2005 was a year of transitions – both large and small – for The Walt Disney
Company. After the tumultuous year of 2004 (link),
it looked like things were going to continue and even accelerate. The year
started with continuation of the shareholder lawsuit regarding the hiring
and firing of Michael Ovitz, the ongoing campaign by the quickly-fading Save
Disney movement and furor over succession of leadership in the company from
Michael Eisner to Robert Iger (link).
But then a funny thing happened. Things quieted down – quickly.
Iger came in with a plan. He wanted to take the management of Disney out
of the spotlight and let the company speak for itself. It was a major change
from the self-aggrandizing approach used by Eisner, and taking himself out
of the limelight also helped to take him out of the crosshairs.
At the same time, Iger was exercising his skills as a fence-mender. He began
a campaign to restore friendly relations with Steve Jobs, after the stormy
relationship and falling-out between Jobs and Eisner. He persuaded Roy Disney
to drop the Save Disney campaign and come back to the company in an advisory
role (link).
He also made a few small moves shortly after his appointment to show the business
and fan communities that he planned to run things differently. Less than two
weeks after his designation as CEO-elect, Iger disbanded Disney’s Corporate
Strategic Planning Division – referred to many inside the company as the “Business
Prevention Department” – one of Eisner’s creations, which had the reputation
of interfering and planning the spontaneity and creativity out of each corporate
project.
Focus on Technology
Another transition was the increasing speed at which the company embraced
new technology, one of Iger’s favorite subjects. From the purchase of British-based
interactive TV games developer Mind’s Eye and German game developer and publisher
Living Mobile, to the launch of ESPN Mobile and announcement of Disney Mobile,
to the groundbreaking sale of Disney, ABC and ESPN television shows for iPod
portable video players through the iTunes Music Store, to launching podcasts
for several arms of the company, taking Disney content with you became much
easier this year.
Even the theme parks division got into the fray, as Walt Disney Parks & Resorts
Online (WDPRO) launched the popular Virtual Magic Kingdom game, which integrated
at-home play with in-park quests and merchandise tie-ins. But WDPRO didn’t
stop there.
In the spring, they launched an online component of the new Buzz Lightyear’s
Astro Blasters attraction at Disneyland, giving park guests a two-way tie
between the park and their home. Upon exiting the attraction, guests could
send a digital on-ride photo of themselves (with their scores showing) to
their own email address for free (an almost unheard-of thing at Disney parks,
of late) and, after viewing the photo, they could play an online Astro Blasters
game that would help to light targets for players on the actual attraction
inside the park.
In the fall, WDPRO tested two interactive handheld games inside Disneyland
Park, trying out a new way to bring technology inside the park to enhance
guest experiences (link).
While many decried the handheld games as antithetical to the “Disney theme
park experience,” one could argue that the games only affected those using
them, who might otherwise not be interested in the traditional Disney experience.
Other technology spread at the theme parks, as well. The “ticket tag” system,
which had been tested with Walt Disney World Annual Passholders, was rolled
out to all guests at the resort. Rather than requiring guests to get a hand
stamp each time they left the parks in order to prove that they matched the
already-used ticket when reentering a park the same day, biometric scanning
was used to tie the guest to the ticket. Because the new system no longer
required one cast member at each turnstile, this allowed Disney to reduce
the workforce at the gates and redeploy the thinly-spread cast elsewhere.
(We’ll get back to the casting situation later).
Technology was also in the spotlight at the Disney Studios, as Chicken
Littlebecame the first fully-digital animated Disney film. (Yes, Dinosaur
was digitally-animated, but the backgrounds were largely live film footage.)
In addition, the studios led the push for the installation of digital projectors
in theaters, which allowed Chicken Little to be shown in Digital 3-D
on 79 screens. Disney continued to push the format, and next year’s “Meet
the Robinsons” is targeted to be released on 750-1,000 digital screens.
Motion pictures
Speaking of the studios, it was a fairly weak year for the company that dominated
the box office two years earlier. The Chronicles of Narnia (3), Chicken
Little (14), The Pacifier (16) and Flightplan (19) were
the studio’s only films in the top 20, only the first three cracking the $100
million mark. Disney was only the third-ranked studio this year, when including
their Dimension and Miramax labels. (With Paramount acquiring DreamWorks,
that combined company would bypass Disney, dropping it to fourth.)
Weighing heavily on the studios was the departure of the Weinstein brothers,
who had built Miramax and eventually butted heads with Eisner one too many
times. Iger was able to ease the negotiations for their departure, but could
not stop them from leaving. Before their departure, they released a huge slate
of films that had been piling up waiting for release dates. The resulting
glut of smaller films resulted in none of them receiving much press individually,
and they all quickly sank.
At the beginning of the year, it seemed an extremely long shot that Disney
would ever come to terms on a new contract with Pixar Studios. The extremely
profitable relationship had been torched by conflict between Eisner and Pixar
(and Apple) boss Steve Jobs. Immediately upon ascending to the CEO-elect position,
Iger began trying to break down the walls between the companies, and by year’s
end the work seemed to be paying off. Not only were most news sources reporting
that a Disney-Pixar deal were imminent, but rumors were even flying of Disney
buying some or all of Pixar, with Steve Jobs possibly being offered the position
of Chairman of the Board at Disney. We shouldn’t have to wait too much longer
to find out how this story plays out.
Iger wasn’t above raising his own ruckus, though. He incensed theater owners
by suggesting that movies should be released on DVD much sooner, maybe even
while the movie was still playing in first-run theaters. As the year ended,
more people seemed to be warming to the idea, though no theater owners had
broken ranks yet.
