The New York Times
August 15, 2005
<NYT_HEADLINE type=" " version="1.0">Next Disney Chief Plans Company's Transformation
</NYT_HEADLINE><NYT_BYLINE type=" " version="1.0">By LAURA M. HOLSON
</NYT_BYLINE><NYT_TEXT>LOS ANGELES, Aug. 14 - Robert A. Iger does not officially get the keys to the Disney castle for another six weeks, but he is already well along with his restoration plan.
Mr. Iger, the 54-year-old president of the Walt Disney Company, becomes chief executive on Oct. 1 as the handpicked successor to Michael D. Eisner, who ran the corporation with skillful determination for 21 years but has more recently reigned over a troubled kingdom.
When a Delaware judge last week upheld Disney's $140 million severance package granted to Michael S. Ovitz in 1996, after only 14 months as president, it closed one of the last pieces of unfinished, unflattering business from the Eisner era.
Mr. Iger, though, has not been waiting for judges or anyone else to fix problems that festered on Mr. Eisner's watch.
In March, less than two weeks after the board approved his nomination to become chief executive, Mr. Iger dismantled the company's corporate strategic planning group, giving the heads of the film, television, theme park and other divisions the freedom they had long sought to run their own businesses.
In April Mr. Iger traveled to Northern California to sit down with Steven P. Jobs, the chief executive of Pixar Animation Studios, whose years of feuding with Mr. Eisner had threatened the future of the companies' mutually lucrative movie distribution partnership.
And in July Mr. Iger negotiated a truce with Roy E. Disney, a dissident former board member and nephew of Walt Disney, who helped lead a shareholder uprising last year that diminished Mr. Eisner's power and led in part to his decision to retire.
"If anyone had a list of things for Bob to do right away it would be these; figuring out the Roy thing and, at the end of the day, seeing that Pixar and Disney should be partners," said Lawrence J. Haverty, associate portfolio manager of the Gabelli Global Multimedia Trust and an investor in Disney stock. "What Bob has to do now is execute the obvious, brilliantly."
For his part, Mr. Iger, who has been Disney president for five years, credits Mr. Eisner for letting him start exercising the prerogatives of chief executive even before holding the job. "Not only did he stand down and get out of the way, but he supported me all along," said Mr. Iger in an interview late Friday night. "Michael has been exceptional in how he handled this transition."
Only a year ago, few in Hollywood or on Wall Street considered Mr. Iger the right man to succeed Mr. Eisner. The main criticism was that he lacked the corporate gravitas to lead Disney, despite having been the heir apparent at Capital Cities/ABC when Disney bought it in 1996.
But his accomplishments in corporate diplomacy in recent months are quieting such criticism. So is the company's financial resurgence, spurred in part by the revival of the ABC television network; Mr. Iger said a few years ago that he was taking personal responsibility for fixing that business.
On the strength of new hit shows like "Desperate Housewives" and "Lost," ABC's operating income surged in the quarterly results announced last week, when Disney reported an overall gain of 41 percent in profit for its fiscal third quarter, to $851 million, on revenue of $7.72 billion.
Many had assumed, even feared, that Mr. Eisner would not cede power easily after two decades. Mr. Eisner became Disney's chairman and chief executive at age 42 after being passed over for the chairmanship of Paramount Pictures. Under him, Disney resurrected its animation business, extended its reach into cable television and onto Broadway and grew to about 117,000 employees worldwide from 28,000.
But in the mid-1990's, the stock price and profits slumped. Disney made expensive acquisitions, including the ABC Family channel and the ABC television network, which was a money-loser for years. And Mr. Eisner was criticized for alienating top executives, most notably Jeffrey Katzenberg, who angrily departed in 1994 after overseeing a string of animated hits like "Beauty and the Beast," "Aladdin" and "The Lion King."
There was also the debacle with Mr. Ovitz, the powerful Hollywood talent agent in whom Mr. Eisner lost confidence only months after hiring him as president. In more recent years, shareholders lost confidence in Mr. Eisner.
But to the surprise of his detractors, Mr. Eisner has given Mr. Iger considerable leeway. "I wanted Bob to get on with it and start running the company as soon as possible," Mr. Eisner said in an interview on Saturday. "I'm glad the unnecessary distractions are over."
One distraction, still not fully resolved, is Disney's fractured relationship with Pixar, the maker of "Toy Story" and "Finding Nemo."
Last year, after a standoff lasting for months between Mr. Jobs and Mr. Eisner, Pixar said it would end talks on continuing its 14-year partnership with Disney and seek another studio to distribute its films in 2006.
Disney did not like the terms Pixar was demanding, but there was also unresolved tension over whether Pixar sequels could count toward the number of movies Disney was owed under the existing agreement. (Mr. Jobs wanted them to count, while Mr. Eisner said they would not.)
