This is a long article, but trust me, it’s worth the read. Not only is it one of the best biographies of Robert Iger, it also does a very good job of summarizing his plans and strategy for the Walt Disney company.
Bob Iger is inside the Royal Festival Hall in London on a September afternoon, geeking out with some young guys about two of his favorite things: tunes and technology. The CEO of Walt Disney Co. pulls out his iPhone and thumbs through his playlists, looking for a particular live U2 track from an Italian concert. Briefly the conversation is drowned out by the squeals of teen girls standing behind a nearby barricade of security guards and velvet ropes. “They’re screaming for me,” Iger says, glancing up.
He’s joking, well aware that they’re really screaming for his companions: Kevin, Joe, and Nick Jonas, a.k.a. the Jonas Brothers. The collectible-lunchbox-cute trio, with a median age of 18, are pop heartthrobs who a few weeks earlier became the first musical act ever to occupy three spots in the Billboard top-ten album chart in a single week.
They’re in London to promote their Disney Channel TV movie “Camp Rock.” And Iger is there – along with requisite Mickey and Minnie mascots working the red carpet outside.
Not only do the Jonas Brothers sell bushels of CDs and downloads via Disney’s Hollywood Records label; in the past year they have performed live before more than a million people, were fixtures on Radio Disney, released a book via Disney-owned Hyperion that has already sold 750,000 copies, and are preparing to star in a Disney feature film. On the Disney Channel, their own show is scheduled to debut in the spring. Action figures, T-shirts, throw pillows, and sheet sets are just the beginnings of the retail onslaught.
The Jonas Brothers neatly fit Disney’s tween machine: They are polite, reputedly abstinent boys, whose father is a musician and former pastor and whose mother is a former singer-actress. On the other hand, as their father, Kevin, 43, points out, “they are not characters” – his boys were not “imagineered” in any Disney product lab; they’ve been playing and writing their own music for years. (Rolling Stone called their latest release “as assured as any American rock album released in 2008.”)
Just two years ago the boys were signed to Sony’s (SNY) Columbia label and playing mostly to friends. The breakout stardom and screaming girls and the private jet across the pond would not have been possible, their father says, without Disney. “This is the natural place for them to be,” he says.
The Jonases are emblematic of a creative and financial revival at the Magic Kingdom that has taken place over the roughly three years since Iger became CEO. Against long odds, Disney (DIS, Fortune 500) is back at the head of a frazzled and uncertain bunch, the fraternity of media conglomerates. In revitalizing the company, Iger has built a compelling case that integrated, cross-platform leviathans like his still make sense in the Digital Age. Who knew?
Seismic shift
A lot of what’s new comes from two big and related strategic changes Iger has made at Disney, and the way he has managed the business. One was his subtle but seismic decision to refocus the company and most of its more than 150,000 employees around its roster of “franchises,” like the Jonas Brothers – Iger defines a franchise as “something that creates value across multiple businesses and across multiple territories over a long period of time.”
The second change was unsubtle: Just days into Iger’s new job, Disney acquired Pixar Films, bringing Apple’s (AAPL, Fortune 500) Steve Jobs onto the company’s board in the process. In recent weeks these moves have contributed to a string of hits at the box office, including “High School Musical,” “Beverly Hills Chihuahua,” and the animated “Bolt.”
The Disney Channel, which has emerged as a centerpiece of the company’s strategy, is expected to finish 2008 as the second-most-watched cable channel in primetime. For the third straight year it was first or second and the leader among small kids and tweens.
Meanwhile, Disney has been touting Pixar’s – sorry, Disney Pixar’s – “Wall-E” as a Best Picture contender for the Academy Awards. Should “Wall-E” prevail, it would be the first time Hollywood’s top honor went to an animated film, not to mention to a picture released under the Disney name.
In home video, the company released “Tinkerbell” in October, the first of five DVD films that are part of its new “Fairies” franchise, which, following the success of its “Princesses,” has elaborate publishing, online, and consumer products offshoots. (Check out Disney Clickables Fairy Charms, a new line of bracelet toys. When one wearer’s charm is held up to another’s, both people become fairy friends in Pixie Hollow, a virtual world for the more than 7.5 million fans who had created their own fairy avatars before Tinkerbell or Clickables even hit the streets.)
There is more to Disney, of course, than Disney. It counts ABC and part-ownership of cable channels Lifetime and A&E among its assets. Sports juggernaut ESPN – 80% owned by Disney – is estimated by Doug Mitchelson of Deutsche Bank to have generated around one-third of the company’s $8.4 billion in 2008 operating income.
