He and his boss, CEO Bob Iger, had discussed him running the sports network as far back as 2012, according to sources familiar with one particular conversation. Iger had asked Pitaro, chairman of the conglomerate’s consumer products and interactive media division, where he saw his future at Disney. A lifelong sports fanatic, Pitaro told him his dream job lie in the executive suite at ESPN headquarters in Bristol, Conn.
Whether Iger gave him any kind of assurances that day is unknown, but he didn’t leave Pitaro discouraged, either.
That Pitaro ended up with his coveted post, announced Monday, wasn’t exactly a surprise considering his bond with Iger was well known enough to have put him on most short lists for the president role at ESPN. But his ascension has raised its share of eyebrows in Burbank and Disney’s satellite office in Glendale, home to Pitaro’s division, known as DCPI.
Pitaro, 48, is regarded throughout the digital-media and sports circles he inhabits as a genial, well-liked and well-connected executive. But many of the people he has worked with, both past and present, are questioning what gave Iger the confidence to award Pitaro Disney’s most valuable asset considering how he fared for the past seven years at DCPI, a much smaller, oft-ignored division that has weathered plenty of turmoil and failure.
A Disney rep speaking on behalf of both Pitaro and Iger declined to comment on this story beyond referring to Iger’s statement from the press release issued announcing the promotion. “Jimmy is a talented and dedicated leader with the right strategic vision, relentless drive and passion for sports required to lead the stellar ESPN team at this incredibly dynamic time,” he said.
While Pitaro is credited with restoring profit to a unit that was hemorrhaging hundreds of millions of dollars in losses before he got there, Pitaro has done that by aggressively cutting costs—at least 1,200 jobs. DCPI has also had only a handful of successes that all proved short-lived under Pitaro, whose detractors view him as offering little strategic vision to the unit beyond managing the financials from quarter to quarter.
“It’s like they love him as an executive independent of what the results of his work are,” said one former exec who has worked alongside Pitaro.
Pitaro bested many other internal candidates passed over for the job including Disney’s chief strategy officer Kevin Mayer and several well-regarded ESPN vets: Justin Connolly, Burke Magnus and Connor Schell. They were vying for a role vacated by John Skipper, who abruptly exited last December citing unspecified problems with substance abuse.
Iger had futilely tried to get Skipper working with Pitaro years before the former executive stepped down, according to The Hollywood Reporter. That Iger is as high as he is on Pitaro might at least in part be explained by an inside joke at Disney: the CEO tends to favor executives who remind him of himself. Like another former Iger disciple, ex-COO Tom Staggs, Pitaro is cut from the same cloth: an athletic, trim male with the diplomacy skills necessary to win over colleagues and clients.
Moving Pitaro to ESPN also creates a new dilemma for Iger: who runs DCPI next? With no obvious internal candidate emerging as a contender, one scenario making the rounds at the company has this unit, which has morphed several times in its decade of existence, shifting once again to tuck into what could be a bigger portfolio for Disney parks chief Bob Chapek, who could become the company’s first COO since Staggs exited in 2016.
With Disney perhaps a year or so away from transforming itself with the absorption of assets from 21st Century Fox, DCPI could become part of a bigger restructuring.
As a New York Yankees fan and Cornell University football player who grew up in Westchester, N.Y., Pitaro seemed a natural for the ESPN job from an early age. But it’s at Yahoo, where he rose through the ranks of the sports and content divisions from 2001-10, that he really came into his own and forged relationships with top execs at the key pro leagues. Graduating from St. John’s University law school in 1994, he practiced law for a few years before taking a business affairs job at Launch Media, which Yahoo acquired.
It was at Launch where Pitaro demonstrated his knack for winning over powerful friends like the company’s founder, Dave Goldberg, a Silicon Valley legend who died in 2015. He was married to another tech legend—Facebook COO Sheryl Sandberg, also a member of the Disney board of directors. Having steered Pitaro to Iger, she recently gushed from her Facebook page about his new job.
But Pitaro’s hire in 2010 came as a surprise to some at Disney, where many of its top execs toil for at least a decade before penetrating Iger’s inner circle. Pitaro came in with some buzz having propelled Yahoo Sports from fourth to first in its category, making it even more popular than ESPN.com while he was there. But he was also just a vice president at a tech company that was well into secular decline by the time he left.
Pitaro began his Disney tenure as co-president of Disney Interactive Media Group, a grab bag of digital-facing businesses from mobile games to branded websites that reflects Iger’s early focus on figuring out a future less reliant on the movies and TV shows that propel the conglomerate’s fortunes.
Rechristened Disney Interactive, the unit became DCPI in 2015 by merging with Disney’s vaunted consumer products division, a merchandise machine that currently drives the lion’s share of DCPI profits. Prior to the integration, Pitaro was able to swing Disney Interactive from an annual loss of $308 million in fiscal 2011 to a profit of $132 million at the time DCPI formed.
But the division’s revenues sunk 13% in the fiscal year ending in 2017 versus the prior year, a drop Disney attributes to a cyclical comedown from the unexpected confluence of “Frozen” and “Star Wars” mania. And DCPI is still a rather small piece of the company, representing less than 9% of Disney’s $55.1 billion revenues in the fiscal year ending in 2017.