On April 8, Mr. Iger flew to Pixar headquarters in Emeryville, Calif., where he met the company's animators, toured the office and had lunch with Mr. Jobs. He followed up with a second visit in May. "I wanted to make the connection myself," Mr. Iger said. "I hadn't had one."
Since then, Mr. Jobs's anti-Disney rhetoric has softened and he has praised Mr. Iger during Pixar's earnings conference calls. Most important, the two have resumed talks about a potential deal, with Mr. Jobs saying he wants to name a distribution partner - Disney or not - by the end of the year.
"The one thing I know about Bob and Steve, they will do what's best for their companies," Mr. Eisner said. "Look, divorce is never good for the children. It's good for these companies to be having talks."
There was another Eisner feud that Mr. Iger needed to address. For two years, Mr. Disney and another former board member, Stanley P. Gold, had publicly complained about what they considered Mr. Eisner's autocratic management style. In 2004 the two rallied shareholders to revolt against Mr. Eisner, resulting in his being stripped of his chairman's title. Disney, like a growing number of companies, now has a nonexecutive chairman, George J. Mitchell, a former United States senator, who said he would resign next year.
The Disney-Gold revolt also led in part to Mr. Eisner's decision not to seek an extension of his contract after it expires in September.
But the battle had been costly for both sides. Mr. Disney and his family spent tens of millions of dollars on the fight. And it took a heavy toll on Disney's executive team, which was distracted from running the company. So on May 6, Mr. Iger met Mr. Disney for an awkward lunch in a Burbank restaurant, according to three people who were apprised of the discussions but declined to be named, citing the sensitive nature of the talks. Mr. Disney declined to comment for this article.
Mr. Iger, citing a confidentiality agreement, declined to discuss the lunch except to say: "Roy called me first. I was motivated on behalf of the company to settle the differences."
Nothing was resolved. Instead, the next Monday, Mr. Disney and Mr. Gold filed a lawsuit in Delaware Chancery Court, demanding that the most recent Disney board election be voided and contending that the board did not conduct a thorough search for Mr. Eisner's successor when it gave Mr. Iger the job. Mr. Iger was upset, said two of the three people who were briefed on the meeting. And some investors questioned why Mr. Disney and Mr. Gold would sue, given that their unhappiness was largely with the departing Mr. Eisner.
The company's relations with the former directors remained frosty - so much so that Mr. Disney was not sent an invitation to the 50th anniversary celebration of Disneyland on July 17, according to two of the people.
In early June the Delaware judge allowed the case to proceed. By now, though, neither side was thrilled at the prospect of another legal fight. So Mr. Iger and Mr. Disney met again. After weeks of negotiations the two sides announced a truce on July 11.
Mr. Disney and Mr. Gold agreed to drop their lawsuit. In return, Mr. Disney was given the largely ceremonial title of director emeritus, with no voting power or board responsibilities, and allowed to serve as a consultant.
Mr. Iger said he had been worried that negotiating with Mr. Disney "would be disrespectful to Michael." Instead, Mr. Eisner "helped make it happen," Mr. Iger said.
"He didn't allow his personal feeling or the perception that 'he couldn't get it done and I could' get in the way," Mr. Iger said. "If it was settled, my tenure as C.E.O. would be better."
Mr. Iger's success, of course, will be gauged by more than how well he rebuilds Mr. Eisner's broken bridges. Now he will be judged on how well he handles other important issues, such as ensuring that the ABC network continues its successful rebound, expanding Disney's international operations and rebuilding the in-house animation business.
"Strong future performance is dependent on Mr. Iger's ability to be a head coach rather than a star player," the Morgan Stanley media analyst Richard Bilotti wrote in a research report after Mr. Iger was named to the chief executive's post. "The complexity of realizing growth from media assets, an issue faced by all media conglomerates, is the more daunting task."
In the last several months Mr. Iger has traveled several times to Asia - including China, India, Vietnam and Hong Kong. Asia is a top priority for Disney. The company is set to open its newest park, Hong Kong Disneyland, on Sept. 12, and Mr. Iger sees the entire region as one of Disney's main growth opportunities.
More than a year ago Disney's consumer products division began to open small boutiques within Chinese department stores to promote and sell its popular Princess line of dolls, costumes and toys. And just last week Disney announced that "Desperate Housewives" would be carried in China this fall.
The greater challenge for Mr. Iger may be reviving Disney's animation business, which has ceded the field it long dominated to DreamWorks Animation and Pixar. This fall Disney will release "Chicken Little," the first market test of the talents of Disney's newly renovated computer animation division.
But after months of diplomatic damage control, Mr. Iger seems more than happy to concentrate on the company's creative challenges. "With some of these things resolved," he said, "we can now focus on the internal issues."