But what Iger has done, as Andy Mooney, head of Disney’s consumer products business, puts it, is “widen the aperture” of one of the world’s most valuable brands. A decade ago the Mickey Mouse and Winnie-the-Pooh franchises accounted for 80% of the company’s consumer products business; today it’s closer to 50%. You can still buy a $1 Disney T-shirt at Wal-Mart (WMT, Fortune 500), but a Mickey Mouse T-shirt from Dolce & Gabbana sells for $1,400. There’s even a posh Four Seasons hotel under construction at Disney World.
And when it comes to overseas growth – the perennial holy grail for U.S. media firms – Iger has put creative executives on the ground in Russia, China, India, and elsewhere with the aim of producing, for the first time, original, local-language movies under the Disney name.
So far it’s working. Over the past three years Disney, which ranked 67th on the Fortune 500 last year, cruised to the head of the media pack in terms of both its stock performance and its return on invested capital. Even after losing 30% of its value in the past six months amid the financial blowout, Disney has held up better than the S&P 500 and rivals like Time Warner (TWX, Fortune 500) and News Corp (NWS, Fortune 500). Under Iger, who turns 58 in February, Disney has become the world’s largest media conglomerate by market value, worth around $40 billion.
There is so much of what Iger calls the “Disney difference” in the company’s stock price that some wonder if its premium is sustainable. Analyst Michael Nathanson at Sanford Bernstein noted that by late December, Disney’s trading multiple, based on forecast 2009 earnings, had “ballooned” to 9% above the S&P’s and more than 70% above those of its media-conglomerate peers, “the widest margin in recent history.” He thinks either Disney needs to start trading down or the rest need to start trading up.
And even at these levels, Disney stock is now slightly below where it was when Iger took over (he has two million options likely to expire worthless in February). As he put it to his European management team in a strategy meeting hours before joining the Jonas Brothers: “Unfortunately, all this success creates the ever-greater demand for more success.”
Between the impact of the economic crisis on tourism and the digital upheaval in the media business, the headwinds now are no less intimidating than those young Walt Disney faced when his first Mickey Mouse cartoon, “Steamboat Willie,” debuted in 1928. Even so, Iger says, “We felt like we were the last to feel the pain, and we think we could be the first to heal.”
Under the radar
It ’s hard to overstate what a surprise Iger’s early impact as Disney’s CEO has been. A hard-working and likable hand who had been in the media business for more than three decades, Iger had no big claim to fame when he took the top job, having dwelled largely in the shadow of his boss, Michael Eisner.
Eisner’s run as Disney CEO is an oft-told tale: In the 1980s and early ’90s he was credited with reviving an American icon, and in the mid-’90s he smartly acquired Capital Cities/ABC, tacking ESPN and a broadcast TV network onto the company’s film and theme park businesses. But his later years saw a feud with board members, management chaos, and an unwanted takeover bid from Comcast.
Eisner ran hot and cold on his top people, so it was unclear to anyone – even to Iger – what the succession plan would be. But when Eisner resigned, he did recommend Iger and the board eventually agreed – news that was received coolly by some investors. “There were many naysayers,” recalls one. “People would call him ‘mini-Eisner,’ his yes man.”
Iger says the criticism didn’t get to him. “I don’t know that I was necessarily on a mission to prove people wrong,” he says. “But I wanted very much to exceed expectations.”
Iger grew up middle-class in a housing development on Long Island, N.Y., where his father, a jazz trumpeter, worked in advertising and publishing, and his mother tended to Bob and a younger sister. He remembers watching the “Mickey Mouse Club” and wearing his coonskin cap from Disney’s “Davy Crockett”show. “A couple of years ago I downloaded the Davy Crockett theme song onto my iPod and thought, ‘Wow, have I come a long way,’ ” he says.
Graduating from Ithaca College, he aspired to be a news anchor and worked briefly as a weatherman, but in 1974 he joined ABC as a low-level production supervisor. He earned his stripes working under ABC Sports legend Roone Arledge and rose quickly through the company’s ranks. As its entertainment chief, he greenlighted the longest-running program on ABC to this day – “America’s Funniest Home Videos.”
In 1994, Iger’s career took a turn that might shed light on his quiet readiness for his current job: He was named president of Cap Cities/ABC by its longtime leader, Thomas Murphy. Warren Buffett, whose Berkshire Hathaway was the largest investor in the company, once called Murphy “the top manager in the U.S.,” and Iger was his protégé.
In naming him president, Murphy informed Iger that he planned to retire, and that Iger, then 44, would succeed him. “That would have been the plan,” recalls Murphy. But before that could happen, Eisner made a $19 billion offer for the company that it could not resist. Iger says he was philosophical about the sale to Disney and is grateful for the decade he worked under Eisner, but he adds, “It’s a lot more fun being CEO.”
The invisible man
Unlike his predecessor, Iger doesn’t host Disney TV shows. He pens no florid letters to shareholders. He uses an alias for his e-mail account – one that plays on his wife’s name. “Personally I would prefer staying completely invisible or anonymous,” he says, “but I don’t think it would be good for the company.”
