Iger's Presentation

[larworth]

Finally got around to listening to Iger’s presentation at the 2002 Entertainment, Media, and Telecommunications Conference. While many of the things he covered were not new (and several had been posted before), I found it a good summary of their direction. Here’s my synopsis.

Presentation Topic: Where will growth over the next few years come from?
(order as presented, not necessarily by priority)

1. More direct to video products – these have very attractive profit margins.
2. More 2nd tier character promotion and Monster’s merchandise.
3. International theme park expansion – will continue to look for new sites and like the lower Disney investment in lieu of royalty model.
4. Synergy provided by multiple television outlets – can’t see a standalone broadcast channel being able to survive anymore.
5. Learning market – aggressively expand “Baby Einstein” platform. Will start marketing toys under the Imagineering label.
6. International television – room to grow with ESPN, Disney channel, and Fox Kids.
7. DVD replacements of VHS – using IMAX as a launch tool to drive DVD sales for the re-releases.
8. Video on demand – think there is huge upside when Movies.com becomes the #1 site (capture much bigger share of profits than the typical 35% studio take today).
9. Creation of television content - as the number of channels per home continues to grow there will be increased demand for it. Management turnover and top executive attention are start in making this turnaround.

Closing quote “The success of different distribution platforms is hard to predict, but whichever one is successful we plan on being there with content. These things (above) should provide solid growth”.

Additional information coming from the Q&A session:

1. Is NBA deal done? No real comment
2. What will it take for parks to rebound? Better economy, time to elapse from 911, resumption of international visitors. Believe current key is to closely manage costs (hours, etc.)
3. Animation prospects? Unrealistic to repeat 85-95 results, it was an aberration. Hope new managers will have positive results.
4. Abandoning big budget pictures? No, can still be an attractive play, and will continue to do them, but will be very cautious.
5. Sport franchises still wanted? Glad to sell if buyer will pay decent price and agree to leave them in Aneheim. One of the reasons they were bought was to give us more leverage with the city to get them to make area improvements. This has been very successful. Other expected content synergies are not there.
6. More acquisitions? Prices still too high. No plans to expand into distribution.
7. Takeover candidate? No comment. Not in trouble.
8. Plans for retail? Have scrapped plans to renovate stores, just too expensive. Currently looking at three test concepts: Play (toys and plush), Home (everything for a kid’s room), Small (away from the department store mentality).
9. Danger of character saturation? No signs today this is being done. Probably overdid some things in the late 80’s. Easy to tell when it happens as merchandise sales drop off.
10 Milliornaire handling? No proof we would have made more money longerterm with fewer exposures. We were “printing money” and had few other choices. Said it was squarely his call.
11. What are your key metrics? Free cash flow still a big focus (Staggs comment)
12. DCA results? Still a work in progress. Bad year to open a new park. Think with a little tweaking (Bug’s rides, ToT) it will show good progress.

***

!Absent was any real mention of the domestic theme park business, except the comment that they are their most important brand builders! Essentially a “sit and wait while closely managing cost approach”. Growth does not seem to be on their radar screen, but cash flow from the parks still is.

As a speaker I continue to be impressed with Iger. He comes across as very knowledgeable, confident, and has a reasonably personable style. I still have no clue if he understands how to make magic, though.

 

[Sarangel]

Thanks for an incredibly articulate recap of Igar's speach.

I'm still not convinced that this 'market everything we have' philosophy is the right one. I still think that Disney needs to work on creating new stuff (and *not* direct to video, which always stinks) to maintain their rep as a content company. I find Iger's assertation that 85-95 was an abberation fairly disturbing, since makes it seem like they aren't even willing to try to re-create it...

Sarangel

 

[YoHo]

if 85-95 is an Abberation, then what was 1939-?

And before the Sharp Pencils arrive. I with a few exceptions, I would think most post 95 animation, while good, are not up to the pre 95 standards. of course that is subjective.

 

[OnWithTheShow]

I think one of the greatest plans they currently have is the IMAX to Theaters to DVD rerelease of the hits of the 90's. DVD sales went through the roof during the Christmas season. IMAX is a strong earner and rereleases in theaters always did well for Disney. It will also bolster interest in theme park attractions based on those films.

