The Disney CEO cements his position by removing a potential competitor for his job – with his contract up in nine months
Disney’s TV chief Peter Rice was called into CEO Bob Chapek’s office in Burbank, Calif., on Wednesday to get the brutal news: He was out. No reason was given. It wasn’t “personal,” he was told, according to an individual with knowledge of the conversation. Chapek just wanted a change. And that change is being seen as a move to fortify the embattled CEO’s position.
Rice wasn’t the only one surprised by Chapek’s decision. “Blindsided” was a word heard frequently from executives around Hollywood on Thursday as the bombshell news raced through executive suites and set iPhones ablaze.
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Only two weeks ago, Rice stood on stage at Disney’s television upfront presentation and introduced his boss to “Grey’s Anatomy” lead Ellen Pompeo and other ABC stars, looking for all the world like jovial colleagues. While Rice was a Fox veteran who wasn’t part of Chapek’s longtime coterie, the two worked closely in the past two years to build a relationship — so the shock this week was all the more jarring.
Outside observers were quick to note that in firing Rice, the 61-year-old Chapek has removed his single most potent threat to replace him as CEO. With Disney stock down nearly 44% from its 52-week high and Chapek’s current contract up in less than a year, many saw the move as a classic power play — and not a very subtle one at that.
“Chapek is nervous about his future and he understood this was a big move,” one veteran producer and Disney observer told TheWrap.
“The whole thing looks bad to me,” a former top Disney executive added.
As if to underscore the move, Disney board chairman Susan Arnold issued a curiously on-the-nose statement on Thursday in support of Chapek, which many Disney watchers noted as another sign of the executive’s need to shore up his public support.
Rice, 56, was summarily dismissed after nearly three years at Disney, where he was responsible for all television content at the entertainment giant, from ABC to Hulu to FX to Disney+ to National Geographic. The executive spent more than 33 years overall at the company, rising from a marketing exec at 20th Century Fox to president of 21st Century Fox and CEO of Fox Networks Group before assuming his role at Disney overseeing all TV content. That job now falls to Dana Walden, a respected TV veteran who served as Rice’s deputy for much of their careers, first at Fox and then at Disney.
Among the oddities in the abrupt change is that Chapek gave no proximate cause either of performance or corporate misbehavior by Rice, which has fed the power play theory. The speculation was also rampant inside Disney, where Chapek was questioned repeatedly by executives as to the reason for his decision, according to two insiders who spoke to TheWrap.
A Disney spokesperson didn’t respond to multiple requests for comment by TheWrap.
Chapek has endured a rough year as the company’s share price continues to drop and the CEO faced an internal revolt from LGBTQ+ Disney employees over the company’s bungled response to Florida’s so-called “Don’t Say Gay” bill. After Chapek’s initial silence over the antigay bill in Florida led to an employee walkout, his belated denunciation of the bill (now signed into law) sparked a tongue-lashing by Florida Republicans, with Governor Ron DeSantis revoking Disney’s special tax status for its theme parks in the state.
His mishandling of the issue has created an ongoing PR nightmare for the company — which has become a frequent target of conservatives who deride the studio for advancing a “woke” ideology. The fiasco also follows Chapek’s ill-advised and surprisingly public legal spat with Scarlett Johansson last summer over how the scuttled theatrical release of the star’s “Black Widow” impacted her backend compensation deal.
Chapek has been the public face for all of these high-profile stumbles — and his pick to head up corporate communications, Geoff Morrell, exited in April after just three months on the job. Despite the board’s public vote of confidence on Thursday, there has been much speculation about his future given that his contract is up in less than a year.
But with Rice’s exit, there are no names among Disney’s senior executive leadership that jump out as prospective challengers to Chapek’s throne — and Disney hasn’t named an outsider as CEO since tapping Paramount president Michael Eisner and former Warner Bros. chair Frank Wells to jointly lead the company in 1984.
Rice’s exit also comes less than a year into his own lucrative new contract, which runs through 2024. Disney will buy out the remainder of his deal in what is expected to be a “giant” payout, according to an agent.
While multiple insiders suggested that Chapek’s unsure footing atop Disney played a key role in his decision, a cultural divide within Disney may have also contributed to the move. Rice is known as a stealth player, one who finds deft ways to sidestep controversy. One former executive who clashed with Rice described him as “opaque and untrustworthy.”
It’s unclear if Chapek shared that view — but it’s noteworthy that the press release announcing Walden’s promotion didn’t include the traditional acknowledgement of her predecessor — or explicitly thank Rice for his contributions to the company.
Others suggested that Rice’s downfall may have stemmed from his perceived defense of more traditional distribution models like Disney’s broadcast and cable networks — and that he didn’t fully embrace Chapek’s push for a streaming-first strategy. An individual with knowledge of Rice’s thinking disputed that he pushed back on the company’s streaming initiatives.
“There was a war brewing inside of Disney over what has more importance, ABC’s linear networks or streaming and streaming became more important,” a former high-level executive for ABC told TheWrap. “In some ways, there’s still a certain amount of arrogance that streaming shouldn’t be the priority, that the gold standard is the networks, and that’s slipping away in this new world order.”
Since succeeding former CEO Bob Iger just weeks before the coronavirus pandemic upended the industry, Chapek pushed a new focus on the company’s streaming platforms — and one insider said the he required buy-in from all of his top lieutenants. In a memo to employees Thursday, Chapek wrote that Rice was “departing the company after leading the [Disney General Entertainment] group through an incredible period of transition, expansion, and creative renaissance.”
But many analysts are now questioning the wisdom of a streaming-first strategy, especially after Netflix’s disappointing first quarter earnings, drop in total subscribers and subsequent stock market tumble. In Disney’s most recent financial quarter, the linear networks segment generated $2.2 billion more in revenue than the direct-to-consumer segment that Chapek is now emphasizing. As of April, Disney boasts a total global streaming subscriber base of 205.6 million people across Disney+ (137.7 million), Hulu (45.6 million) and ESPN+ (22.3 million).
And while streaming may in fact turn out to be the future of entertainment consumption, Disney needs to pump its more traditional platforms for ad and other revenue to help pay down the $46.6 billion in long-term debt leftover from its 2019 acquisition of Fox’s film assets. That means Walden will have to squeeze as much as she can out of her small-screen roster of 300 shows, from ABC’s “Abbott Elementary” to National Geographic specials to Hulu originals like “Only Murders in the Building.”
Joe Belbruno contributed to this report.