Iger made an early decision that most of his time as CEO would be spent “managing inside the walls” of the Magic Kingdom. He says hello to everyone on the Disney campus in Burbank and leads the Disney team that raises money by competing in the Malibu Triathalon.
Iger is devoutly, if not obsessively, fit and disciplined, working out at his Brentwood home at 4:30 each morning, then taking a break to read the papers and download music before driving his BMW to the office, often making the first pot of coffee when he gets there. This fall he put himself on a diet, dropping more than 13 pounds from his already buff frame because he “didn’t feel comfortable.” He jokes that his wife, Willow Bay, a journalist who is a former model and TV anchor, “has a diet that mainly consists of arugula.” He and Bay have two young sons, and Iger has two grown daughters – and a granddaughter – from a first marriage.
At work Iger is fixated on quality and the ways that it can be measured and studied in everything from consumers’ attitudes toward the Disney brand to waiting times for theme park rides. When Kevin Jonas had lunch with Iger one day last year in Disney’s dining room, he was struck by how much Iger knew about the rotation his boys’ songs were getting on the radio that morning.
John Pepper, the retired Procter & Gamble CEO who is now Disney’s chairman, says the company’s approach to measuring data is very similar to P&G’s, and that Iger’s push to organize the company around franchises echoes the way consumer products giants like P&G manage their top-selling brands. “Disney,” Pepper says, “is a zealot for data.”
A bold move
Jeff Bewkes , CEO of Time Warner (which owns Fortune, among many other things), says Iger’s easy manner and good nature should not be confused with a lack of ego or competitiveness, but rather signifies his lack of pretense. “Part of management is just getting everybody to see that we’re not changing the rules every day,” says Bewkes. “I deal with Bob a lot, and he’s a very straightforward, easy-to-understand guy.”
When Iger articulated his big new strategy for Disney after taking over, it sounded pretty much like every other major media company’s: Growth would come from an emphasis on creativity, technology, and international markets. But the first indication that Iger was going to shake things up came on his very first day as CEO, Oct. 1, 2005. Meeting with the board, he said his top priority was to fix Disney’s slumping animation business.
At the time, the company’s deal to distribute releases from Pixar was coming to an end because of clashes between Jobs and Eisner. But in the six months since he had been designated incoming CEO, Iger had formulated another idea that he now shared with the board: Buy Pixar. (The initial reaction, he recalls, was “stunned silence.”)
Iger was given the go-ahead, and his first move had tongues wagging – not just because Disney paid an outsized $7 billion for Pixar, but because the deal made the brilliant but mercurial Steve Jobs Disney’s largest individual shareholder with a 7% stake.
Iger had been working behind the scenes to mend the relationship with Jobs, and had also put in time with top Pixar executives Ed Catmull and John Lasseter, who initially balked. Iger noted that he too had been acquired, twice: when Cap Cities bought ABC in the mid-1980s and then when Disney bought ABC. Plus, Catmull and Lasseter would have a bigger canvas because Disney animation would now report to them.
Jobs told Fortune that Iger won him over when he said that as soon as he found out he was going to be CEO, he spent a day at Disneyland going on every ride and watching every show – and observed that all the new ones were based on Pixar characters. Today, Jobs gives Iger and the board input on everything from store design and videogaming to China. “I consider Bob Iger a friend,” says Jobs. “I don’t have a lot of friends. I just really like him, and he’s a really solid guy.” (Try to put a dollar value on that.)
Aside from Pixar, Iger quietly tried to put out whatever fires remained from Eisner’s era. He settled shareholder litigation with dissident former directors Roy Disney and his advisor Stanley Gold and patched things up with Comcast. Internally, in a move treated like D-day, Iger dismantled a corporate strategic-planning department that had to clear most of the company’s major decisions.
“When he took that job, Disney was really messed up,” recalls Jobs. “Bob looked at the guys running the divisions and said, ‘You’re in charge of your businesses now.’ ” Giving more authority to division heads was a page out of Iger’s Cap Cities playbook. “People have plenty of room to make decisions, and they should feel amply empowered and trusted. But everybody has got accountability and responsibility,” he says.
The problems Iger sought to fix by buying Pixar were linked to another troubling issue. For years, Disney had struggled with “brand fatigue.” Also, analysts warned of “age compression,” meaning that Disney had become identified mainly with young children, and rivals, particularly Viacom’s Nickelodeon, had attracted older kids by exhibiting more edge and attitude.
Iger commissioned an analysis that showed that the most value the company had created over the years stemmed from films done under the Disney banner – everything from “Snow White and the Seven Dwarfs” to “The Lion King.” Then he and Disney Studios chief Dick Cook pored over the American Film Institute’s list of the 100 greatest movies and found that while very few were Disney releases, a lot of them might have been, if the studio had thought more broadly about its brand.
