There's a lot that's going to be decided in the next three weeks at Disney — and that was before Tuesday's surprise Comcast bid for 61 percent of Sky. Let's go over all the different cross currents and decision points that are up in the air right now.
Friday March 16 will be about 90 days since ESPN President John Skipper stepped down on Dec. 18. George Bodenheimer came in as a temporary stop-gap leader of the organization for the interim period. Disney also said at the time of the announcement that there was a 90-day clock that was running, at the end of which it would be announcing who the permanent ESPN president would be. We are now three weeks away from that 90-day milestone. Ten weeks have sped by very quickly since Skipper stepped down.
There has been a lot of speculation about who the new president will be. The reason why I believe this decision has ramifications for all of Disney is that I think Skipper's replacement will have the lead position for succeeding Bob Iger as Disney's CEO in 2021. The ESPN job is such an important job for such an important division within Disney that someone who takes it on and succeeds will be seen as a hero.
The new ESPN president will have the chance to transition the entire media networks group from the old linear bundle to over-the-top (OTT) and direct-to-consumer (DTC). He or she will also likely play a key role with ESPN+ (launching as soon as next month), Disney's entertainment OTT service, and Hulu. This person who takes on ESPN will have a chance to return ESPN to its former glory from an earnings perspective.
I suspect that person is going to be very adept in the new OTT digital world, loves sports, and is probably someone Iger knows and trusts from working with. That suggests to me that it will be a current direct report of Iger's.
The three potential candidates who fit that criteria the most would be: (1) Bob Chapek, who is head of Disney Parks, (2) Kevin Mayer, who is the head of strategy, and (3) Jimmy Pitaro, who is the head of consumer products and interactive.
There are pluses and minuses for each. Chapek stepped in to run the parks division and has been doing a phenomenal job — it's now on track to be the biggest engine within the Disney empire. It's going to pass media networks in a couple of years in terms of contributing the largest profit stream to the organization. This week, Iger complained at the Morgan Stanley Technology, Media & Telecom Conference that Wall Street wasn't paying enough attention to parks' performance compared with ESPN subs. However, I've had three separate people who I've asked about Chapek's potential for taking on the ESPN role tell me they don't think he'd take the ESPN job because he'd see it as a demotion from his current job.
That leaves Mayer and Pitaro. I think both are very capable and could do the job. Kevin spoke at the Recode Code Media conference a couple weeks ago in Huntington Beach, California. The 25-minute conversation with Peter Kafka was one of his few public appearances. He's obviously had his hands all over the Disney M&A strategy. He speaks very well. You can certainly imagine him doing a good job running ESPN. He was deeply involved in the BAM Tech acquisition, and that's going to play a key role in ESPN going forward. It was interesting to see his reaction when Peter asked him about his interest in the ESPN job. He was very diplomatic and said he would happily do whatever Bob asked him to do, but had an interesting facial reaction. There was a hint of a smile there, which leads me to think perhaps he knows something, that he has already been tapped for the job.
The biggest risk with Kevin is that he hasn't been at an operating role at Disney in the last 25 years. He comes from a strategy consulting background. So he's very good at analyzing, but can he run something? It's a big job to be thrown into and risk that he'll be a skilled operator. Is Iger comfortable with that risk?
The other strong candidate is Pitaro. Jimmy has run consumer products and interactive for the past few years. Prior to that, he worked as the head of media for Yahoo, and prior to that he was on the management team for Launch, which was Dave Goldberg's company that Yahoo acquired many years ago. Because of his time at Launch and Yahoo, he has a lot of great ties to some very smart people within Silicon Valley. Sheryl Sandberg, I'm told, is a big fan of his. She just stepped off the Disney board, so one would think that she was whispering in the ear of Bob advocating for Jimmy because of her own experience seeing him work firsthand at Launch.
We know from this Jim Miller article that Jimmy made it clear to Iger a couple of years ago that he was very interested in taking on the ESPN job someday. And apparently Iger was on board with the idea of parachuting Jimmy into Bristol while Skipper was still there. According to Miller, he was told by Skipper it wasn't necessary to send him over. So I think he's a strong candidate. Probably the biggest knock against him would be questions about whether the performance of consumer products and interactive has been good the way the parks division has been. Clearly, it hasn't, but don't forget that Chapek ran consumer products and interactive before going to Parks. Did Chapek transform parks or was it already under its current trajectory? Did Pitaro help improve the performance of consumer products and interactive even though it hasn't grown as much? These are questions that really only Iger and the Disney board know.
Of course, there is the possibility that Iger could pick an internal candidate, one of the people who had reported into Skipper previously (Justin Connolly, Connor Schell, or Burke Magnus). And the other dark horse scenario is that Bodenheimer decides to come back on a full-time basis. I don't think these are as likely as a Burbank person, though.
And are they going to go outside to hire a traditional TV executive like CNN's Jeff Zucker? I don't see it. Such a person wouldn't really map on to the push into OTT that's coming.
So I think the most likely scenario is that it's Mayer or Pitaro with Bodenheimer staying on as executive chairman for, say, a two-year period to help that person get up to speed.
Other key questions to watch that should get answered in the next three weeks:
- Will the new ESPN president also get responsibility for BAM Tech? If so, it signals they will play a key role in all Disney streaming services going forward and not just ESPN+
- Are they really pushing ESPN+ to attract subscribers this year or is this year more about treating the service as a sandbox to experiment with the BAM Tech and personalization technology in anticipation of the Disney entertainment OTT service launching next year?
Another key longer-term question that Disney needs to answer is: will it continue to operate ESPN+, Disney Entertainment OTT and Hulu separately or does it eventually collapse them all into one streaming service including the Fox RSN content? Part of what makes Netflix so compelling is that it's basically got everything there in one service.
Or maybe Disney tries to recreate the cable bundle with these sports and entertainment assets. So you could subscribe to Netflix for $12.99 a month or you could subscribe to all the Disney streaming assets for $10.99 a month. So who they hire for the ESPN job, and what their strategy is, could end up having big ramifications for how it answers these important long-term questions.
Finally, the last interesting point: Does Iger really retire in 2021? Or does he stay on, or — here's a more radical idea — does he just sell Disney to someone like Apple and never appoint a successor? Apple and Disney have had a close relationship ever since Steve Jobs struck a special distribution agreement for Pixar with Disney.
So, lots of questions, and few answers. However, we'll have a lot more answers in the next three weeks. Whoever gets the ESPN job will play a major role in Disney's long-term success.
Disclosure: Affiliates controlled by Eric Jackson hold long positions in Netflix, Apple, and Disney.
Comcast is the owner of NBCUniversal, parent company of CNBC and CNBC.com, and is a co-owner of Hulu.
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