Better Mousetrap
In Shakeup, Disney Rethinks How It Reaches Audiences
Iger Seeks High-Tech Delivery Of Movies, TV Shows; Theater Owners Worry
'Housewives' on a Handheld
By MERISSA MARR
Staff Reporter of THE WALL STREET JOURNAL
October 1, 2005; Page A1
Robert Iger, who takes over today as Walt Disney Co.'s chief executive, is shaking up the Magic Kingdom by pushing a mandate for the digital age: Consumers must be able to use Disney content whenever and wherever they want it.
Mr. Iger is talking about selling episodes of ABC hits such as "Lost" and "Desperate Housewives" online like songs. He is roiling the movie-theater industry by publicly floating the idea of releasing movies in cinemas and on DVD at the same time. He is negotiating with telecom companies about ways to deliver entertainment over cellphones.
Mr. Iger, who succeeds 21-year incumbent Michael Eisner, faces enormous challenges as he rethinks Disney's business model. The anytime/anywhere strategy threatens to erode traditional revenue from theaters, DVDs and broadcast television and presents new risks of high-tech piracy.
The 54-year-old executive inherits a company whose old way of doing business has been blown up by technology. Legal technologies such as fancy home theaters and digital video recorders are driving down movie attendance and sapping TV ad sales. Piracy is eating into entertainment sales at home and abroad. And Disney has lagged in rapidly growing areas like videogames that have become popular with young consumers.
Media moguls have struggled unsuccessfully with these questions for the last decade. Disney's track record of adapting to new technologies is mixed at best, but Mr. Iger is under pressure to devise new ways to drive growth. Its core businesses -- movies, TV, theme parks and consumer products -- are mature, and even when performing well, are hit-driven. Disney's stock, clouded by the threat of piracy and the uncertainty over new digital media, has dropped more than 12% since Mr. Iger was named to succeed Mr. Eisner in March.
Under Mr. Eisner, Disney took a more conservative approach to the burgeoning digital media world, intent on protecting such traditional revenue engines as advertising and home video. Mr. Iger believes Disney's future still lies in its entertainment content, but he wants the company to move to deliver it in new ways, in spite of the short-term turmoil it might bring.
"If we sit back and rely on old technology, the consumer is going to pass us by," Mr. Iger says, noting that the music industry made that mistake. "It's extremely important as I enter this new role that I not let that happen to the Walt Disney Co. We're not a technology company, but we need to be the closest thing to that."
Mr. Iger says his biggest obstacle may be the business habits of Disney's own employees and of theater owners, mass retailers, television affiliates and others. "We need to create an atmosphere that tolerates experimentation, even if it's at the expense of near-term economics," he said during a recent trip to open the new Hong Kong Disneyland.
Having risen from a job as a TV weatherman to head of Disney's ABC network, Mr. Iger sees television networks as being at particular risk from new technology. Some viewers today watch video clips on cellphones and use digital recorders that skip ads. Others watch entire seasons of a TV series on DVD, missing advertising altogether.
These developments are shifting control to viewers, forcing Disney to think beyond the 30-second ad. So even though Disney's television unit is posting strong results, Mr. Iger is examining new delivery models.
Among the ideas being discussed at Disney's headquarters: Selling hit television shows online, perhaps for use on portable video devices. That may include providing shows for devices like an iPod that would play video -- something that Apple Computer Inc. could announce by the end of the year, people familiar with the situation say.
One of Mr. Iger's top lieutenants, Disney-ABC Television Group President Anne Sweeney, recently handed out to her staff Sony's PSP portable video and games devices, loaded with programming such as the teen TV show "That's So Raven," "ABC News," and the movie "Pirates of the Caribbean." She wanted them to see what their shows looked like playing on a smaller screen.
Soon, she says, staffers were discussing fundamental change. Should shows that might prove popular on such devices be shortened? Should certain camera angles be emphasized? Would different promotional techniques be warranted?
"In the future, there will be a percentage of people who only receive our content on devices other than television sets," predicts Ms. Sweeney, who is about to appoint a new executive to lead the division's digital efforts.
The push into new technologies means Disney has to worry more about the growing problem of unauthorized digital copies. Mr. Iger recently had discussions with Ivan Seidenberg, chief executive of Verizon Communications Inc., about a programming deal for Verizon's online services and nascent television operation. Before cutting the deal, Mr. Iger insisted on a provision that requires Verizon to send warnings to its broadband customers identified by Disney as unauthorized copiers of Disney content. The provision was significant because Verizon, intent on protecting the privacy of its customers, had balked at demands made by the music industry in its effort to battle piracy.