The decision to refocus on the Disney brand was cemented by the success of the first “Pirates of the Caribbean film,” released just a few weeks after he was named CEO. The studio had asked producer Jerry Bruckheimer – known for high-octane romps like “Top Gun” and “Armageddon” – to make the film based on one of Disney’s most popular theme park rides, and he had insisted it be the company’s first PG-13 film. “I don’t think Disney had ever done this before,” Bruckheimer recalls.
Another light bulb went off with the growing success and centrality of the Disney Channel. Iger and Anne Sweeney, the head of ABC and Disney’s cable networks (apart from ESPN), had shrewdly migrated the channel in the U.S. from premium to basic cable, while launching localized versions around the world. The channel pursued the tween audience with shows like “Lizzie McGuire” while still dedicating time to shows for preschoolers, like “Mickey Mouse Clubhouse.”
One consequence of the renewed Disney focus is that the company slashed production of films under the Touchstone and Miramax studio names. And one risk is that Iger has limited growth by becoming over-reliant on family-oriented fare, however broadly defined. Though making non-Disney movies remains part of the plan, Iger says he’d rather do fewer of them. “I don’t care if a Touchstone movie does $100 million on $30 million of cost,” he says. “Its success doesn’t breed any other success in the company.”
What does get Iger excited is the idea that global franchises can be drawn from any division of the company. “Hannah Montana” came from the Disney Channel, “Princesses” and “Fairies” out of Disney’s publishing arm, the Jonas Brothers out of music, Pirates out of the theme parks, and so on. Also, 70% of most employees’ bonuses are based on companywide performance.
It’s not a universally welcomed concept: Over a recent dinner, George Bodenheimer, who runs ESPN, asked Iger how best to sell the structure to executives who have little or nothing to do with, say, attendance at Disney World.
Franchises writ large
Several years ago – with Eisner’s blessing – Iger began convening monthly meetings with the company’s top executives in which binders are handed out for particular brands, showing how they are doing across divisions and in different markets. Recent topics have included new animated shorts for Winnie-the-Pooh, and brand extensions of the Pixar films “Toy Story” and “Cars.”
“Cars” may be exhibit A of Disney’s franchise machinery at work. Three years after the movie came out, sales of licensed merchandise are running at more than $2 billion annually. A “Cars” sequel is in production. Disney will soon launch an elaborate Cars virtual world. But the biggest bet on “Cars” is Cars Land, a 12-acre stretch of Disney’s California Adventure theme park set to open in 2012.
On a Monday afternoon not long after Iger’s trip to London, he was at Disney’s famed (and so hush-hush there’s no sign outside) Imagineering offices in Glendale, Calif. He was joined by John Lasseter, who was enjoying the early buzz on “Bolt,” the first decent Disney animated film in years, and one on which the Pixar folks had made major modifications.
Lasseter and Iger were eyeballing wood and foam scale models of Cars Land. The biggest draw in the mini-park will be a ride featuring animatronic characters from the movie and “cars” that go 40 miles an hour but seem much faster in places, thanks to new projection technology. Lasseter crouched as he made his way through the 1/8 scale mockup, adding his own sound effects for each twist and turn. “Look at this! Have you seen this, Bob? Lean down and take a look. It’s like the movie, except you’re there.”
Upstairs, designers were doing what’s called “pre-viz” work, wearing headgear that allowed them to explore a virtual 3-D rendering of the ride and stroll around (or fly above) Cars Land.
In an industry with a miserably low success rate for mergers, Iger gets high marks for Pixar. And he notes that Cars Land would not have been possible on this scale – or with Lasseter and his colleagues’ hands-on input – if not for the acquisition.
Iger isn’t done buying. He says he hopes to use Disney’s position of relative strength and a reasonably clean balance sheet to make further acquisitions along the nontraditional lines of videogame publishers and Club Penguin, the kids’ social network it purchased last year. (Electronic Arts (ERTS) and Discovery Communications (DISCA) are often mentioned as potential fits for Disney – not that Iger is telling.)
Iger, meanwhile, perhaps best sums up his mission at Disney as he walks out of the Cars Land meeting and pauses to say hello to a woman who works in the building. “It’s the happiest place on earth,” Iger tells her as he turns to go. “Let’s keep it that way.”
One thing that’s definitely not in the cards – sorry, conspiracy theorists – is some kind of Jobs master plan leading to an Apple-Disney merger. Asked what his long-term intentions are as the company’s largest shareholder, Jobs says, “I think there are some companies that transcend just being businesses. Disney is one of those very special companies, and I think it’s very special companies that prosper in the long run. I’ve never worried about my investment. I know that it’s going to be just fine. Family is a renewable resource.”
I have to say, I don’t always agree with what disney does, but on the whole I’m quite impressed with Mr. Iger.