Television networks
The ABC television network kept building on 2004’s successes. As some shows
cooled, other shows got hot to pick up the slack. ABC became so confident
of their nightly programming that they agreed to pass Monday Night Football,
an institution on the network for 33 years, to sibling network ESPN, one of
the hottest brands at the Walt Disney Company. While ABC’s ratings are still
good, it is not the number one network this year. Revenues remain strong,
and the network should get a boost from broadcasting this year’s Super Bowl
on February 5.
Theme parks
The Disney theme parks had a year of extremes. From the excitement of the
Happiest Homecoming on Earth at Disneyland Park with the reopening of Space
Mountain and refurbishment of the Enchanted Tiki Room to the Florida version
of Disneyland’s 50th birthday celebration with newly-cloned attractions opening
in each of the four theme parks, the year had a whole host of highs.
At the other end of the spectrum, Walt Disney World suffered a series of
public relations nightmares, as first a 4-year-old boy died after riding Mission:
Space at Epcot, then a British teenager had a massive heart attack after riding
the Twilight Zone Tower of Terror and – at last report – still remains in
a vegetative state in the hospital and, finally, a 12-year-old girl died after
collapsing at Typhoon Lagoon. While none of the deaths were related to the
operation of the attractions and were in fact due to pre-existing medical
conditions in the victims, the three series of “Disney Death” headlines in
the span of just over two months set the year’s celebrations back a bit.
Other highs included record attendance at all stateside parks, the ranking
of Disney parks in the top eight slots worldwide in terms of attendance, the
successful West Coast trial of the Disney Cruise Lines, a restructure of Euro
Disney, SCA (the owner/operator of Disneyland Paris) that seems to be moving
the company to a slightly more stable financial footing, and the opening of
Hong Kong Disneyland.
Lows included lower-than-expected attendance and revenues at the new Hong
Kong park, a pair of chemical spills at the California parks in December,
a fire at the Grand Californian Hotel, an accident on the California Screamin’
coaster at Disney’s California Adventure, and the admission of liability in
the fatal 2003 accident on Big Thunder Mountain Railroad in California.
Corporate matters
In corporate news, Disney Chairman George Mitchell agreed to stay on one
additional year beyond his planned retirement date to allow for more time
to search for a suitable replacement (and, perhaps, to woo Steve Jobs?). Two
new independent directors were added. Many of “Eisner’s boys” were reassigned
to other positions or agreed to leave the company as the changing of the guard
continued. Eisner himself left the board of directors on the day that he retired
as CEO (link),
rather than finishing out his term.
In the meantime, both the Southern Baptists and the American Family Associate
ended their boycotts of the company, partly implicating the departure of Eisner
as one of the primary reasons for the change.
The company’s stock price dropped nearly four points in 2005, returning the
point it was at when 2003 ended. This may be seen as taking a “wait and see”
approach to Iger’s leadership, or as a retrenchment now that the company has
stabilized following the tumult of 2004. Analysts predict, however, that the
company’s outlook is good, and that the stock price will rise in 2006.
The 2005 annual shareholder meeting was held in the wintry climate of Minneapolis
in February (link).
It was thought to be a response to the large, raucous crowd at the previous
year’s meeting in Philadelphia, intended to shrink the crowd and create a
much quieter event. Of course, by the time that the meeting rolled around,
Save Disney was largely in hibernation and the meeting was largely uneventful.
It’s still anybody’s guess where and when this year’s meeting will be held,
but if Iger is as good a fence-mender as I think he is, I would expect the
meeting to return to Anaheim, or perhaps to Walt Disney World. We’ll have
to wait and see on that one.
Staffing issues
Some other transitions this year came in the area of staffing. A great deal
of downsizing and outsourcing took place in many areas, including Information
Technology, Imagineering and Feature Animation (link)
early in the year. These moves received mixed reviews and even inspired angry
responses from some quarters. However, when asked about Imagineering in particular,
Iger noted that “any steps taken are not designed to dismantle the group or
its capabilities.”
Larger problems presented themselves in the areas of theme park staffing,
as the “presenteeism” crackdown at Disneyland caused major staffing shortages
(link)
and the lack of available workforce to fill the 55,000 positions needed at
Walt Disney World had a similar effect there. Part of these problems are due
to the low wages being paid by Disney to front-line staff on both coasts,
especially in light of what is being paid by the non-theme park employers
to job seekers. Walt Disney World has resorted to trying to bus people in
from surrounding counties, holding job fairs for Hurricane Katrina victims
and other, even more desperate measures to fill the job vacancies.
Summing up
Compared to the busy 2004, the year 2005 was downright quiet (at least outwardly),
yet it still held some significant changes for the company. From the CEO succession
to the end of the shareholder lawsuit, from the end of the Miramax saga to
the thawing relations with Pixar, the listing ship appeared to slowly right
itself.
It will be interesting to see what new technological directions Bob Iger
takes the company in. The date and location of the annual shareholder meeting
should be announced soon. New attractions at both Disneyland (Sully and Mike
to the Rescue) and Walt Disney World (Expedition: Everest) are due to open
soon. Cars, Pirates of the Caribbean 2, and other major motion
pictures are due to debut. A new Pixar deal may be done. A new chairman should
be named.
There’s much in store for 2006, and we at MousePlanet look forward to continuing
to bring you the news and analysis that you’ve come to expect from us. Stay
with us for what looks to be an interesting year.