On a Disney conference call with analysts in August, Mr. Iger suggested that the movie industry also needed to rethink its business model by narrowing, or even eliminating, the gap between a movie's theatrical release and its availability on DVD or pay-per-view. His suggestion took aim at two problems plaguing the industry: declining movie attendance and an apparent plateau in DVD sales.
Theater owners lashed back at Mr. Iger in a sharp public statement, blaming bad movies for Hollywood's problems.
"If the entire industry went to a simultaneous release, that would mean fewer movies, fewer movie theaters, and consumers will have fewer choices," says John Fithian, president of the National Association of Theater Owners.
In an email to senior Disney studio executives in August, Mr. Iger apologized for "creating a controversy or for making your lives tougher," but he showed no inclination to back down. "The message I want to send internally is that we must ask the right questions about current business conditions, and we have to be innovative and willing to test new ideas and new strategies, even if there is some risk associated with them."
Disney Studios Chairman ________ Cook recently presided over a debate among senior executives about new business models, people familiar with the matter say. The group agreed that Disney needed to investigate industry changes in greater depth.
Disney's movie studio is leading an effort to push another change on theater owners: digital distribution of movies. Disney and other studios stand to save some $1 billion a year in film print and distribution costs. But theater owners have less incentive to go digital. They question, for example, whether improved digital picture quality will bring more people to the movies.
Consequently, Disney and other studios may have to bear the brunt of the cost of installing digital equipment in theaters, estimated at $80,000 to $100,000 per auditorium. Disney recently made a deal with two digital cinema companies to help finance the rollout of equipment to theaters, the first such agreement to emerge. Disney also has been in negotiations, along with other major studios, for a similar financing deal with Thomson SA's Thomson Technicolor film processing unit, according to people familiar with the situation.
This year, Disney is also investing heavily in two new cellphone services: one for sports fans based on the ESPN brand, the other a Disney-branded service for families. The planned ESPN service will feature a branded phone that will deliver sports scores, video clips and headlines. Disney plans to operate the two services by renting telephone time from Sprint Nextel Corp. Steve Wadsworth, President of Disney's Internet Group, predicts they will have a "significant impact in the next four to five years."
Disney executives also have been debating whether to join the media industry's rush to buy Internet properties. During one conference call, staffers were asked to suggest online properties Disney should be looking at. Disney flopped in its efforts in the 1990s to compete with Internet giants like Yahoo Inc., and remains cautious about major online acquisitions. Mr. Wadsworth says valuations are too high for now.
Another popular debate inside Disney executive suites has been whether the company should buy a major videogame publisher to bulk up in what has become a $25 billion industry. Disney is currently a modest player with videogame revenue estimated at about $150 million. After an early gaming foray went awry, Disney is turning to outside experts and has bought several small game developers.
Mr. Iger knows that if Disney wants to become a serious player, it must reach out to adult gamers who have little interest in Disney's traditional family fare. These days, adult players outnumber kids.
At a meeting this year, Disney's head of videogames, Graham Hopper, proposed a handful of videogames to Mr. Iger, including a dinosaur-hunting game called "Turok." After getting a dose of the shooting and killing contained in early footage, Mr. Iger sat back and breathed deeply, according to one person who was there. Disney had never before released a "first-person shooter" game. Turok calls for the player to gather weapons and kill evil dinosaurs and reptiles.
Mr. Iger recalled for Mr. Hooper that when he was running ABC Television years earlier, he had similarly agonized before deciding to green-light "NYPD Blue," which was then considered a racy show for network television. Mr. Iger decided a similar move was in order. "Let's do Turok," he told Mr. Hooper.
The game is edgier than anything Disney has done before and is likely to carry an "M" rating for mature audiences. But Mr. Iger says that Disney will not venture into the violent and graphic territory of games such as "Grand Theft Auto." The victims in Turok are not human, he reasons, and there is not much blood when they are killed. Nevertheless, it will not carry the Disney brand name.
"I can support fare on the edgy side so long as it's high quality," says Mr. Iger. "That needs to be the Disney approach." He hastens to add that the focus for the gaming business, and the entire company, must remain Disney-branded family fare that can be spun across the empire. "You're never going to see a Turok attraction in one of the theme parks," he says.