Unfortunately, Pitaro has spent much of his time at Disney climbing out of a hole not of his own making. Just a few months prior to his arrival at the company, Disney pulled the trigger on Playdom, a social gaming acquisition that cost $763 million.
Gaming has long been a sore spot at Disney, where Pitaro was forced to cut 200 jobs in 2011. Disney’s attempt to cash in on the social gaming craze compounded those difficulties as soon as Facebook revised its algorithms, undercutting companies entirely focused on the space including Zynga. The demise of Playdom was a key factor in another layoff at Disney Interactive that eliminated a whopping 700 jobs in 2014.
But the blame for that went to Playdom founder John Pleasants, who came along to Disney with the deal as co-president alongside Pitaro. That may have paved the way for Pleasants’ departure in 2013, but not before he produced what is unquestionably the biggest success for the non-licensing side of DCPI: Disney Infinity, a gaming/toy hybrid that grossed $550 million in its first 10 months in 2013.
But the success of Infinity came to a screeching halt by 2016. Just months after Disney execs had publicly touted the continued success of new iterations of the game, Pitaro pulled the plug upon realizing that its nine-figure cost had soared far higher than Disney anticipated. Infinity went from white hot to ice cold; he got ahead of the entire toy-to-life product category collapsing soon after.
Pitaro shifted DCPI’s videogame business to a less risky licensing model; Electronic Arts acquired publishing rights to videogames derived from the “Star Wars” franchise in 2013. But the pivot ended up leading to a new problem that tarnished Disney’s most precious IP. The “Star Wars: Battlefront 2” release last year was a controversial disappointment, selling poorly amid fan backlash over the game’s microtransaction system, which requires players to cough up additional payments deemed excessive. Pitaro was reportedly forced to intervene, prompting EA to yank microtransactions from the game before “Battlefront 2” hit stores, but the damage was already done.
The wisest move Pitaro may have made during his tenure at DCPI was refusing to have another ill-fated Disney acquisition, Maker Studios, get placed in his portfolio, according to sources, because he feared the property would endanger his division’s profits. An online video production hub, Maker was purchased for $675 million in 2014; thought it would have fit right in with the rest of Pitaro’s digital properties, it was kept under the oversight of former CFO Jay Rasulo, an alignment that mystified Disney observers.
But sure enough, Maker proved quickly to be an expensive mistake for Disney. By the end of 2016, DCPI was finding itself reorganizing itself again to integrate Maker, which dramatically downsized its affiliates and pivoted to a different business. DCPI already cut 250 jobs in September of that year but the cuts kept coming in 2017 as Pitaro sent 80 more employees packing at Maker, which already lost another 30 while still under Rasulo.
Pitaro has since retooled Maker as part of Disney Digital Network, aimed at offering marketers global scale online. He is also hopeful for continued momentum for new-ish e-commerce site ShopDisney and “Star Wars: Jedi Challenges,” an augment-reality headset produced by DCPI that drew strong reviews in 2017.
Disney is often touted for its M&A prowess thanks to megadeals including Marvel, Lucasfilm and Pixar. But as Maker and Playdom demonstrate, the conglomerate has a sorrier track record with overly expensive acquisitions that called DCPI home. Another one that faded under Pitaro’s watch was kiddie social network Club Penguin, which was purchased for $350 million in 2007. Once a phenomenon among the elementary-school set, the brand had essentially crumbled by 2017, its 12-year run practically the digital equivalent of an eternity.
Just as Infinity went down along with all of its competitors, Club Penguin melted along with an entire genre of product known as virtual worlds. To some degree, these failures come with the territory of being in the uncertain world of digital content at a traditional media company. And to what extent any one executive could be held to blame for any venture going south among fickle young audiences on emerging platforms is questionable.
At DCPI, Pitaro leaves behind a scrap heap of discarded acquisitions and homegrown builds that including over a dozen video game studios and a collection of websites and apps targeted at moms and families. It’s not a list to be proud of, but looked at another way, it says something that Disney was being aggressively experimental during an increasingly challenging period for media companies that demanded trying new things even if failure was the result.
Pitaro will leave behind a coterie of executives he brought over from Yahoo; the rest of DCPI is waiting to see whether they will move on with him to ESPN or stick around. They are as loyal to him as he is to Iger, who in Pitaro will now have a close ally that will keep him far more plugged into Bristol than Skipper, who tended to operate more independently of Burbank.
But keeping Pitaro close is not going to guarantee success for Iger at ESPN, which is at a critical juncture in its history. A pending launch of a branded streaming service will face the daunting task of beginning to offset significant subscriber declines for the network. A frayed relationship with the NFL needs mending as well.
And yet Pitaro doesn’t have any experience in ESPN’s current core competency: television. Still, hiring a digital executive speaks volumes about where Iger sees the brand’s future.
As for Pitaro’s future, the speculation has already begun as to whether he has a shot at continuing his rapid ascension at Disney by eventually replacing his mentor, who isn’t scheduled to retire until July 2019—a date that could end up getting postponed. Cracks one Disney insider, “If he can figure out how to fix ESPN, he damn well deserves to be the next Bob.”