At Disney, a Dealmaker in the Grip of Technological Change
http://www.nytimes.com/2006/01/23/business/media/23iger.html
January 23, 2006
At Disney, a Dealmaker in the Grip of Technological Change
By LAURA M. HOLSON and JOHN MARKOFFLOS ANGELES, Jan, 22 - If Robert A. Iger, the chief executive of The Walt Disney Company, and Steven P. Jobs, chief of Pixar Animation, played characters in a movie, it could well be Pixar's own computer-animated "Toy Story."
As Buzz Lightyear, a space-age superhero who can seemingly fly, Mr. Jobs is the perfect foil to Mr. Iger, whose smoothly coiffed hair and earnest intentions bring to mind the amiable cowboy Woody. And like the two characters, Mr. Iger and Mr. Jobs, who is also chief executive of Apple Computer, are friendly and sometimes cautious rivals, but that relationship could change substantially.
Disney's board is considering whether to buy Pixar Animation for roughly $6.8 billion in stock and give Mr. Jobs a seat on Disney's board. But whatever the board decides, Mr. Iger's aggressive pursuit of a deal with Pixar speaks volumes about his own ambitions and how he perceives Disney's future.
Seen as a safe corporate successor to the combative and polarizing Michael D. Eisner, Mr. Iger is trying to position himself as an old-media executive willing to embrace new-media ideas. Unlike Mr. Jobs, however, who has shown his mettle in music, videos and television, Mr. Iger has yet to establish a track record as a technologically hip leader.
But he has given hints of what he is willing to do. Mr. Iger, who has been chief executive for only four months, angered movie theater owners when he suggested studios needed to accommodate consumer demand by releasing movies simultaneously in theaters and on DVD. He weathered the wrath of network affiliates when ABC announced it would distribute episodes of "Lost" and "Desperate Housewives" for the Apple video iPod. And bringing Pixar into Disney would probably entail a wholesale rebuilding of Disney's famed animation department and bring a new level of intrigue to a corporate board that at times was described during Mr. Eisner's tenure as passive and compliant.
"Steve Jobs has proven that he is a visionary in technology," said Brian Grazer, the Academy Award-winning producer of "A Beautiful Mind" who is a friend of Mr. Iger's. "It is Bob's goal to control storytelling and acquire intellectual property. If you are trying to bet on the future, it seems like a pretty interesting partnership."
Mr. Jobs, of course, does not have to sell himself. His career has been marked by his iconoclastic business style, which is characterized by a disdain for traditional business school strategies and conventional thinking. A dropout from Reed College in Portland, Ore., Mr. Jobs is a legendary micromanager with a mercurial personality who has an instinctive sense of what will be a hit.
At first glance, Mr. Iger seems like an unlikely match. He grew up in Oceanside, N.Y., and has a curiosity that appears genuine; he was voted "most enthusiastic" in high school. Unlike Mr. Jobs, Mr. Iger exhibits a cool demeanor that has served as a corporate survival technique. Mr. Iger declined to comment for this story. But since being named chief executive, he has sought to distance himself from Mr. Eisner, his predecessor, most notably by smoothing over old conflicts with Mr. Eisner's enemies - among them Mr. Jobs.
"Bob's been No. 2 for so long he is not so covetous of power," said Mr. Grazer. "A partnership is more biomedically comfortable for him."
But now, as Disney's No. 1, the company's fortunes lay squarely at Mr. Iger's feet. Disney has hardly distinguished itself in recent years as a think tank for technological innovation. In the 1950's and 1960's, Disney was prized for its entrepreneurial flair. Then, Walt Disney handpicked some of his studio's best creative talent to plan, design and build Disneyland.
Imagineers, as they were called, pioneered such innovations as audio-animatronics, including a talking and moving Abraham Lincoln, which awed audiences in 1964 at the World's Fair in New York.
Disney struggled to maintain a competitive edge. It missed the computer-animated movie wave altogether. Mr. Iger oversaw technology initiatives while he was Disney's president, including Disney's failed MovieBeam venture, a video-on-demand service.
Perhaps the company's biggest new media success is ESPN, a prized brand in cable television, mobile phones and online for its sports news and games. Many in the industry speculate it was successful because executives at Disney's headquarters in Burbank, Calif., were discouraged from meddling at all. ESPN is run as a mostly autonomous unit based in Bristol, Conn.
Even in the cable distribution arena - hardly risky new media - Disney has been criticized for overpaying for Fox Family Worldwide, a $5.2 billion acquisition that has not lived up to its original promise. That deal has given some analysts pause regarding Pixar, given that an acquisition would dilute future earnings and there is no guarantee that Pixar will continue to produce box-office hits.
"As a concept you can't do better than this merger," said Michael G. Nathanson, a media analyst at Sanford C. Bernstein & Company. "But, then again, the market loved the combination of AOL and Time Warner when that was announced."
But even as Mr. Iger espouses a new-media philosophy, his foot is still squarely in an old-media camp. After making the statement that so angered theater owners, Disney has not moved to offer blockbuster movies on DVD at the same time they play in theaters.
And while Mr. Iger got public relations value out of being the first to make shows available on the video iPod, ABC has not aggressively promoted the video service during showings of "Lost" and "Desperate Housewives." (NBC runs brightly colored ads for iTunes during "The Office" and "My Name is Earl.") The reason, said a Disney executive, is that ABC does not want to further upset affiliates by driving viewers away from the broadcast to iTunes.
For Mr. Jobs, the deeper question is the significance of taking a board position as Disney's largest shareholder. Many analysts and others agree it would probably have less impact than his ability to focus his attention on Apple Computer.
Mr. Jobs has always been clear that his goals extend beyond profitability. He is famous for having seduced the former Pepsi-Cola chief executive, John Sculley, to become Apple's chief executive by asking him if he wanted to spend the rest of his life selling "sugar water."
"Having Steve Jobs as its largest shareholder would be a wonderful thing for Disney, but it probably won't change the world," said Roger McNamee, co-founder of Elevation Partners, a private equity firm investing in media, entertainment and consumer electronics firms. "Apple is Steve's platform for changing the world and there's no other platform like it."
Mr. Jobs has positioned Apple better than at any time in the company's nearly three decades. This year Apple, with its new alliance with the chip maker Intel, was the talk of the recent Consumer Electronics Show in Las Vegas as dozens of companies tried to imitate Apple products. Apple's stock closed at $76.09 on Friday, down just over $10 from its five-year high earlier this month.
The challenge, though, for Mr. Jobs is completing his original vision of the personal computer as the ultimate digital media machine. To do that, he will have to operate from his base in Silicon Valley. And Mr. Jobs's interest appeared to be shifting from audio to video when he made the first step to offer television shows, music videos and animated short films on the new video iPod.
That may be just the beginning. Apple is widely believed within the technology industry to be moving toward offering an Internet-connected set-top box, a move to bypass the control of the cable and telephone companies now struggling to maintain control of the distribution of digital content.
Indeed, having succeeded in creating a vibrant digital marketplace for music and podcasting, it may fall to Mr. Jobs to successfully connect the next generation of Hollywood's high-definition digital video by creating an independent system using the Internet to connect to the ever-larger television screens in American living rooms.
"He's the only guy who has applied systems thinking to media," said Paul Saffo, a consumer electronics industry consultant who is a director at the Institute for the Future in Palo Alto, Calif. "He's the only person who bridges both hardware and software."