Write to Merissa Marr at merissa.marr@wsj.com
In Shakeup, Disney Rethinks How It Reaches Audiences
Iger Seeks High-Tech Delivery Of Movies, TV Shows; Theater Owners Worry
'Housewives' on a Handheld
By MERISSA MARR
Staff Reporter of THE WALL STREET JOURNAL
October 1, 2005; Page A1
Robert Iger, who takes over today as Walt Disney Co.'s chief executive, is shaking up the Magic Kingdom by pushing a mandate for the digital age: Consumers must be able to use Disney content whenever and wherever they want it.
Mr. Iger is talking about selling episodes of ABC hits such as "Lost" and "Desperate Housewives" online like songs. He is roiling the movie-theater industry by publicly floating the idea of releasing movies in cinemas and on DVD at the same time. He is negotiating with telecom companies about ways to deliver entertainment over cellphones.
Mr. Iger, who succeeds 21-year incumbent Michael Eisner, faces enormous challenges as he rethinks Disney's business model. The anytime/anywhere strategy threatens to erode traditional revenue from theaters, DVDs and broadcast television and presents new risks of high-tech piracy.
The 54-year-old executive inherits a company whose old way of doing business has been blown up by technology. Legal technologies such as fancy home theaters and digital video recorders are driving down movie attendance and sapping TV ad sales. Piracy is eating into entertainment sales at home and abroad. And Disney has lagged in rapidly growing areas like videogames that have become popular with young consumers.
Media moguls have struggled unsuccessfully with these questions for the last decade. Disney's track record of adapting to new technologies is mixed at best, but Mr. Iger is under pressure to devise new ways to drive growth. Its core businesses -- movies, TV, theme parks and consumer products -- are mature, and even when performing well, are hit-driven. Disney's stock, clouded by the threat of piracy and the uncertainty over new digital media, has dropped more than 12% since Mr. Iger was named to succeed Mr. Eisner in March.
Under Mr. Eisner, Disney took a more conservative approach to the burgeoning digital media world, intent on protecting such traditional revenue engines as advertising and home video. Mr. Iger believes Disney's future still lies in its entertainment content, but he wants the company to move to deliver it in new ways, in spite of the short-term turmoil it might bring.
"If we sit back and rely on old technology, the consumer is going to pass us by," Mr. Iger says, noting that the music industry made that mistake. "It's extremely important as I enter this new role that I not let that happen to the Walt Disney Co. We're not a technology company, but we need to be the closest thing to that."
Mr. Iger says his biggest obstacle may be the business habits of Disney's own employees and of theater owners, mass retailers, television affiliates and others. "We need to create an atmosphere that tolerates experimentation, even if it's at the expense of near-term economics," he said during a recent trip to open the new Hong Kong Disneyland.
Having risen from a job as a TV weatherman to head of Disney's ABC network, Mr. Iger sees television networks as being at particular risk from new technology. Some viewers today watch video clips on cellphones and use digital recorders that skip ads. Others watch entire seasons of a TV series on DVD, missing advertising altogether.
These developments are shifting control to viewers, forcing Disney to think beyond the 30-second ad. So even though Disney's television unit is posting strong results, Mr. Iger is examining new delivery models.
Among the ideas being discussed at Disney's headquarters: Selling hit television shows online, perhaps for use on portable video devices. That may include providing shows for devices like an iPod that would play video -- something that Apple Computer Inc. could announce by the end of the year, people familiar with the situation say.
One of Mr. Iger's top lieutenants, Disney-ABC Television Group President Anne Sweeney, recently handed out to her staff Sony's PSP portable video and games devices, loaded with programming such as the teen TV show "That's So Raven," "ABC News," and the movie "Pirates of the Caribbean." She wanted them to see what their shows looked like playing on a smaller screen.
Soon, she says, staffers were discussing fundamental change. Should shows that might prove popular on such devices be shortened? Should certain camera angles be emphasized? Would different promotional techniques be warranted?
"In the future, there will be a percentage of people who only receive our content on devices other than television sets," predicts Ms. Sweeney, who is about to appoint a new executive to lead the division's digital efforts.
The push into new technologies means Disney has to worry more about the growing problem of unauthorized digital copies. Mr. Iger recently had discussions with Ivan Seidenberg, chief executive of Verizon Communications Inc., about a programming deal for Verizon's online services and nascent television operation. Before cutting the deal, Mr. Iger insisted on a provision that requires Verizon to send warnings to its broadband customers identified by Disney as unauthorized copiers of Disney content. The provision was significant because Verizon, intent on protecting the privacy of its customers, had balked at demands made by the music industry in its effort to battle piracy.
