There’s Turmoil Inside Disney’s Magic Kingdom

If Disney’s commercials are to be believed, its theme parks are places where children go to live out their dreams. For a lot of adults inside Walt Disney Co. itself, however, that dream spot seems to be the office currently occupied by Bob Iger.

Iger was initially planning to vacate his CEO suite this year but pushed that date back to June 2016. That delay has allowed a palace intrigue to emerge as several top executives seen as contenders for the job have been jockeying to be named successor. Adding to the uncertainty is that Disney has no president, a position traditionally used to groom future CEOs.

Whoever wins the honor will have a tough act to follow. Under Iger, Disney’s brand and business is as strong as it’s been in four decades and there is no clear path to maintaining the double-digit profit growth Disney has been enjoying.

This month, speculation about Iger’s successor heated up after Anne Sweeney, who headed Disney’s ABC TV group, stepped down to pursue what she insisted was her own dream of directing TV programs. That left Thomas Staggs, who heads Disney’s resorts division, and CFO Jay Rasulo as the leading candidates, along with a few dark horses like Disney International chairman Andy Bird also in the race.

CEO transitions at Disney have a habit of starting of happy and ending on a tragic note. After Walt Disney died, the company enjoyed some of its best years under the management of his brother Roy, who served as CEO from 1929 to 1971. After Roy stepped down, three CEOs managed the company over a 13-year period that saw the stock stagnate and the company became a cultural anachronism in the cynical 70s.

After financial problems spurred a few hostile takeover attempts, Disney brought in Michael Eisner in 1984. Eisner led Disney into animation franchises like the Lion King and non-traditional hits like Pretty Woman as well as a big presence on cable TV. But in the early aughts, Disney again floundered and Eisner was ousted after some in the Disney family accused him of creating a “rapacious, soulless” company.

That paved the way for Iger, then Disney’s president to take on the role of CEO. Under Iger’s leadership, Disney has seen its stock rise 250% – five times better than the Dow Jones Industrial Average. Iger has shut down, sold off or cut back properties like Touchstone and Miramax and bought others like Pixar for $7.4 billion and Marvel for $4 billion.

Iger’s Disney is closer in spirit to the one run by the Disney brothers, focusing its brand on animation franchises and theme parks, but pushing it all up to an international scale. Disney has been working on a $4.4 billion resort in Shanghai and has raised ticket prices in some theme parks two times in the past year. (So far, nobody at Disney is calling the price hikes “rapacious.”)

Iger seems determined to leave Disney on a high note. When the board extended his tenure by 15 months, it not only allowed internal CEO candidates to better prepare themselves (while also intensifying the competition), it allowed Iger to put some finishing touches on his legacy: Shanghai Disneyland and Star Wars Episode VII will both open a few months after Iger steps down, while Frozen is on track to become the biggest animated film of all time.

Disney’s next CEO will need to scramble to create an impressive follow-up act. Raising theme-park prices will be tough without driving away families. ESPN remains a highly profitable media property, but to grow Disney will need to find others, which are hard to come by. Weak emerging markets may limit Disney’s ability to find markets as promising as China’s.

Above all, Disney’s next CEO will have to grapple with an issue that Iger has largely side-stepped. Media is going digital, which will create new opportunities while challenging old business models. Disney’s fastest growing segment is its Interactive division, which grew 26% last year. But the unit has been losing money, and its growth rate lags digital media companies like Facebook.

Far from fading in the 21st Century, the Disney brand is as strong as ever. Inheriting that brand will be something of a double-edged gift for whoever moves into Iger’s office. It’s one thing to attain your dreams. It’s another entirely to keep them alive for years to come.