Michael Eisner talks to Goldman Sachs
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Michael Eisner recently spoke at the Goldman Sachs Communacopia XIII Conference. In regards to the company's future, Michael said he remains optimistic anticipating double digit growth for the next several years, thanks to strong management and strong performance at the parks and resorts. He also said that ESPN and the company's licensing were performing well. He said that in the last 5 years the company has spent 11 billion dollars in capital and now it was time for the company to reap the rewards of that investment and reducing the capital invested and increase margins.
Next Michael compared the Disney of today to the Disney of twenty years ago. He started off by pointing out that there was less talk of succession twenty years ago, which caused a small giggle in the audience. He went on to say that the company used to be simpler and the focus was on reinventing the company by increasing theme park prices and reestablishing the company's movie business ( a comment Ron Miller would have disagreed with). The next phase of the company was a creative renaissance, according to Michael, where they went from three theme parks to eleven and built tens of thousands of hotel rooms. They also created 900 movies, bought ABC/Cap Cities, a golden age of animation, and established creative relationships with Miramax and Pixar. Michael then said we are now a phase of "hunkering down� and keeping a close eye to investment and trying to increase profit.
Then Michael was asked about what he wants to accomplish in his last two years at Disney. He started off by mentioning that first of all he wanted to maintain financial discipline. He then focused on ESPN discussing how he would like to increase the diversity of programming on the network to decrease reliance on costly sports rights packages. He wants to maintain ESPN as an institution regardless of whether or not a deal can be negotiated with the various sport leagues. Examples of ways ESPN has already done this is with original movies like Hustle and The World Series of Poker.
The next question was regarding the forecasted 100 million dollar loss of the ABC television network. Michael responded that the entertainment business is a blockbuster business, but while you're waiting for a blockbuster you try to control finances. This is shown by the decrease in losses over the last year. Regarding the future, he said he is in love with the management of ABC, and is looking to get one hit each semester in order to build a number one schedule. When asked why he is reserved about the success of Lost and Desperate housewives he said he is only reserved externally, not internally. The cause of his reservation is that he believes he is good at managing failure, but that the entire team now needs how to learn how to manage success, by being cautious. But he did admit there is a lot of "high-fiving� at ABC.
Switching CGI, Michael was asked to describe the company's CGI strategy. Michael talked about Disney's animation history, discussing the glut of animation after Walt's golden age. He discussed how history repeated itself during the second golden age that began with The Little Mermaid. He says everyone is doing the same thing after the success of Pixar, including Disney, resulting in a lot of CGI movies. The effect of this is that only the CGI movies with the best stories that are the most innovative will succeed. And then in five or six year, there will be very few making CGI films but Disney will remain, making films internally and with partners. When asked if there is a limit to how many CGI films can be successful, Michael said yes and that is why he has been putting a financial box around the creative folks in the animation department since the cost of animation began to get out of hand five years ago. Disney is producing Chicken Little at about half the cost of other CGI films, which minimizes the risk, and Michael does not believe this will effect the quality of the film. He said otherwise the film would have to be a blockbuster for the film to break even.
When discussing next year's film slate, Michael said you will never find a film group that doesn't think next year is their best year, and that it's corporate's job to keep them in check. But Michael feels next year will be good. Michael is confident in the performance of the Incredibles and National Treasure. He also said that they are working on two sequels to both Pirates of the Caribbean and Toy Story at the same time. He also said there would be no "Alamo�.
Next up for discussion was ESPN, which has been a key driver to Disney's growth. Michael was asked if ESPN could keep up its growth. Michael started by saying his goal is that in two years, when he leaves, that it will be in such good shape for growth and that it would take a decade to "screw it up.� He then expressed his confidence in George Bodenheimer. He talked about the success of ESPN De Portes, ESPN's original programming, and the launch of the ESPN college network. He said that ESPN is second, only to Disney, in terms of brand strength. He was asked how ESPN would like to restructure their deal with the NFL. Michael said he would like he NFL to give it as a charitable donation. That being said, he feels that Disney has a strong relationship with the NFL, and that they are aware of the problems with losing money on Monday Night Football. Michael says that he will not shoot himself in the foot with an emotional buying of programming and that includes Monday Night Football. He says ABC is much stronger than the last time the rights were up for negotiation and they felt it was more important to keep it on the air, but now ABC is in a much stronger place and is less integral to the schedule.
The main theme of Michael's presentation was that quality will succeed, but you need to be fiscally conservative in order to minimize risks. This can be seen across all of The Walt Disney Company. At the parks, capital expenditures have been dramatically reduced, the amount spent on films, and the number of them, has been diminished, and the cost of programming on ABC has decreased even as it begins its climb up from fourth place. As Michael's term comes to a close, it will be interesting to see how his successor views this model, and how he or she will change how Disney is run, like Michael did twenty years ago.
Discuss It!
-- Story by Benji Breitbart
-- Posted October 14, 2004
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