Iger begins sequel to Eisner's reign at Disney

John W. Schoen Senior Producer • Profile • E-mail

Robert Iger is officially the CEO of the Disney empire, though he has been busy reshaping the company since his embattled predecessor, Michael Eisner, announced his resignation a year ago.

Despite some recent box office clunkers, Iger seems to be off to a good start, including recent success rebuilding important bridges that Eisner burned during the turbulent closing years of a 21-year reign that culminated in shareholder revolt.

When Eisner was originally cast as the company’s chief executive in the 1980s, Disney operated a pair of theme parks and a second-tier movie studio that lived off its library. Over the next two decades, Eisner and his management team added eight new theme parks (the latest just opened in Hong Kong); acquired ABC television (along with 10 local stations); added 18 cable networks, including sports leader ESPN; expanded merchandising, records, radio and publishing; and reanimated the company’s movie business with in-house hits and partnerships with digital pioneer Pixar and the hugely successful indie filmmaker Miramax. The company Iger takes over is a sprawling entertainment giant (second in size only to Time Warner) that took in more than $30 billion last year.

But the Eisner script also included some major reversals, mostly in the third act. A series of contentious relationships — the recruitment and subsequent ouster of Hollywood kingpin Michael Ovitz, a nasty divorce with Pixar, and a falling-out with Miramax co-chairmen Bob and Harvey Weinstein — culminated in a shareholder revolt led by Roy Disney, nephew of the company’s founder, in which 45 percent of shareholders voted not to renew Eisner’s contract. Within six months, he announced he would step down — after shepherding Iger’s appointment to replace him.

Grimm box office
Iger faces several major repair projects as he takes over the keys to the Mouse House, starting with its movie business. The company last month warned Wall Street that earnings would fall short of expectations — largely because of a series of box office disappointments including “The Brothers Grimm,” “The Great Raid,” and “Dark Water.” The result is an expected operating loss of some $250 million to $300 million for the quarter.

Once the unrivaled producer of animated films, Disney has lost ground over the past decade to a wave of digitally animated hits from competitors Pixar and DreamWorks. Still, some analysts point to a more promising film pipeline for Disney next year, including “Chicken Little” and “The Lion the Witch and the Wardrobe,” along with a sequel to the successful “Pirates of the Caribbean.”

“While the studio’s performance in the quarter will look dreadful, we don’t think it reflects a significant negative turn in Disney’s film business,” Katherine Styponias, who follows the company at Prudential Equity Group, said in a recent note to clients.

Disney has had mixed success with its broadcast operations, which contribute roughly 60 cents of every dollar of profit. But the network has recently pulled out of a slump in ratings and ad revenues. Riding the success of hit shows “Desperate Housewives” and “Lost,” ABC sold 80 percent of its ads in this year’s “upfront” market in June, taking in some $2.7 billion in ad sales, about 30 percent more than last year.

Iger's background in television should serve him well as the company works to maintain that momentum. After a long climb up the ladder at ABC, Iger entered the Disney fold when the network was acquired in 1996.

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