 

[raidermatt]

Unrealistic to repeat 85-95 results, it was an aberration.

Don't like this comment at all. Whatever happened to striving for the best? Not only is he acknowledging that current quality is less than past, he's telling us the future can't match the past. Forget asking whether Walt would say that, would ANY good leader say that? Records are made to be broken, and somebody will ALWAYS come along to top what was done before. Apparently Iger is acknowledging it will be somebody other than Disney. Truly inspiring.

More direct to video is fine, as long as it doesn't come at the expense of other avenues. Besides, its actually a good place for young animators and other creative types to hone their skills.

No real problems with the rest of the comments. On the surface, his DCA comments seem to downplay the problems, but really, the public comments should downplay the problems. It's the actions that should indicate that Disney understands the problems. ToT, Bugtown, and Play It are steps in the right direction. The conversion the the Puck restaurent to a character meal setting is also a plus.

 

[Another Voice]

Next on ABC Family – our special presentation of the musical ‘How to Succeed in Business Without Really Trying’.

The entire list can be boiled down to one strategy – sell anything you can slap “Disney” on and don’t spend a dime creating it.

No where is there any mention about “content”, it’s all about distribution. “Imaginerring” no longer designs rides, it’s a brand for toys. Animation is an “aberration” and the movies themselves are nothing but brand names for video sequels (“this year’s ‘Lion King’ movie is…”). Theme parks are just like McDonald’s that can be photocopied anywhere people are willing to pay for a fast hit of American culture. DVD means we can resell all those VHS tapes people bought, and multi channels means that at any given time on your television you can catch an episode of ‘Who’s Line is It Anyway?’.

Where are the plans – or even the hints – that The Company intends to make anything new? Why not create new, first tier movie characters instead of pushing second tier old ones? Why not make good merchandise for the stores instead of shrinking them just to sell the existing plush inventory? How about giving people a reason to travel to WDW instead of hoping they forget what happened in September?

There are other, darker views about what’s going on. It’s being called the Stripmine Plan. Basically, Eisner and friends know the gig is up and want to retire in a few years. The goal is to maximize the stock price and cash out as high as possible during a takeover. The plan is to squeeze all the possible value out of The Company without any concern for its long range viability. They’ll spin it as “maximizing past investments in the company” and cynically justify to themselves that they’ll leave the company in the same shape that they found it. No movies in the vault, the parks in desperate shape requiring billions in new investments, a brand name that’s thrashed by over exposure and a mountain in debt.

Grab the cash with the least amount of effort. A proud legacy.

 

[airlarry!]

There are other, darker views about what’s going on. It’s being called the Stripmine Plan. Basically, Eisner and friends know the gig is up and want to retire in a few years.

Post of the day, AV.

What amazes me about the Iger comments & Ei$ner's comments that I posted before the 'freeze' is that we #3 car riders have been posting for months that the current regime is either cashing out or never was interested in continuing the Disney legacy (take your pick, either way it is disgusting). But. But. But never in my wildest dreams did I think that we would be able to prove they have this master plan and with actual statements from the two big head cheeses at the Mouse House.

But there the statements are in black and white. These people are not interested in the creation of magic, they are in the business of creating money.

Nobody can accuse Walt of having that philosophy; all but a few give Dr. Ei$nerstein (& now Igor) that label.

 

[Planogirl]

This item really disturbs me:

"Plans for retail? Have scrapped plans to renovate stores, just too expensive. Currently looking at three test concepts: Play (toys and plush), Home (everything for a kid’s room), Small (away from the department store mentality)."

I don't really understand what he means by "Small" but the "Play" and "Home" ideas are less than overwhelming. I can get most Disney themed toys at any toy store or large discount store at lower prices. Why would anyone want to go to a Disney toy store just to pay more for just about the same items? There's only so much plush a person can buy.

I also know that some people were excited about the prospect of a Disney Home Store. I don't think that they realized that it was only kids' stuff again.

What happened to the idea that Disney is for kids of all ages? I miss the old Disney Store.