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Bob Iger rocks Disney (pg. 3)

By Richard Siklos, editor at large
Last Updated: February 3, 2009: 7:22 PM ET

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.)

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."

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." To top of page

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