Iger Faces a Bumpy Magic Kingdom Ride
By KATE KELLY, JOE FLINT and BROOKS BARNES
Staff Reporters of THE WALL STREET JOURNAL
March 14, 2005
As incoming chief executive officer of Walt Disney Co., Robert Iger will take the reins of a company he knows intimately. But despite years of navigating his way around the Magic Kingdom he will face a few blind spots.
Having risen through the ranks of the television business, Mr. Iger has long experience in Disney's important network and cable operations, which account for more than a third of the company's overall revenue. And since becoming Disney's president and chief operating officer in 2000 he has dealt closely with the company's consumer-products arm, a smaller but meaningful revenue driver. He is less well-versed, however, in the theme-park and movie divisions. Together, those units make up more than half of Disney's revenue.
[Robert Iger]
Mr. Iger, who will assume the CEO title in October, will need to get up to speed fast. Disney's animated film business, long regarded as Hollywood's gold standard, has fallen behind in the new era of computer-generated cartoons and needs to make a comeback. He'll also have to rebuild Disney's operations in the specialty film business once the company completes its expected separation from Harvey and Bob Weinstein, co-chairmen of its Miramax Films unit.
Disney's theme-park business, meanwhile, still faces challenges amid the global travel slump that set in after the Sept. 11, 2001, terrorist attacks. And Mr. Iger must seek to greatly extend the Disney brand overseas. Mr. Iger has already been involved in negotiations, for example, to bring a Disney theme park to mainland China.
Even on his home turf of the TV business Mr. Iger, whom Disney didn't make available for this article, faces rough going. He must expand a nascent turnaround at Disney's ABC broadcast network, which after years of declines is suddenly riding high on the success of new hits "Desperate Housewives" and "Lost." In the near term he has to decide whether Disney will renew a National Football League package that has long been a key part of its schedule.
On the management front, Mr. Iger must soon decide who is the best choice to take on his former role as Disney's president. Among the likely candidates: Disney studio chief ________ Cook; Chief Financial Officer Tom Staggs; consumer-products chief Andy Mooney; and Anne Sweeney, president of the ABC-Disney Television Group. A Disney spokeswoman said Mr. Iger was not available to comment yesterday.
Some of the company's longtime critics, notably dissident ex-directors Stanley Gold and Roy E. Disney, have already attacked Mr. Iger's qualifications. Despite the company's financial turnaround in the last year -- a factor the Disney board cited in naming him -- they note that Mr. Iger was also a top executive during the many years of declining earnings in the late 1990s and early 2000s. Mr. Iger must now grapple with the question of whether or not to extend an olive branch to Messrs. Gold and Disney.
Many on Wall Street have seemed pleased with Mr. Iger in recent months. With his long experience in the entertainment business, which started in the early 1970s at ABC television, some investors believe he's well suited to the task. "Bob Iger is clearly the right person to succeed Michael Eisner as Disney's CEO, given his background," says Jack Liebau, a Pasadena, Calif., asset manager who owns stock in the company.
But Mr. Liebau cautions that Mr. Iger will "have to wrestle with the new technologies," as well as the question of "how, in a world with consolidating cable and satellite distributors, a content-rich company continues to reach the consumer." Under Mr. Eisner, Disney has mostly remained a content company that is uninterested in owning distribution pipelines beyond its TV and radio stations.
On the television front, ABC has staged one of the most dramatic turnarounds in recent broadcast history since the start of the fall season. The over-the-top comedic drama "Desperate Housewives" on Sunday nights is the season's No. 1 new show, and the island mystery "Lost" isn't far behind it. As a result, the network has posted double-digit gains in total viewers and among viewers age 18 to 49, the age demographic advertisers pay a premium to reach. In cable, Disney is the majority owner of the thriving ESPN cable sports-programming franchise, a wildly successful enterprise that, according to analysts, contributes about 15% of the company's bottom line.
That "Lost" has gone on to be a major engine for ABC illustrates Mr. Iger's occasional missteps when it comes to spotting programming that will pop, say producers and studio executives. Insiders say Mr. Iger repeatedly dismissed "Lost" as a concept that would never work as a full-blown series. Indeed, one of his fundamental challenges will be to resist what some see as micromanaging tendencies and trust the judgment of Steve McPherson, who succeeded Susan Lyne as president of entertainment, when it comes to programming decisions.