</NYT_TEXT>
August 15, 2005
<NYT_HEADLINE type=" " version="1.0">Next Disney Chief Plans Company's Transformation
</NYT_HEADLINE><NYT_BYLINE type=" " version="1.0">By LAURA M. HOLSON
</NYT_BYLINE><NYT_TEXT>LOS ANGELES, Aug. 14 - Robert A. Iger does not officially get the keys to the Disney castle for another six weeks, but he is already well along with his restoration plan.
Mr. Iger, the 54-year-old president of the Walt Disney Company, becomes chief executive on Oct. 1 as the handpicked successor to Michael D. Eisner, who ran the corporation with skillful determination for 21 years but has more recently reigned over a troubled kingdom.
When a Delaware judge last week upheld Disney's $140 million severance package granted to Michael S. Ovitz in 1996, after only 14 months as president, it closed one of the last pieces of unfinished, unflattering business from the Eisner era.
Mr. Iger, though, has not been waiting for judges or anyone else to fix problems that festered on Mr. Eisner's watch.
In March, less than two weeks after the board approved his nomination to become chief executive, Mr. Iger dismantled the company's corporate strategic planning group, giving the heads of the film, television, theme park and other divisions the freedom they had long sought to run their own businesses.
In April Mr. Iger traveled to Northern California to sit down with Steven P. Jobs, the chief executive of Pixar Animation Studios, whose years of feuding with Mr. Eisner had threatened the future of the companies' mutually lucrative movie distribution partnership.
And in July Mr. Iger negotiated a truce with Roy E. Disney, a dissident former board member and nephew of Walt Disney, who helped lead a shareholder uprising last year that diminished Mr. Eisner's power and led in part to his decision to retire.
"If anyone had a list of things for Bob to do right away it would be these; figuring out the Roy thing and, at the end of the day, seeing that Pixar and Disney should be partners," said Lawrence J. Haverty, associate portfolio manager of the Gabelli Global Multimedia Trust and an investor in Disney stock. "What Bob has to do now is execute the obvious, brilliantly."
For his part, Mr. Iger, who has been Disney president for five years, credits Mr. Eisner for letting him start exercising the prerogatives of chief executive even before holding the job. "Not only did he stand down and get out of the way, but he supported me all along," said Mr. Iger in an interview late Friday night. "Michael has been exceptional in how he handled this transition."
Only a year ago, few in Hollywood or on Wall Street considered Mr. Iger the right man to succeed Mr. Eisner. The main criticism was that he lacked the corporate gravitas to lead Disney, despite having been the heir apparent at Capital Cities/ABC when Disney bought it in 1996.
But his accomplishments in corporate diplomacy in recent months are quieting such criticism. So is the company's financial resurgence, spurred in part by the revival of the ABC television network; Mr. Iger said a few years ago that he was taking personal responsibility for fixing that business.
On the strength of new hit shows like "Desperate Housewives" and "Lost," ABC's operating income surged in the quarterly results announced last week, when Disney reported an overall gain of 41 percent in profit for its fiscal third quarter, to $851 million, on revenue of $7.72 billion.
Many had assumed, even feared, that Mr. Eisner would not cede power easily after two decades. Mr. Eisner became Disney's chairman and chief executive at age 42 after being passed over for the chairmanship of Paramount Pictures. Under him, Disney resurrected its animation business, extended its reach into cable television and onto Broadway and grew to about 117,000 employees worldwide from 28,000.
But in the mid-1990's, the stock price and profits slumped. Disney made expensive acquisitions, including the ABC Family channel and the ABC television network, which was a money-loser for years. And Mr. Eisner was criticized for alienating top executives, most notably Jeffrey Katzenberg, who angrily departed in 1994 after overseeing a string of animated hits like "Beauty and the Beast," "Aladdin" and "The Lion King."
There was also the debacle with Mr. Ovitz, the powerful Hollywood talent agent in whom Mr. Eisner lost confidence only months after hiring him as president. In more recent years, shareholders lost confidence in Mr. Eisner.
But to the surprise of his detractors, Mr. Eisner has given Mr. Iger considerable leeway. "I wanted Bob to get on with it and start running the company as soon as possible," Mr. Eisner said in an interview on Saturday. "I'm glad the unnecessary distractions are over."
One distraction, still not fully resolved, is Disney's fractured relationship with Pixar, the maker of "Toy Story" and "Finding Nemo."
Last year, after a standoff lasting for months between Mr. Jobs and Mr. Eisner, Pixar said it would end talks on continuing its 14-year partnership with Disney and seek another studio to distribute its films in 2006.
Disney did not like the terms Pixar was demanding, but there was also unresolved tension over whether Pixar sequels could count toward the number of movies Disney was owed under the existing agreement. (Mr. Jobs wanted them to count, while Mr. Eisner said they would not.)
