Disney and the Post-Pandemic Reckoning

During Mr. Iger’s tenure from 2005 to 2020, Disney built an unrivaled content catalogue by acquiring 21st Century Fox, Marvel Entertainment, Pixar and the rights to the Star Wars franchise. Disney blockbusters rang up banner profits as other film studios struggled to adapt to the digital age. Mr. Chapek was well-positioned to capitalize.

Early on Disney+ experienced rapid growth as lockdowns forced people to stay home and government Covid payments gave them money to burn. It boasted 130 million subscribers by this year’s first quarter. But growth has slowed amid increased streaming competition and inflation, which has prompted consumers to cut back on media subscriptions.

Netflix’s

stock plunged this spring after it reported losing subscribers, although it still boasts 60 million more than Disney+. Rising interest rates have put pressure on corporate valuations and caused a selloff in growth and tech stocks. What the Federal Reserve giveth it also taketh away.

Corporate earnings are under pressure, and investors are losing patience with companies that miss profit projections. Disney’s stock plunged after it warned in August that Disney+ had added only 100,000 U.S. and Canada subscribers in the prior quarter. Its stock tumbled again after it reported mounting losses in its streaming business amid hefty investment in new content. Its market cap, once as high as $366 billion, was $163 billion before a rally on Monday.

Mr. Chapek planned to reduce Disney’s streaming losses by raising the Disney+ subscription price to $10.99 a month from $7.99 and introducing a cheaper plan with ads, as Netflix did this month. He also followed other tech and media companies in announcing a hiring freeze. But Disney’s board concluded it lacked confidence in Mr. Chapek, and Mr. Iger’s criticism from the sidelines no doubt played a role.

The marketplace is a tough disciplinarian, in contrast to government, and the first duty of a corporate board is to replace a CEO who isn’t doing the job. Most boards act too late rather than too early. Mr. Iger has signed up for two interim years, and maybe the board can do a better job finding a successor this time.

Some on the political right are attributing Disney’s business troubles to its “woke” controversies, notably with Gov.

Ron DeSantis

over Florida’s law banning K-3 instruction on sexual orientation and gender identity. Mr. Chapek handled that episode poorly, managing to upset his woke employees and the company’s more traditional customers. But Disney’s business is so broad that it can ride out political PR messes, and its theme parks have been doing well as people show a renewed desire to travel with the children.

The real Disney problem is the old-fashioned one: bad business performance. Can Mr. Iger turn it around? He did it once, and after Disney’s long fall this year he has nowhere to go but up.