It is time to pick the worst CEO of 2022. This year, it is not much of a contest. The chief executive who has done the most damage to his company and its reputation is Bob Chapek, the head of Walt Disney Co. (NYSE: DIS). He has taken a century-old business and turned it into one that has struggled recently to keep pace with its competition.
A memo leaked to the media indicates that Chapek plans to cut costs and lay off workers. As is usually the case, Chapek’s job is safe. Earlier this year, Disney’s bungling board extended his three-year contract. Looking back, it was a huge mistake and a failure of even reasonable public company governance.
Disney investors have voted with their feet. The entertainment company’s stock is down 40% this year, compared to a drop of 15% in the S&P 500. Much of that plunge came in the past three months.
Disney’s most recent quarterly report was gruesome. Problems with its streaming business and the company’s total earnings pushed the stock to a two-year low. Its forecast also disappointed Wall Street.
It is worth noting that Chapek took over from long-term chief Bob Iger in February 2020. Chapek cannot be blamed for the horrible results of the early part of the COVID-19 pandemic. He can be blamed for everything that happened as Disney emerged from that period.
Disney management has said on more than one occasion that streaming media was at the core of its future success. The most recent Disney earnings report shows the streaming business is in trouble. The division of Disney that included streaming media posted a loss of $1.5 billion last quarter and got very little for it. Disney+, the streaming flagship, only added 12.1 million new subscribers, which took its total to 164.2 million. And the subscriber additions are expected to slow. Disney does not post figures for “churn,” so outsiders cannot really judge the health of this business.
Disney’s solution to the slow growth is to increase subscriber rates and put ads on some Disney streaming products. Monthly rates for its streaming service without ads jump from $7.99 to $10.99, an increase of 37%. Will Disney subscribers think the service is 37% better?
Disney remains up against the three most powerful streaming services. Netflix is the perennial leader. Amazon offers its video streaming service as part of a popular suite of benefits that include free shipping, special sales and a large library of music. Apple is a late entry into streaming. However, it is the most profitable company in the country and has a limitless supply of cash. It also can market its streaming service to billions of people who have iPhones, iPads and Macs. That leverage is inimitable.
Chapek’s past performance has been poor. It appears the future will not be any better.
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