On April 8, Mr. Iger flew to Pixar headquarters in Emeryville, Calif., where he met the company's animators, toured the office and had lunch with Mr. Jobs. He followed up with a second visit in May. "I wanted to make the connection myself," Mr. Iger said. "I hadn't had one."
Since then, Mr. Jobs's anti-Disney rhetoric has softened and he has praised Mr. Iger during Pixar's earnings conference calls. Most important, the two have resumed talks about a potential deal, with Mr. Jobs saying he wants to name a distribution partner - Disney or not - by the end of the year.
"The one thing I know about Bob and Steve, they will do what's best for their companies," Mr. Eisner said. "Look, divorce is never good for the children. It's good for these companies to be having talks."
There was another Eisner feud that Mr. Iger needed to address. For two years, Mr. Disney and another former board member, Stanley P. Gold, had publicly complained about what they considered Mr. Eisner's autocratic management style. In 2004 the two rallied shareholders to revolt against Mr. Eisner, resulting in his being stripped of his chairman's title. Disney, like a growing number of companies, now has a nonexecutive chairman, George J. Mitchell, a former United States senator, who said he would resign next year.
The Disney-Gold revolt also led in part to Mr. Eisner's decision not to seek an extension of his contract after it expires in September.
But the battle had been costly for both sides. Mr. Disney and his family spent tens of millions of dollars on the fight. And it took a heavy toll on Disney's executive team, which was distracted from running the company. So on May 6, Mr. Iger met Mr. Disney for an awkward lunch in a Burbank restaurant, according to three people who were apprised of the discussions but declined to be named, citing the sensitive nature of the talks. Mr. Disney declined to comment for this article.
Mr. Iger, citing a confidentiality agreement, declined to discuss the lunch except to say: "Roy called me first. I was motivated on behalf of the company to settle the differences."
Nothing was resolved. Instead, the next Monday, Mr. Disney and Mr. Gold filed a lawsuit in Delaware Chancery Court, demanding that the most recent Disney board election be voided and contending that the board did not conduct a thorough search for Mr. Eisner's successor when it gave Mr. Iger the job. Mr. Iger was upset, said two of the three people who were briefed on the meeting. And some investors questioned why Mr. Disney and Mr. Gold would sue, given that their unhappiness was largely with the departing Mr. Eisner.
The company's relations with the former directors remained frosty - so much so that Mr. Disney was not sent an invitation to the 50th anniversary celebration of Disneyland on July 17, according to two of the people.
In early June the Delaware judge allowed the case to proceed. By now, though, neither side was thrilled at the prospect of another legal fight. So Mr. Iger and Mr. Disney met again. After weeks of negotiations the two sides announced a truce on July 11.
Mr. Disney and Mr. Gold agreed to drop their lawsuit. In return, Mr. Disney was given the largely ceremonial title of director emeritus, with no voting power or board responsibilities, and allowed to serve as a consultant.
Mr. Iger said he had been worried that negotiating with Mr. Disney "would be disrespectful to Michael." Instead, Mr. Eisner "helped make it happen," Mr. Iger said.
"He didn't allow his personal feeling or the perception that 'he couldn't get it done and I could' get in the way," Mr. Iger said. "If it was settled, my tenure as C.E.O. would be better."
Mr. Iger's success, of course, will be gauged by more than how well he rebuilds Mr. Eisner's broken bridges. Now he will be judged on how well he handles other important issues, such as ensuring that the ABC network continues its successful rebound, expanding Disney's international operations and rebuilding the in-house animation business.
"Strong future performance is dependent on Mr. Iger's ability to be a head coach rather than a star player," the Morgan Stanley media analyst Richard Bilotti wrote in a research report after Mr. Iger was named to the chief executive's post. "The complexity of realizing growth from media assets, an issue faced by all media conglomerates, is the more daunting task."
In the last several months Mr. Iger has traveled several times to Asia - including China, India, Vietnam and Hong Kong. Asia is a top priority for Disney. The company is set to open its newest park, Hong Kong Disneyland, on Sept. 12, and Mr. Iger sees the entire region as one of Disney's main growth opportunities.
More than a year ago Disney's consumer products division began to open small boutiques within Chinese department stores to promote and sell its popular Princess line of dolls, costumes and toys. And just last week Disney announced that "Desperate Housewives" would be carried in China this fall.
The greater challenge for Mr. Iger may be reviving Disney's animation business, which has ceded the field it long dominated to DreamWorks Animation and Pixar. This fall Disney will release "Chicken Little," the first market test of the talents of Disney's newly renovated computer animation division.
But after months of diplomatic damage control, Mr. Iger seems more than happy to concentrate on the company's creative challenges. "With some of these things resolved," he said, "we can now focus on the internal issues."
</NYT_TEXT>