On a Disney conference call with analysts in August, Mr. Iger suggested that the movie industry also needed to rethink its business model by narrowing, or even eliminating, the gap between a movie's theatrical release and its availability on DVD or pay-per-view. His suggestion took aim at two problems plaguing the industry: declining movie attendance and an apparent plateau in DVD sales.
Theater owners lashed back at Mr. Iger in a sharp public statement, blaming bad movies for Hollywood's problems.
"If the entire industry went to a simultaneous release, that would mean fewer movies, fewer movie theaters, and consumers will have fewer choices," says John Fithian, president of the National Association of Theater Owners.
In an email to senior Disney studio executives in August, Mr. Iger apologized for "creating a controversy or for making your lives tougher," but he showed no inclination to back down. "The message I want to send internally is that we must ask the right questions about current business conditions, and we have to be innovative and willing to test new ideas and new strategies, even if there is some risk associated with them."
Disney Studios Chairman ________ Cook recently presided over a debate among senior executives about new business models, people familiar with the matter say. The group agreed that Disney needed to investigate industry changes in greater depth.
Disney's movie studio is leading an effort to push another change on theater owners: digital distribution of movies. Disney and other studios stand to save some $1 billion a year in film print and distribution costs. But theater owners have less incentive to go digital. They question, for example, whether improved digital picture quality will bring more people to the movies.
Consequently, Disney and other studios may have to bear the brunt of the cost of installing digital equipment in theaters, estimated at $80,000 to $100,000 per auditorium. Disney recently made a deal with two digital cinema companies to help finance the rollout of equipment to theaters, the first such agreement to emerge. Disney also has been in negotiations, along with other major studios, for a similar financing deal with Thomson SA's Thomson Technicolor film processing unit, according to people familiar with the situation.
This year, Disney is also investing heavily in two new cellphone services: one for sports fans based on the ESPN brand, the other a Disney-branded service for families. The planned ESPN service will feature a branded phone that will deliver sports scores, video clips and headlines. Disney plans to operate the two services by renting telephone time from Sprint Nextel Corp. Steve Wadsworth, President of Disney's Internet Group, predicts they will have a "significant impact in the next four to five years."
Disney executives also have been debating whether to join the media industry's rush to buy Internet properties. During one conference call, staffers were asked to suggest online properties Disney should be looking at. Disney flopped in its efforts in the 1990s to compete with Internet giants like Yahoo Inc., and remains cautious about major online acquisitions. Mr. Wadsworth says valuations are too high for now.
Another popular debate inside Disney executive suites has been whether the company should buy a major videogame publisher to bulk up in what has become a $25 billion industry. Disney is currently a modest player with videogame revenue estimated at about $150 million. After an early gaming foray went awry, Disney is turning to outside experts and has bought several small game developers.
Mr. Iger knows that if Disney wants to become a serious player, it must reach out to adult gamers who have little interest in Disney's traditional family fare. These days, adult players outnumber kids.
At a meeting this year, Disney's head of videogames, Graham Hopper, proposed a handful of videogames to Mr. Iger, including a dinosaur-hunting game called "Turok." After getting a dose of the shooting and killing contained in early footage, Mr. Iger sat back and breathed deeply, according to one person who was there. Disney had never before released a "first-person shooter" game. Turok calls for the player to gather weapons and kill evil dinosaurs and reptiles.
Mr. Iger recalled for Mr. Hooper that when he was running ABC Television years earlier, he had similarly agonized before deciding to green-light "NYPD Blue," which was then considered a racy show for network television. Mr. Iger decided a similar move was in order. "Let's do Turok," he told Mr. Hooper.
The game is edgier than anything Disney has done before and is likely to carry an "M" rating for mature audiences. But Mr. Iger says that Disney will not venture into the violent and graphic territory of games such as "Grand Theft Auto." The victims in Turok are not human, he reasons, and there is not much blood when they are killed. Nevertheless, it will not carry the Disney brand name.
"I can support fare on the edgy side so long as it's high quality," says Mr. Iger. "That needs to be the Disney approach." He hastens to add that the focus for the gaming business, and the entire company, must remain Disney-branded family fare that can be spun across the empire. "You're never going to see a Turok attraction in one of the theme parks," he says.
Write to Merissa Marr at merissa.marr@wsj.com
