Media

Tara Lachapelle is a Bloomberg Gadfly columnist covering deals. She previously wrote an M&A column for Bloomberg News.

Bob Iger, in his more than 11 years running Walt Disney Co., has made himself indispensable. Nowadays that's a rarity in Corporate America, and for mostly good reason. 

Investors were happy last week to see another year tacked on to the 66-year-old's contract, which will now expire in July 2019. Disney's stock has produced industry-leading gains under his leadership. And because his three big studio acquisitions -- Pixar, Marvel and Star Wars -- were all home runs, shareholders have instilled so much faith in Iger's M&A genius that it's perhaps almost up there with the likes of Warren Buffett. 

Still The Fairest
Disney's valuation remains at a premium to peers even amid challenges in its media-networks division, which drives half the company's operating profit
Source: Bloomberg

Practically speaking, it is good for Disney shareholders that Iger is staying longer, especially given the worsening troubles in the ESPN division. But it's also problematic that the $179 billion TV, film, theme-park and consumer-products company has been molded by Iger over the years into something it seems only he can manage.

Topping Out
Disney's years-long rally ended in 2016. It has extended CEO Bob Iger's contract so that he can have more time to fix (or sell?) ESPN and find a successor.
Source: Bloomberg

This may just be an inherent flaw in any conglomerate structure today: There's no perfect successor to sustain the CEO's legacy if the operations become unwieldy. Activist hedge funds have made good money pouncing on sprawling, inefficient companies and demanding they sell off divisions. At Disney, Iger's mere presence at the helm is partly what props up the stock and offsets concern over ESPN's shrinking audience.

As it stands now, Iger's replacement would need to be someone who can continue making smart movie-studio deals, see ways to keep refreshing the global theme-parks business, turn around ESPN and manage ABC and the cable channels amid weak ratings and the rising popularity of over-the-top TV. That's a lot to take on. And not even Iger has found a way to fix ESPN yet (although the sports network's challenges are admittedly bigger than itself -- just look at the NFL). 

Disney's most obvious internal CEO candidates both departed the company in the past couple of years, and it's not clear that the board has faced the reality yet that it may need to embrace an outsider for the role. Big names floated in the press have included Sheryl Sandberg, Facebook Inc.'s chief operating officer and a Disney board member, and Steve Burke, who runs Comcast Corp.'s NBCUniversal division and used to be a Disney executive. Speculation had also been building last year that Disney could acquire Netflix Inc. and eventually put Reed Hastings, co-founder and CEO of the streaming app, in charge of the combined company. 

Be Our Guest
Disney's "Beauty and the Beast" remake dominated the U.S. box office for a second straight weekend
Source: Box Office Mojo

Disney has bought itself more time to figure things out. But as it does, somehow Iger will need to help shareholders mentally untangle him from the idea of Disney's success -- or else any succession news will just drag down the stock. Buffett himself has worked to do this for years, little by little prepping investors for the time when someone else takes over Berkshire Hathaway Inc.

I've asked this before but it bears repeating: Does Iger make it easier by splitting apart Disney? 

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

To contact the author of this story:
Tara Lachapelle in New York at tlachapelle@bloomberg.net

To contact the editor responsible for this story:
Beth Williams at bewilliams@bloomberg.net