SEATTLE POST-INTELLIGENCER
http://seattlepi.nwsource.com/virgin/219693_virgin12.html
Bad decisions, not Microsoft, hurt Disney
Tuesday, April 12, 2005
By BILL VIRGIN
SEATTLE POST-INTELLIGENCER COLUMNIST
Long before he became the pinup boy for overpaid, out-of-touch and manipulative corporate executives, Walt Disney Co. CEO Michael Eisner had his eye on one company he saw as a potential major rival in the entertainment business.
"Microsoft may be our most daunting competitor," Eisner wrote in his 1998 book, "Work in Progress."
Microsoft at that point didn't have much of a track record in the entertainment business, but Eisner (speaking in a teleconference to reporters) was concerned that Microsoft's cash flow, aggressiveness, buying power and youth -- not to mention its interest in entertainment -- made Bill Gates "a competitor to be watched."
Just add it to the list of things that Disney and Eisner got wrong.
There's a new book out on Disney -- James B. Stewart's "DisneyWar" -- that chronicles the events leading up to news last month that Eisner will later this year leave the company he has run for two decades.
What's interesting about that book is that Microsoft figures as barely more than a footnote to the action. Gates gets even less ink -- there's a reference to an embattled Eisner suggesting that he could eventually relinquish the CEO title but become chairman and chief creative officer (much as Gates is chairman and chief software architect for Microsoft).
Instead, "DisneyWar" does an effective job of chronicling how the biggest threat to Disney's success was not external competitors (including those marginally in the entertainment business, such as Microsoft), but its own remarkable accumulation of bad decisions about a business it was supposed to know.
"Lord of the Rings?" We'll pass. "CSI?" Not for us. "Survivor?" Not interested. (Disney's ABC also had a chance to do "The Apprentice" but haggled over price to the point that the show was chased to NBC.) "The Sixth Sense" is a hit? That's good, since we produced it -- except we already sold the profit rights to that movie, so we'll only be getting a distribution fee.
Accompanying that record -- and maybe a root cause -- was Eisner's own management style, which featured constant belittling of personnel (to their faces and behind their backs) and what Stewart bluntly terms his "tendency to distort, embellish or forget the truth."
Lost in the long-running corporate soap opera of Disney is the competition with Microsoft that turned out not to be. It's useful to take a look at why that competition never occurred.
Eisner wasn't wrong to be concerned about Microsoft's intentions in the entertainment business in 1998. Indeed it would have been imprudent for a CEO in just about every industry to neglect wondering what the Behemoth of Redmond might be up to. Bankers, for example, saw the integration of Microsoft Money and online financial services as the first step toward Bill Gates National Bank.
Disney's strategic response was to build a portal -- an Internet home through which consumers could access all sorts of information, entertainment and commerce, all powered by Disney. To accomplish that, Disney in 1997 bought Web site developer Starwave from Paul Allen, then in 1998 swapped Starwave for a stake in Infoseek.
Together they produced Go.com, which was to be the Disney portal; Disney even issued a tracking stock based on Go.com designed to capture the crazed prices for Internet-related stocks.
It didn't work. Stewart notes that Disney poured millions into the venture before buying back Go Network shares and taking a massive write-off on its Internet venture.
But it wasn't Microsoft that proved the greatest problem for Disney. Stewart notes that Disney lacked a coherent strategy for melding a "motley collection of assets" into a unified Internet presence. It also started far behind Yahoo! and AOL and couldn't catch up.
Over that same period, meanwhile, in the entertainment industry Microsoft was accomplishing ... not much.
It has had a few successes, making itself a player in the video-game business.
But its cable television news ventures trail Fox and CNN. In the music distribution realm it's Apple that leads the way.
As for portals and search, MSN is just one of a crowd of competitors trying to catch Google, which wasn't even on Eisner's or anyone else's radar in 1998.
In the 1998 interview, Eisner said his competitive concerns weren't allayed by the lack of a big hit in entertainment for Microsoft. The company had started slowly in other businesses and eventually became successful, he said.
That didn't happen for Microsoft and entertainment. It may never happen. But that wasn't any help for Disney, or Eisner's tenure at the company or his legacy.