"Desperate Housewives" and "Lost" have masked other substantial problems on ABC's schedule. It's still not a player on Thursdays, often the most lucrative night on TV due to the preference of movie studios and car manufacturers to advertise before the weekend. With "Nightline" suffering from spiraling ratings, ABC is also absent from the highly profitable late-night period. News programming in general has been problematic this season, with "Primetime Live" seeing double-digit declines from its peak.
Other television-related questions loom large. A big one: How to handle Disney's soon-to-expire contracts with the National Football League. ABC's "Monday Night Football" deal with the NFL, which is up at the end of the coming football season, creates losses for the network of about $150 million a year. But it's a key promotional platform for ABC's other programming, and as a result the network may face potential competition from General Electric Co.'s NBC for the contract.
Mr. Iger has barely been involved in Disney's movie operations. Now, he takes over at a time when the company faces challenges in both the live-action and animation businesses.
After a strong 2003 in the live-action category, Disney stumbled badly last year with misses like "The Alamo" and "Hidalgo." It's hoping to get back in gear with some big bets in the next couple of years, including two "Pirates of the Caribbean" sequels that will together cost in the neighborhood of $300 million. The company is also ramping up "The Chronicles of Narnia," a hoped-for franchise in the family/fantasy genre.
Disney later this year will test its chops in the popular computer-animation genre with "Chicken Little," which is intended to show that the studio can compete with stalwarts Pixar and DreamWorks Animation SKG.
Mr. Iger hasn't articulated what he would like to do about Disney's ruptured relationship with Pixar Animation Studios, which provided lucrative hits like "Finding Nemo" over the past decade. Pixar and Disney have co-financed Pixar's films for the past 10 years, but Pixar last year said it was ending the lucrative partnership amid tensions between Pixar chief Steve Jobs and Disney's Mr. Eisner. Pixar has not yet made plans to distribute its future films yet, leaving some to believe there was still hope something could be worked out with Mr. Eisner's successor.
Write to Kate Kelly at kate.kelly@wsj.com, Joe Flint at joe.flint@wsj.com and Brooks Barnes at brooks.barnes@wsj.com
By KATE KELLY, JOE FLINT and BROOKS BARNES
Staff Reporters of THE WALL STREET JOURNAL
March 14, 2005
As incoming chief executive officer of Walt Disney Co., Robert Iger will take the reins of a company he knows intimately. But despite years of navigating his way around the Magic Kingdom he will face a few blind spots.
Having risen through the ranks of the television business, Mr. Iger has long experience in Disney's important network and cable operations, which account for more than a third of the company's overall revenue. And since becoming Disney's president and chief operating officer in 2000 he has dealt closely with the company's consumer-products arm, a smaller but meaningful revenue driver. He is less well-versed, however, in the theme-park and movie divisions. Together, those units make up more than half of Disney's revenue.
[Robert Iger]
Mr. Iger, who will assume the CEO title in October, will need to get up to speed fast. Disney's animated film business, long regarded as Hollywood's gold standard, has fallen behind in the new era of computer-generated cartoons and needs to make a comeback. He'll also have to rebuild Disney's operations in the specialty film business once the company completes its expected separation from Harvey and Bob Weinstein, co-chairmen of its Miramax Films unit.
Disney's theme-park business, meanwhile, still faces challenges amid the global travel slump that set in after the Sept. 11, 2001, terrorist attacks. And Mr. Iger must seek to greatly extend the Disney brand overseas. Mr. Iger has already been involved in negotiations, for example, to bring a Disney theme park to mainland China.
Even on his home turf of the TV business Mr. Iger, whom Disney didn't make available for this article, faces rough going. He must expand a nascent turnaround at Disney's ABC broadcast network, which after years of declines is suddenly riding high on the success of new hits "Desperate Housewives" and "Lost." In the near term he has to decide whether Disney will renew a National Football League package that has long been a key part of its schedule.
On the management front, Mr. Iger must soon decide who is the best choice to take on his former role as Disney's president. Among the likely candidates: Disney studio chief ________ Cook; Chief Financial Officer Tom Staggs; consumer-products chief Andy Mooney; and Anne Sweeney, president of the ABC-Disney Television Group. A Disney spokeswoman said Mr. Iger was not available to comment yesterday.
