last year.

Disney’s shares have fallen so much since the virus crisis began -- 34% from the Feb. 21 close through Thursday -- that Apple Inc. might want to swoop in and buy the company, Rosenblatt Securities analyst Bernie McTernan said in a note Friday.

“The upside from acquiring Disney would be securing their content/streaming strategy and potential synergies from adding the emerging Disney ecosystem to the iOS platform,” McTernan said of Apple.

Disney shares bounced on Friday along with the broader market.

Iger, who served as CEO for 15 years, handed the reins to Chapek in a surprise move on Feb. 26. Iger’s retirement had been expected for years, but the timing and the choice of successor still came as a shock. Under the company’s new chain of command, Iger planned to focus on the company’s creative content until his contract ends in December 2021. Chapek, a 27-year company veteran who also worked at the film studio, was to handle the nuts-and-bolts running of the company.

The company is trying to adjust to the new world order. ESPN is running its SportsCenter news and commentary shows all day and night, rather than games. Disney’s film studio, the industry’s leader last year, is looking at alternate dates later in the year for “Mulan,” “The New Mutants” and “Antlers,” a science-fiction horror film from its Searchlight division. And some green shoots are forming. This week Disney reopened the hotel and shopping area outside the Shanghai park.

Still, the short term looks bleak.

Needham’s Martin, in a note on Friday, referred to the film backlog as just one of Disney’s many challenges in eventually bouncing back from the virus effects. Disney had already warned of a big hit to its theme parks due to the virus, including $175 million less in operating income in the current quarter because of the closures in Shanghai and Hong Kong. Ironically, one bright spot for the company may be its direct-to-consumer business, with its Hulu and Disney+ streaming services, which Chief Financial Officer Christine McCarthy has said would lose $900 million in the quarter. They could see an uptick in viewing and subscriptions as it launches in Europe and India.