by Robert Iger;
In the fall of 2017, we heard complaints about John Lasseter from women and men at Pixar, about what they described as unwanted physical contact. Everyone knew John as a hugger, and while many dismissed this behavior as innocuous, it quickly became evident the feeling was not unanimous. I’d spoken with John about this some years back, but these new allegations were more serious, and it was clear to me that he had to be confronted.
Alan Horn and I met with John in November of that year, and together we agreed that the best course was for him to take a six-month leave to reflect on his behavior and give us time to assess the situation. John issued a statement to his teams before he left. “Collectively, you mean the world to me,” he wrote, “and I deeply apologize if I have let you down. I especially want to apologize to anyone who has ever been on the receiving end of an unwanted hug or any other gesture they felt crossed the line in any way, shape, or form. No matter how benign my intent, everyone has the right to set their own boundaries and have them respected.”
In John’s absence, we put a leadership structure in place at Pixar and Disney Animation and we conducted dozens of interviews with people at both studios to determine what was best for the organization.
* * *
—
THE NEXT SIX MONTHS—working on our direct-to-consumer strategy, contending with high-profile personnel issues, and analyzing and negotiating a Fox deal—were as challenging as any stretch of my career. I grew increasingly convinced that what Fox had in terms of content, global reach, talent, and technology would be transformative for us. If we could acquire them and integrate them quickly and smoothly while executing our direct-to-consumer vision—a daunting series of ifs—Disney would be facing the future in a stronger position than it had ever been in.
As our discussions proceeded, Rupert had three things in mind. The first was that, of the possible companies that might be interested in buying Fox, Disney provided the most likely path to regulatory approval. The second was the value of Disney stock. He could continue to have a controlling interest in Fox as it struggled among much bigger fish, or he could have a piece of a much more robust combined company. The third was his confidence that we could integrate the two companies smoothly and set the newly combined company on a dynamic path.
Among Rupert’s many challenges as we negotiated throughout the fall of 2017 was managing the decision with his sons, Lachlan and James. They’d watched their father build the company since they were kids, hoping and assuming that someday it would be theirs. Now he was selling it to someone else. It wasn’t an easy situation for any of them, and my stance from the outset was to let Rupert manage his family dynamics and stay focused on the business aspects of our discussions.
Throughout that fall, Kevin Mayer and I met several times with Rupert and his CFO, John Nallen. We’d determined that we were willing to make an all-stock offer of $28 a share—or $52.4 billion—for the acquisition. In the months after our initial conversation with Rupert, word had leaked that he was contemplating a sale, which invited others to start considering an acquisition. Comcast emerged as our competitor, making an all-stock bid that was considerably higher than ours. We were confident that even though Comcast’s initial bid was higher, the Fox board would still favor us, in part because of the regulatory challenges Comcast was likely to face (they already owned NBC-Universal, as well as one of the largest distribution businesses in the country, and they were likely to face intense regulatory scrutiny).
At the end of Thanksgiving weekend, Kevin and I met Rupert and John once more at the winery in Bel Air. The four of us went for a long walk through rows of grapevines. Near the end of the walk, Rupert informed us that he wouldn’t go below $29 a share, which translated to about $5 billion more than we wanted to spend. I suspected that he thought I was worried about Comcast’s offer and would feel the need to go higher. As much as I wanted to make the deal, though, I was willing to walk away from it. I was enamored of many parts of their company, and had begun imagining in detail what they could do for our new business, but there were huge executional risks involved. Making it all work was going to require an enormous amount of time and energy. Even if we could execute a deal and get regulatory approval and successfully merge the two companies, there were still plenty of unknowns in the marketplace that concerned me. I was also torn about remaining at the company for what would be three more years. Would this be good for me or for Disney? I wasn’t completely sure, but I didn’t have much time to think about it. By the end of the meeting, I felt it was vital that we get all of the possible value out of the deal, so I told Rupert as we were leaving, “Twenty-eight is as high as we can go.”
I don’t know if Rupert was surprised that I was holding my ground, but Kevin worried we would lose the deal by not going up. I felt confident we would prevail, though—that the risks of going with Comcast were too big for them—and when I came into the office on Monday morning, I told Kevin to call Nallen and tell him we needed an answer by the close of business. At the end of the day, Rupert called and accepted our bid, and invited me back to his winery—Lachlan was also there, and I wondered how it must all be settling with him—to toast the deal. We spent the next two weeks ironing out fine points, and then I flew to London for the premiere of Star Wars: The Last Jedi on December 12. While there, I went to Rupert’s office to take a picture of us shaking hands on his balcony, which would be released along with an announcement of the deal on the 14th.
I flew back to L.A. on the thirteenth, arriving late in the afternoon, and went straight into a prep meeting for the announcement the next morning. I was scheduled to go on Good Morning America at 7:00 A.M. EST, which meant being at the studio on the Disney lot at 3:00 A.M. PST, to get made up and be ready to go live at 4:00 A.M. In the middle of our prep meeting, Jayne Parker, our head of Human Resources, came in and asked me if John Skipper, the president of ESPN, had been in touch with me.
