Business: The mistake that cost Walt Disney Corporations' CEO Chapek his job
By Jonathan Lansner | SCNG Business Columnist
Bob Chapek‘s biggest blunder in his brief tenure as Walt Disney Co. chief executive was a mistake made in numerous executive suites in the past year.
Forget all the chatter about his managerial style. Tough calls, right or wrong, are why CEOs get the big bucks. And if the bottom line and stock price trend up, many executive sins are forgivable.
What Chapek misread — and he’s by no means alone — is that the pandemic is over to the American consumer. And this change of heart called for fresh corporate thinking.
Disney under Chapek seemed oblivious to the public’s “I’m going back outdoors” mindset even as profits withered, and its Wall Street value tumbled by $116 billion.
These sorts of gaffes are not just Disney’s. Similar missteps have haunted a broad collection of companies that failed to see the public’s desire for “normal.”
These are costly slip-ups. E-commerce giant Amazon’s Wall Street value is off more than $900 billion from its high. Facebook’s owner, Meta, is down $640 billion. And 19 big homebuilders and apartment owners have lost a combined $100 billion in value. Even in a horrible year for stocks, those are stunning drops.
You see, the pandemic was largely an economic oddity. For consumers, the “new normal” is actually wanting a life much like the one we had before spending two years learning about infectious diseases.
Chapek made a big bet on streaming services while Americans were stuck in their homes, desperate to be entertained on a phone, tablet or big-screen TV.
Disney hugely overspent in the content wars with big-name streaming providers. This ignored 2022’s return-to-normal mentality.
Chapek planned to lose billions in profits to boost the Disney+ streaming portfolio. Disney’s board of directors didn’t agree.
Streaming services aren’t going away, but the medium-term prospects for luring eyeballs will have no outright winners in this expensive media game.
At the other end of Disney’s business portfolio, the company is a major player in the “going outdoors” business. Again, Chapek — Disney’s former theme park boss, no less — didn’t understand an evolving marketplace for entertainment.
During the pandemic, limiting attendance and overcharging those willing to enter seemed like a smart theme park strategy. But in 2022, with qualms about crowds all but history, Disney kept its high-price strategy.
It now costs $1,100 to bring a family of four to the theme park for admission, parking and access to a ride-reservation system, one Disneyland fan site estimates. That kind of pricing risks the long-term “family-friendly” attractiveness of the parks.
Such missteps proved to be a career killer for Chapek as Disney shares plummeted 40%. Especially when there was a beloved former CEO willing to take his old job back.
So Bob Iger, who picked Chapek as his successor, now has the starring role in his own CEO sequel.
And to be fair to Chapek, once the initial thrill of the old-boss-is-back wears off, Iger faces daunting questions about Disney in this post-coronavirus consuming world.
Bricks are back
How much has the consumer changed? Ponder e-commerce behemoth Amazon.
Circa 2020, we were locked in our homes, and store shelves were empty. Shopping by click was almost a necessity. The truck with a smile on its side was making daily drops seemingly everywhere.
E-commerce was the future and old-school “brick-and-mortar” retailers were toast.
But today, we’re back to feverishly hunting for a parking spot at our favorite shopping centers. Going out is the new normal even as gas prices hit record highs.
You see, shopping isn’t always about transactions. And with a fear of crowds mostly gone, consumers find some joy in a trip to the mall. You can window shop. Or stroll the aisles for ideas. You can touch products before purchase. Maybe grab a bite.
Going to the store symbolizes normalcy. And Amazon missed it.
The dominant online retailer is now undergoing a painful retrenching as its stock price was halved. It’s shelving or delaying numerous grandiose expansion projects within its massive warehouse network. And it’s laying off corporate and tech workers to resize to a lower growth pace.
Dare we mention Amazon is also making a big bet on streaming services? I wonder how that will play out.
Oh, Amazon also has an old boss in the wings, founder Jeff Bezos. I’d love to know what current CEO Andy Jassy was thinking while reading about Disney’s CEO carousel.
The pandemic’s 24/7/365-at-home lifestyle — you know, remote work and online schooling— uncorked an urge for larger living spaces.
This sudden housing demand — fueled by historically low mortgage rates — spurred a surprising rush to buy homes and rent apartments in 2021. Purchase prices soared. Rents did, too, especially at high-end complexes.
Developers relished these patterns. For the first time in decades, we had a building boom, both for ownership and rental properties. The logic? The pandemic created long-lasting alterations in living preferences.
Well, 2022 is ending with falling home prices and sliding rents. Gobs of unsold new homes and a wave of new apartments that will be hard to fill will throttle the housing market for much of 2023.
Wall Street already sees the trouble ahead. The value of 19 large public homebuilders and apartment owners is down an average 32% from their highs.
And this bubble-bursting cooldown is not just about sky-high mortgage rates or a wobbly economy. People look at unaffordable housing and think, hmm, living with family or roommates will do.
Housing was another misdirected gamble on consumer trends.
Two of the wealthiest people in the world — Elon Musk and Mark Zuckerberg — are struggling with the headaches facing social media platforms in this post-pandemic world.
Do you recall not so long ago when Facebook and Twitter felt like a lifeline to humanity and a place to catch the latest news and views about the pandemic?
History will say that was the heyday for social media, both as a societal tool and for money-making.
Today, seeking news or gossip online isn’t as urgent. The lives of our family and friends are no longer as dramatic. And we’re going out — to work, shop, school or just play. Social media is very 2020.
Musk‘s hyper chronicled new ownership of Twitter is really about him paying $44 billion fora broken business model. Zuckerberg’s once seemingly unbeatable Facebook has similar challenges. Shares of his Meta are off 70%.
Basically, 2022 means the advertisers that pay the bills at Twitter and Facebook know the buzz is gone. They’ve acted rationally by cutting ad purchases.
Layoffs at Twitter and Facebook followed. The fixes won’t be simple.
Ponder two pandemic corporate wunderkinds — Carvana and Peloton.
Carvana was a used-car game-changer, making buying or selling a vehicle as simple as the click we use to shop on Amazon or the like.
When pandemic supply issues made finding a car a nightmare, Carvana offered a low-contact way to buy a used one. It also provided simplicity to cash in an old clunker that suddenly was an asset in the car buying binge.
It was a great idea with numerous caveats. Carvana’s profitability was always suspect, and 2022 has seen the used car market return to some normalcy. The company’s viability is now in question as its shares nosedived 97%.
Lockdowns didn’t end our craving for exercise and human interaction. Instead, we got both from our living rooms.
Peloton’s networked workouts were a solid solution. The costly, interactive cycling machines became a must-have as the nation’s housing was remodeled for the locked-down age.
But 2022 is back to the office and back to school. Forget all of Peloton’s supply-chain issues, customer satisfaction challenges, or marketing mistakes that the company’s new CEO must repair.
Peloton’s primary competition, a bike ride in the park, is cheaper and just as refreshing. So, its shares plunged 80%.
Yes, the pandemic-fueled boom for tools that improve indoor life is over. Bob Chapek and his fellow bosses just didn’t realize that.
Jonathan Lansner is the business columnist for the Southern California News Group. He can be reached at email@example.com.