Michael Eisner Presentations
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On June 3rd Michael Eisner held a Q&A session at the Bernstein's Strategic Decisions Conference. They started the presentation by looking at the past, present, and future of The Walt Disney Company. When they say the past, they do not mean Steamboat Willie and the opening of Disneyland, but the near past around the time Disney’s Animal Kingdom opened in 1998. Since that time, Disney has not been as strong as it has been in the past. When asked what Disney should have done differently in the last five years, Michael said he did not think they should have done much differently. He defended the ABC acquisition, not only as a good financial acquisition, but as an essential acquisition. Even though he said he understood that prime time schedules are cyclical and that they expected ABC to move downward, he did wish that, “we did not program Millionaire 22 times a week�?. ABC has transformed Disney and has been, “a synergistic homerun�?, according to Michael. In the last five years there has been a large capital investment in the parks and resorts which was not spent at the best time, but Michael stressed that all the resorts are now multi-park destinations and are poised to take advantage of the turn-around in the tourism industry. Even though the Internet experiments were largely publicized as a failure, Michael called it “fairly meaningless�? and pointed out that their Internet ventures are now profitable.
Coming to the present, the moderator discussed the relaxation of FCC regulations regarding station ownership. Disney has decided not to purchase more broadcast stations because of the cost of those stations and the moderator wanted to know if Disney views itself as being behind because they do not own additional stations, especially in terms of leverage in negotiating retransmission agreements with cable companies. Michael said that they have had the opportunity to purchase stations but is not going to pay inflated prices. Responding to a question on how long it takes for a television network to rebound, Michael was uncommitted. He mentioned that after a strong fall ABC lost ground because of strong programming on other networks like American Idol, and poor programming on ABC, like Are You Hot?. Transitioning to the parks, Michael said that guests have not accepted The Disneyland Resort as a multi-park destination and they have to reeducate the public.
Across the board, Michael is seeing encouraging signs in terms of bookings, but this might be caused by special promotions the company is running because of the tourism slowdown. Michael said that the last Orange Alert had less affect than the previous Orange Alerts, and that bookings continued even though the terrorism alert was raised. The moderator asked if building international parks will decrease the desire for international guests to visit the Disneyland Resort or the Walt Disney World Resort. Michael responded that it’s a different type of guest that visits an international park rather than a domestic park because the international parks are more weekend destinations instead of weeklong destinations. This does not address international guests visiting The Disneyland Resort, because it is a two gate destination like the international resorts.
Moving to consumer products, Michael said that the consumer products business has changed due to the “Wal-Martation of America�? and that Disney is creating relationships with these large chains as a result.
Next was the Pixar question. Michael said that they have a very good relationship with Pixar. He mentioned that he is confident that the relationship with Pixar will continue, but that the relationship will probably change. He said continuing the relationship is a win-win for Disney and a win-win for Pixar. In terms of the Disney owned releases, Michael highlighted the upcoming releases of Pirates of the Caribbean: Curse of the Black Pearl and Brother Bear which he said, “was in the Lion King realm because it has talking animals, we shall see if it is in the Lion King realm in terms of talking bankers�?.
Currently Disney has eight computer generated movies in production. But what Pixar has that Disney doesn’t have, according to Michael, is John Lasseter. Michael compared John’s storytelling ability to that of Walt. He downplayed Pixar’s technological advantage and focused on their storytelling ability. Michael also addressed other questions on such issues as the Fox Family acquisition. While he wishes he could have paid less for it and admitted that ABC Family is not performing as well as expected, he believes it is an investment that will play out in the long term.
He also discussed piracy. He talked about the protection of preview screening with security searching for camcorders while people thought they were searching for guns. They also had people with night vision goggles watching for pirates. Michael used this opportunity to say he wants to transform Disney to a digital company so people will be able to download videos legally. Using technologies like Movie Beam, which Michael thinks is going to be a success and the disappearing DVD, which Michael thinks will be a failure, they will be able to combat piracy by making the content available legally. This is in addition to combating piracy through more traditional means like legislation, litigation, and encryption. The additional benefit of these technologies is eliminating the middle man like Blockbuster Video and cable pay per view operators. This brought up the age old debate between content vs. distribution. Addressing the continuing battle with cable operators, Michael felt that content is the side to be on. Distribution channels can change instantly, but intellectual property is more stable. Disney will continue to negotiate with distribution channels with the understanding that Disney offers value to the distribution companies because of the value of Disney’s brands including ESPN.
Discussing the Disney Stores, Michael believes they would be a very good value to a retail expert while Disney would maintain a strong license agreement that would govern the business practices and the ways the store synergizes with the company. He would like to reposition the stores as a high-end location, moving away from the Wal-Mart sector. Michael believes that the stores will remain a part of Disney but in a licensed manor.