“No,” I said. “What’s up?”
The look on Jayne’s face said it was a problem, and I asked immediately if it was something that needed to be dealt with right away or whether it could wait until after we made the announcement the next day. “It’s bad,” Jayne said. “But it can wait.”
December 14 ranks as another of the most compartmentalized days of my career. Looking back at the notes in my calendar, here’s what turns up: GMA announcement at 4:00 A.M. Conference call with investors at 5:00 A.M. CNBC Live at 6:00 A.M. Bloomberg at 6:20 A.M. Webcast with investors at 7:00 A.M. From 8:00 A.M. till noon were calls with Senators Chuck Schumer and Mitch McConnell, then Representative Nancy Pelosi and several other members of Congress, in anticipation of the regulatory process that was about to unfold. Finally, that afternoon, Jayne came into my office to have the conversation that we’d punted on the day before. She told me that John Skipper had admitted to a drug problem, which had led to other serious complications in his life and could potentially jeopardize the company. I scheduled a call with John the next day, then went home and, because I’d scheduled it long before I ever could have known that all of these things would converge at the same time, Skyped with a group of students at Ithaca College, my alma mater, about the future of the entertainment and media industries.
The next morning, John and I talked. He admitted that he had terrible personal issues, and I told him that, based on what Jayne had described and what he’d confirmed, we needed him to resign the following Monday. I regarded John highly; he is smart and worldly and was a talented, loyal executive. This was a clear example, though, of how a company’s integrity depends on the integrity of its people, and while I had great personal affection and concern for him, he’d made choices that violated Disney policy. It was a painful decision to let him go, but the right one—even if it meant that, as we entered what was the most taxing stretch for the company and for me since I’d become CEO, we were now without leaders in two of our most important businesses: ESPN and Animation.
* * *
—
THE AGREEMENT WITH Rupert set the complicated process of seeking regulatory approval in motion. This involves a series of filings with the Securities and Exchange Commission laying out the details of the deal, the financial aspects for both companies, as well as a “ticking clock” that transparently narrates how the deal transpired (including, in our case, a description of the initial meeting with Rupert and all of our subsequent conversations). Once the SEC approves the filing, each company then mails a proxy ballot to its shareholders, which includes all of the details in the filing and a recommendation from each company’s board that its shareholders approve the deal. It also stipulates a voting period, which ends with a shareholder meeting at which all of the votes are counted. This whole process can take up to six months, and during this period, other entities can make competing bids.
As complex as our deal was, we assumed we had a clean path to regulatory approval (which, again, was part of why Fox’s board had approved our bid over Comcast’s in the first place) and Fox’s shareholders would ratify it at their meeting that was scheduled for June 2018. There was only one possible hitch. As all of this moved forward, a district court judge in New York was contemplating a lawsuit brought by the Department of Justice against AT&T, to block its acquisition of Time Warner. Comcast was watching this carefully. If the judge ruled in favor of the Justice Department and the deal was blocked, Comcast would conclude that they, too, would face a similar hurdle, and their hopes for making another bid for Fox would be dead. If AT&T won, however, they could be emboldened to come back with a higher offer, assuming that Fox’s board and shareholders would no longer be dissuaded by the regulatory obstacles.
All we could do was go forward under the assumption that we would be acquiring Fox, and begin preparing for that reality. Shortly after we agreed to the deal with Rupert, I began focusing on the question of exactly how we would merge these two huge companies. We couldn’t just add them to what already existed; we had to integrate them carefully in order to preserve and create value. So I asked myself: What would, could, or should the new company look like? If I were to erase history and build something totally new today, with all of these assets, how would it be structured? I came back from our Christmas holiday and dragged a whiteboard into the conference room next to my office and began to play around. (It was the first time I’d stood before a whiteboard since I was with Steve Jobs in 2005!)
The first thing I did was separate “content” from “technology.” We would have three content groups: movies (Walt Disney Animation, Disney Studios, Pixar, Marvel, Lucasfilm, Twentieth Century Fox, Fox 2000, Fox Searchlight), television (ABC, ABC News, our television stations, Disney channels, Freeform, FX, National Geographic), and sports (ESPN). All of that went on the left side of the whiteboard. On the other side went tech: apps, user interfaces, customer acquisition and retention, data management, sales, distribution, and so on. The idea was simply to let the content people focus on creativity and let the tech people focus on how to distribute things and, for the most part, generate revenue in the most successful ways. Then, in the middle of the board I wrote “physical entertainment and goods,” an umbrella for various large and sprawling businesses: consumer products, Disney stores, all of our global merchandise and licensing agreements, cruises, resorts, and our six theme-park businesses.
I stepped back and looked at the board and thought, There it is. That’s what a modern media company should look like. I felt energized just by looking at it, and spent the next few days refining the structure on my own. At the end of that week, I invited my team in to look at it—Kevin Mayer, Jayne Parker, Alan Braverman, Christine McCarthy, and Nancy Lee, my chief of staff. “I’m going to bounce something different off you,” I said, and then I showed them the whiteboard. “This is what the new company would look like.”
