The shocking and sudden departure of Thomas Staggs as Walt Disney Company's chief operating officer Monday has blown open the race to succeed Bob Iger atop the entertainment giant. It likely means that for the first time since the 1980s, Disney will look outside its ranks for a new leader to guide the company through an era of tremendous changes in the entertainment landscape.
"For the first time in memory they're going to go outside for a CEO," said Laura Martin, an analyst with Needham & Company. "That's a big thing. Given the unique culture of the Walt Disney Company it was widely expected that a successor to Bob Iger had to come from within."
"Wall Street doesn't like uncertainty and hiring someone from outside after they've jettisoned the heir apparent adds uncertainty," she added.
In recent years, all signs have pointed to Staggs as the man waiting in the wings to assume Iger's mantle. Over more than two decades, he meticulously rose through the ranks from the strategic planning department to CFO to head of the Parks and Resorts division.
Investors responded negatively to his exit, pushing Disney's stock down 1.70% in after market trading to $97.05. The difficulty with finding someone to fill Iger's shoes is that the Disney job requires a variety of expertise. Its vast holdings include gaming, film, television, theme parks, and merchandising.
"Its breadth of activities in media and entertainment are very broad," said Hal Vogel, a media analyst. "No one is an expert in everything, but the next leader has to have experience in a lot of different types of businesses."
In the aftermath of the Staggs announcement, speculation swirled that Facebook COO Sheryl Sandberg, who is already a Disney board member, might be an attractive successor. At 46, she would be a young enough to guide the company for decades, and has the Silicon Valley bona fides to help Disney adapt to the digital era.
There are a number of other external candidates who might fit that bill. 21st Century Fox executive vice chairman Chase Carey, having successfully helped to guide that entertainment company through one turnover in leadership, might be willing to jump ship to a rival. He is steeped in the film, broadcast and cable businesses that help drive Disney's bottom line. Likewise, Peter Chernin, the man who Carey replaced atop what was then News Corp., has run herd across a sprawling entertainment conglomerate in the past and is a known quantity with the investment community.
There's also a chance that CBS chief Leslie Moonves could find himself in the market for a new perch given the uncertainty surrounding the future of Sumner Redstone's Viacom and CBS Corp. holdings. One truly outside-the-box possibility might be to buy DreamWorks Animation and install its founder Jeffrey Katzenberg in the corporate suite. His history with the house that Mickey built is a complex and fraught one -- the psychological stuff of Greek dramas.
The rise of streaming services and online forms of entertainment have soured investors on companies like Disney that rely heavily on the pay television business for their profits. As cable loses subscribers that threatens the financial underpinnings of ESPN, the sports channel widely considered to be one of the crown jewels of Disney's holdings. That means that the company cannot wait long before they signal that they have figured out the next generation of leadership.
"They have a real challenge in front of them with no easy answers," said Rich Greenfield, an analyst with BTIG. "The need someone who can help figure out what appears to be significant changes in the multi-channel landscape."
Inside the walls of the company's Burbank headquarters, the list of candidates narrows. Pixar head John Lasseter is credited with reviving the studio's animation division, but he may not want to abandon the creative side of the business for the stresses of meeting quarterly earnings projections. Alan Horn, currently overseeing the movie division, has the steady hand needed to keep the company on track and years spent in the trenches at Time Warner's Warner Bros. studio. At 73, however, he would probably be seen as a transitional candidate. Two names that aren't being considered, according to insiders, are Disney Media Networks Co-Chairman Ben Sherwood and former CFO Jay Rasulo, the man Staggs pushed out of the line to replace Iger.
"Internally this sets up a horse race, but I'm not sure who the horses are," said Vogel.
There's also the chance that Staggs' exit sets the stage for Iger, who has already been at the helm for over a decade, to extend his contract between its 2018 termination date. That might postpone the inevitable shakeup atop one of the biggest companies in the entertainment space, although it won't delay it indefinitely.