Some of the company's longtime critics, notably dissident ex-directors Stanley Gold and Roy E. Disney, have already attacked Mr. Iger's qualifications. Despite the company's financial turnaround in the last year -- a factor the Disney board cited in naming him -- they note that Mr. Iger was also a top executive during the many years of declining earnings in the late 1990s and early 2000s. Mr. Iger must now grapple with the question of whether or not to extend an olive branch to Messrs. Gold and Disney.
Many on Wall Street have seemed pleased with Mr. Iger in recent months. With his long experience in the entertainment business, which started in the early 1970s at ABC television, some investors believe he's well suited to the task. "Bob Iger is clearly the right person to succeed Michael Eisner as Disney's CEO, given his background," says Jack Liebau, a Pasadena, Calif., asset manager who owns stock in the company.
But Mr. Liebau cautions that Mr. Iger will "have to wrestle with the new technologies," as well as the question of "how, in a world with consolidating cable and satellite distributors, a content-rich company continues to reach the consumer." Under Mr. Eisner, Disney has mostly remained a content company that is uninterested in owning distribution pipelines beyond its TV and radio stations.
On the television front, ABC has staged one of the most dramatic turnarounds in recent broadcast history since the start of the fall season. The over-the-top comedic drama "Desperate Housewives" on Sunday nights is the season's No. 1 new show, and the island mystery "Lost" isn't far behind it. As a result, the network has posted double-digit gains in total viewers and among viewers age 18 to 49, the age demographic advertisers pay a premium to reach. In cable, Disney is the majority owner of the thriving ESPN cable sports-programming franchise, a wildly successful enterprise that, according to analysts, contributes about 15% of the company's bottom line.
That "Lost" has gone on to be a major engine for ABC illustrates Mr. Iger's occasional missteps when it comes to spotting programming that will pop, say producers and studio executives. Insiders say Mr. Iger repeatedly dismissed "Lost" as a concept that would never work as a full-blown series. Indeed, one of his fundamental challenges will be to resist what some see as micromanaging tendencies and trust the judgment of Steve McPherson, who succeeded Susan Lyne as president of entertainment, when it comes to programming decisions.
"Desperate Housewives" and "Lost" have masked other substantial problems on ABC's schedule. It's still not a player on Thursdays, often the most lucrative night on TV due to the preference of movie studios and car manufacturers to advertise before the weekend. With "Nightline" suffering from spiraling ratings, ABC is also absent from the highly profitable late-night period. News programming in general has been problematic this season, with "Primetime Live" seeing double-digit declines from its peak.
Other television-related questions loom large. A big one: How to handle Disney's soon-to-expire contracts with the National Football League. ABC's "Monday Night Football" deal with the NFL, which is up at the end of the coming football season, creates losses for the network of about $150 million a year. But it's a key promotional platform for ABC's other programming, and as a result the network may face potential competition from General Electric Co.'s NBC for the contract.
Mr. Iger has barely been involved in Disney's movie operations. Now, he takes over at a time when the company faces challenges in both the live-action and animation businesses.
After a strong 2003 in the live-action category, Disney stumbled badly last year with misses like "The Alamo" and "Hidalgo." It's hoping to get back in gear with some big bets in the next couple of years, including two "Pirates of the Caribbean" sequels that will together cost in the neighborhood of $300 million. The company is also ramping up "The Chronicles of Narnia," a hoped-for franchise in the family/fantasy genre.
Disney later this year will test its chops in the popular computer-animation genre with "Chicken Little," which is intended to show that the studio can compete with stalwarts Pixar and DreamWorks Animation SKG.
Mr. Iger hasn't articulated what he would like to do about Disney's ruptured relationship with Pixar Animation Studios, which provided lucrative hits like "Finding Nemo" over the past decade. Pixar and Disney have co-financed Pixar's films for the past 10 years, but Pixar last year said it was ending the lucrative partnership amid tensions between Pixar chief Steve Jobs and Disney's Mr. Eisner. Pixar has not yet made plans to distribute its future films yet, leaving some to believe there was still hope something could be worked out with Mr. Eisner's successor.
Write to Kate Kelly at kate.kelly@wsj.com, Joe Flint at joe.flint@wsj.com and Brooks Barnes at brooks.barnes@wsj.com