(FORTUNE Magazine) – By now, the long-running soap opera at Walt Disney Co. has a new star. His name is Bob Iger, and he has proven that he has what it takes to win the CEO job. The ultimate supporting-cast member--loyal, diligent, patient, and handsome to boot--Iger never stole the spotlight from Disney's longtime leading man, Michael Eisner. With Eisner's support, Iger courted directors, charmed investors, and became chief executive by default when every one of his rivals dropped out.

Admirable as they are, though, the qualities that got Iger top billing will take him only so far now that he has to direct the show. To make Disney great again, Iger must accomplish three big goals. He needs to heal Disney's diseased culture. He needs to harness the digital technologies that are transforming media. And he needs to lead a creative rebirth at the company.

Little in his past inspires confidence that Iger can do it all. Then again, like others who have performed in the shadows, he has not had much of a chance to show what he can do. In 30 years at ABC and Disney, Iger has climbed the ladder by impressing powerful mentors like the late Roone Arledge, chairman of ABC Sports and News, and Tom Murphy, CEO of Capital Cities/ABC, with his drive, good judgment, and grace under fire. Invariably described as modest, Iger once told FORTUNE, "I've compensated for an intellect that I'll call normal with a great work ethic." (He declined to be interviewed for this story.) Since 2000, Iger has served as president, chief operating officer, and faithful deputy to Eisner, Disney's brilliant, domineering, and combative CEO.

Next Sept. 30, if all goes according to plan, the 63-year-old Eisner will relinquish the job he has held since 1984, to the joy of shareholders who have been agitating for his ouster. He will leave the board for good next year. (Directors have urged Iger to take charge right away.) The record will show that Eisner ran Disney spectacularly well for about a decade--before the death of his partner, Frank Wells, and the acquisition of Capital Cities/ABC--and not very well at all since. To be sure, Disney has performed better lately. In 2004 the company generated revenues of $30.7 billion, operating income of $4.5 billion, and net income of $2.3 billion. Its earnings grew by 60%, and the company boosted its return on invested capital. But all that growth came off a very low base. This year Disney will earn only modestly more than it did in 1997, even after pouring billions of dollars into capital improvements and acquisitions. Its stock is nearly 36% off its 2000 peak. Iger may face questions about whether Disney--like Viacom--should shed assets such as theme parks to boost its stock price.

For now, Iger will focus on Disney's corporate culture. Here, he can make a difference. His intellect may be "normal"--his word, remember--but he has the emotional intelligence to soothe egos and mediate turf wars. He is calm, diplomatic, collaborative, a good listener, and generally well liked--all things Eisner is not. At Cap Cities, Iger learned how to lead a decentralized culture in which decision-making is delegated to managers, who are then held accountable. He unlearned some of that at Disney, where he has been known to micromanage, Eisner-style; to blur responsibilities; and to cast blame on others when things go awry. But his instincts are sound. Under Iger, Disney will become a better partner and a more collegial place to work, if only because there's so much room for improvement.

An early test of Iger's skills will come when he takes up the company's frazzled partnership with Pixar Animation Studios, which expires in 2006. Pixar's popular family movies, including Toy Story, Finding Nemo, and The Incredibles, have boosted the Disney studio's earnings and obscured its creative drought in animation. Iger must mend fences with Steve Jobs, Pixar's CEO, who can't stand Eisner. (Jobs sent Iger a congratulatory e-mail after he was named CEO.) The trouble is that Jobs will have the upper hand when the two men sit down to talk terms. "Steve Jobs has to know that it's going to be very hard for Bob not to get a Pixar deal done, given the creative drain that's gone on at Disney for the past five to seven years," says Richard Greenfield, a media analyst with Fulcrum Global Partners. Odds are, Iger will have to choose between a bad deal and no deal at all.

A similar dilemma awaits him at the NFL. ABC loses about $150 million a year on Monday Night Football, a network mainstay since the era of Howard Cosell. Iger, a sports guy, would hate to be known as the man who took football off ABC. But he doesn't want to pay more for the rights, either. Unfortunately, the NFL has already induced CBS and Fox to increase their rights fees for Sunday games by about 25%, and News Corp.'s Rupert Murdoch stands ready to grab the Monday-nightpackage too. The Pixar and NFL problems reveal how much Disney, once a content powerhouse, has come to depend on others for some of its most valuable programming.

Another challenge for Iger is technology that's changing the way programming is consumed. Physical media is turning into digital media, presenting an opportunity but also a danger. Iger has said that one of his goals is to get Disney content to any user, on any device, any way they want it, at any time. The company is already exploiting some of those opportunities. For example, an Internet offering called ESPN Motion attracts about three million users a month who watch ad-supported sports highlights and analysis online. Disney screensavers, songs, and games are being sold to cellphone users in Japan. And if Iger can figure out how to sell or rent movies or ABC shows over broadband, he could boost revenues and profits by eliminating middlemen cable operators, Blockbuster, and Wal-Mart.

The problem is, giving consumers control over digital content means they can skip commercials--as millions of TiVo users already do--or copy and steal movies and TV shows. By 2010, the major media conglomerates will lose an estimated $160 billion in equity value if piracy and ad skipping are left unchecked, says Tom Wolzien, media strategist at Bernstein Research. That makes it hard to understand why Disney directors didn't try harder to attract a proven CEO with experience in both media and technology, someone like Terry Semel of Yahoo or Meg Whitman of eBay. Whitman was the only candidate other than Iger interviewed by the board. Outraged by the process, Stanley Gold, a former Disney director who turned against Eisner, told FORTUNE, "Meg Whitman created one of the great companies in the world out of thin air. What has Bob done?"

Good question. Because decision-making in the entertainment industry is collaborative, Iger's track record is murky. At ABC, his longtime focus, his performance has been mixed at best. Back in the early 1990s, as the network's top programmer, he made ABC No. 1 by developing hits like Home Improvement and America's Funniest Home Videos. But after Disney bought Capital Cities/ABC, he presided over the network's steep and protracted decline. Though ABC developed two buzz-generating hits last year, Desperate Housewives and Lost, ABC still trails Fox and CBS among prime-time viewers 18 to 49. What's more, Iger replaced Susan Lyne and Lloyd Braun, the programmers who championed those shows. He has not demonstrated that he can pick the right creative people and create an atmosphere where they will flourish.

That is worrisome, because Iger's most important job at Disney is to get the company's creative juices flowing again. In its glory days, Disney thrived by developing great stories like The Lion King and The Little Mermaid and exploiting them in movies, home video, music, TV, theme park attractions, and consumer products. Most than most companies, Disney is powered by ideas. "They need to keep creating new characters," says Fulcrum's Rich Greenfield. "Lately, they've struggled."

No one disputes that Bob Iger is a good guy. But that doesn't necessarily make him a good CEO. It will take a couple of years to know whether he can command the center stage he's been given.

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