“You just did this?” Kevin asked.
“Yes. What do you think?”
He nodded. Yes, it made sense. The task now was to put the right names in the right places. The moment that we announced the deal, there was understandable anxiety throughout both companies about who would run what, who would report to whom, whose roles would expand or contract and how. Throughout the winter and spring, I traveled all over meeting with Fox executives—in L.A. and New York, London, India, and Latin America—getting to know them and their businesses, fielding their questions and alleviating their worries, and gauging them against their Disney counterparts. Once the shareholders voted—assuming the AT&T ruling didn’t break Comcast’s way—I would have to make a lot of difficult personnel choices very quickly, and I needed to be prepared to start restructuring immediately.
* * *
—
IN LATE MAY, as we were closing in on the judge’s decision and, soon after that, the Fox shareholder vote, I arrived at my office a little before 7:00 A.M. and opened an email from Ben Sherwood, the president of ABC. It included the text of a tweet that Roseanne Barr had posted that morning, in which she said that Valerie Jarrett, the former Obama administration adviser, was the product of “the Muslim Brotherhood and Planet of the Apes.” Ben’s message read: “We have a serious problem here….This is completely abhorrent and unacceptable.”
I immediately wrote back: “We sure do. I’m in the office. I’m not sure the show survives this.”
A year earlier, in May 2017, we’d announced that we were bringing Roseanne back to ABC prime time. I’d been enthusiastic about the idea, in part because of how much I’d grown to like Roseanne when we worked together in the late ’80s and early ’90s when I was running ABC Entertainment, and in part because the idea of the show—that it would reflect a range of political reactions to the controversial subjects of the day—appealed to me.
I hadn’t been aware of the controversial tweets that Roseanne had posted in the past, before we considered bringing the show back on the air, but once it was on, she took up tweeting again and said some thoughtless, occasionally offensive things on a variety of subjects. If she kept it up, it would be a problem. In April, a few weeks before the Valerie Jarrett tweet, I had lunch with her. It couldn’t have been nicer. Roseanne showed up with cookies that she’d baked for me, and she spent part of our conversation recalling that I was one of the few people in her corner way back when and said that she’d always trusted me.
Near the end of the lunch I said to her, “You’ve got to stay off Twitter.” The show was getting incredible ratings, and I felt personally happy to see her thriving again. “You’ve got a great thing going here,” I said. “Don’t blow it.”
“Yes, Bob,” she said, in her funny, drawn-out, nasal voice. She promised me that she wouldn’t go on Twitter again, and I left the lunch feeling reassured that she understood that the success she was enjoying then was rare and could easily go away.
What I’d forgotten, or minimized in my mind, was how unpredictable and volatile Roseanne has always been. We were close in the early days of my tenure as president of ABC Entertainment. I inherited the show, which was in its first season when I arrived, and I thought she was wonderfully talented, but I also got a close-up look at how mercurial and volatile she could be. There were times when she was so depressed she couldn’t get out of bed, and Ted Harbert and I would sometimes go to her home and talk with her until she got going. Maybe it was something to do with my father and his depression that made me sympathetic to her, but I felt the need to look out for her, and she appreciated that.
After reading Ben’s email, I connected with Zenia, Alan, Ben, and Channing Dungey, then the head of ABC Entertainment, and asked them what they thought our choices were. They were considering a variety of responses, which ranged from a suspension and loss of pay to a severe warning and public rebuke. None of them seemed enough, and while they didn’t mention firing her, I knew it was in the backs of their minds. “We don’t have a choice here,” I finally said. “We have to do what’s right. Not what’s p
olitically correct, and not what’s commercially correct. Just what’s right. If any of our employees tweeted what she tweeted, they’d be immediately terminated.” I told them to feel free to push back or tell me I was crazy, but no one did.
Zenia drafted a statement that Channing would eventually issue. I called Valerie Jarrett and apologized and told her we’d just decided to cancel the show and would be making an announcement in fifteen minutes. She thanked me and then called back later to say she was scheduled to be on MSNBC that evening, on a panel about racism, related to the news of Starbucks closing their stores that day for sensitivity training. “Can I mention that you called me?” she asked. I told her she could.
I then sent an email to the Disney board: “This morning we all woke up to a tweet by Roseanne Barr, in which she referred to Valerie Jarrett as a product of the Muslim Brotherhood and Planet of the Apes. We found this comment, no matter what its context was, to be intolerable and deplorable, and we made the decision to cancel Roseanne’s show. I don’t mean to stand on a high horse, but as a company, we have always tried to do what we felt was right, no matter what the politics or the commerce. In other words, demanding quality and integrity from all of our people and of all of our products is paramount, and there is no room for second chances, or for tolerance when it comes to an overt transgression that discredits the company in any way. Roseanne’s tweet violated that tenet and our only choice was to do what was morally right. A statement will be released momentarily.”