Disney's surprise CEO change makes sense because of the coronavirus' growing impact on its business, according to a Wall Street analyst
Disney's abrupt appointment of CEO Bob Chapek on Tuesday was good thinking given the growing threat of the coronavirus outbreak, according to analysts at Rosenblatt Securities.
- The day-to-day pressures of the Disney CEO may mount if the coronavirus continues to spread outside of China, drawing former chief Bob Iger's focus at a crucial creative moment, the analysts wrote.
- Disney has already closed its Shanghai and Hong Kong parks and resorts because of the coronavirus.
- Its upcoming "Mulan" remake could also be impacted by the coronavirus, according to box-office experts, as China's 70,000 theaters are closed and the movie's release date in the region has not been confirmed.
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Disney's sudden CEO appointment on Tuesday, 22 months before its former-chief executive was due to depart the company, was good thinking given the growing threat of the coronavirus outbreak, according to one Wall Street firm.
The spread of the virus is already hurting some of Disney's parks in Asia, and could impact the box office of its upcoming "Mulan" remake.
Bob Chapek, a Disney veteran who has led the company's parks business for the last four years, became the seventh CEO in Disney's history on Tuesday.
The move was expected, as prior CEO Bob Iger was set to retire after his contract expired at the end of 2021. But the timing, unattached to a corporate earnings or other announcements, caught Wall Street and the industry by surprise.
Iger, who will serve as executive chairman for the remainder of his contract, told analysts on a conference call that he would step back from the day-to-day business to focus on creative strategy, which is his top priority before he leaves the company.
The Disney chief's day-to-day pressures may mount if the coronavirus continues to spread outside of China, analysts at Rosenblatt Securities pointed out. It makes sense to free up Iger, and install the executive who was likely already working closely with coronavirus fallout in his parks post, as CEO, ahead of the company's March investor meeting and second-quarter earnings announcement.
"The coronavirus is increasingly spreading outside of China which, if it continues, would likely demand greater allocation of time from the CEO of Disney," Rosenblatt analysts wrote Wednesday, in an investor note. "This could have ultimately taken away from Bob Iger's focus on content creation, a specialty of his."
Disney is in a crucial moment creatively. It is still laying the foundation for the next phase of the Marvel Cinematic Universe, the next slate of Star Wars film, and Disney Plus' programming.
"Leaving Bob Chapek, a Disney veteran with 27 years with the company including most recently as chairman of parks, experiences, and products, to run the day-to-day business while Bob Iger is still in the building seems like a good reallocation of resources to us," the analysts said.
Disney has alread been forced to temporarily close its Shanghai and Hong Kong parks and resorts because of the coronavirus. It's expecting the parks to be closed for two months during the second quarter, and shrink operating income at the locations by a combined $280 million.
The coronavirus has also started to spread beyond Asia. Recently, Italy has been scrambling to contain it.
Disney has parks all over the world, including Europe, where it has Disneyland Paris in France.
The box office of Disney's 'Mulan' remake could be impacted
Disney's pricey "Mulan" live-action remake, which hits theaters in the US and other markets next month, could also be affected by the coronavirus.
The movie, which cost $200 million to produce, is "tailor-made for a big China release," Shawn Robbins, the Boxoffice.com chief analyst, told Business Insider. But that release is in jeopardy. China had not confirmed a date before its 70,000 theaters closed in late January in response to the outbreak and it's unclear when they will reopen.
Robbins said that China would likely be "Mulan's" biggest theatrical market "given the film's cultural roots and Disney's own success with previous films there."
Robbins said that Boxoffice.com was projecting the movie to open domestically in the $40 million to $60 million range, but that's "contingent on how reviews and buzz shape up closer to release" on March 27.
Paul Dergarabedian, the Comscore senior media analyst, told Business Insider earlier this month that "Mulan" faced an "unprecedented" situation at the global box office.
"The longer this tragic situation continues, the greater the impact will be on all of the studios, their movies, and indeed all of the arts in China," he said. "Of course, there will still be a natural hesitation to avoid public spaces even when the situation is contained, so release dates for the 2020 overall movie slate in China could change dramatically."