The lesson of what's in and not in the book may be this: It's always advisable to have a sense of what competitors -- especially competitors with the resources of Microsoft -- are up to. But if you've made a mess of your own company, it really doesn't matter what your competitor succeeds in doing -- or fails at.
http://seattlepi.nwsource.com/virgin/219693_virgin12.html
Bad decisions, not Microsoft, hurt Disney
Tuesday, April 12, 2005
By BILL VIRGIN
SEATTLE POST-INTELLIGENCER COLUMNIST
Long before he became the pinup boy for overpaid, out-of-touch and manipulative corporate executives, Walt Disney Co. CEO Michael Eisner had his eye on one company he saw as a potential major rival in the entertainment business.
"Microsoft may be our most daunting competitor," Eisner wrote in his 1998 book, "Work in Progress."
Microsoft at that point didn't have much of a track record in the entertainment business, but Eisner (speaking in a teleconference to reporters) was concerned that Microsoft's cash flow, aggressiveness, buying power and youth -- not to mention its interest in entertainment -- made Bill Gates "a competitor to be watched."
Just add it to the list of things that Disney and Eisner got wrong.
There's a new book out on Disney -- James B. Stewart's "DisneyWar" -- that chronicles the events leading up to news last month that Eisner will later this year leave the company he has run for two decades.
What's interesting about that book is that Microsoft figures as barely more than a footnote to the action. Gates gets even less ink -- there's a reference to an embattled Eisner suggesting that he could eventually relinquish the CEO title but become chairman and chief creative officer (much as Gates is chairman and chief software architect for Microsoft).
Instead, "DisneyWar" does an effective job of chronicling how the biggest threat to Disney's success was not external competitors (including those marginally in the entertainment business, such as Microsoft), but its own remarkable accumulation of bad decisions about a business it was supposed to know.
"Lord of the Rings?" We'll pass. "CSI?" Not for us. "Survivor?" Not interested. (Disney's ABC also had a chance to do "The Apprentice" but haggled over price to the point that the show was chased to NBC.) "The Sixth Sense" is a hit? That's good, since we produced it -- except we already sold the profit rights to that movie, so we'll only be getting a distribution fee.
Accompanying that record -- and maybe a root cause -- was Eisner's own management style, which featured constant belittling of personnel (to their faces and behind their backs) and what Stewart bluntly terms his "tendency to distort, embellish or forget the truth."
Lost in the long-running corporate soap opera of Disney is the competition with Microsoft that turned out not to be. It's useful to take a look at why that competition never occurred.
Eisner wasn't wrong to be concerned about Microsoft's intentions in the entertainment business in 1998. Indeed it would have been imprudent for a CEO in just about every industry to neglect wondering what the Behemoth of Redmond might be up to. Bankers, for example, saw the integration of Microsoft Money and online financial services as the first step toward Bill Gates National Bank.
Disney's strategic response was to build a portal -- an Internet home through which consumers could access all sorts of information, entertainment and commerce, all powered by Disney. To accomplish that, Disney in 1997 bought Web site developer Starwave from Paul Allen, then in 1998 swapped Starwave for a stake in Infoseek.
Together they produced Go.com, which was to be the Disney portal; Disney even issued a tracking stock based on Go.com designed to capture the crazed prices for Internet-related stocks.
It didn't work. Stewart notes that Disney poured millions into the venture before buying back Go Network shares and taking a massive write-off on its Internet venture.
But it wasn't Microsoft that proved the greatest problem for Disney. Stewart notes that Disney lacked a coherent strategy for melding a "motley collection of assets" into a unified Internet presence. It also started far behind Yahoo! and AOL and couldn't catch up.
Over that same period, meanwhile, in the entertainment industry Microsoft was accomplishing ... not much.
It has had a few successes, making itself a player in the video-game business.
But its cable television news ventures trail Fox and CNN. In the music distribution realm it's Apple that leads the way.
As for portals and search, MSN is just one of a crowd of competitors trying to catch Google, which wasn't even on Eisner's or anyone else's radar in 1998.
In the 1998 interview, Eisner said his competitive concerns weren't allayed by the lack of a big hit in entertainment for Microsoft. The company had started slowly in other businesses and eventually became successful, he said.
That didn't happen for Microsoft and entertainment. It may never happen. But that wasn't any help for Disney, or Eisner's tenure at the company or his legacy.
The lesson of what's in and not in the book may be this: It's always advisable to have a sense of what competitors -- especially competitors with the resources of Microsoft -- are up to. But if you've made a mess of your own company, it really doesn't matter what your competitor succeeds in doing -- or fails at.
