Here at The Motley Fool, we believe that individual investors should have the same access to information that Wall Street has. In that spirit, we've listened in on some investment-bank conferences with major companies and are giving you the rundown. We call this feature "Fool on the Street."
It's a story that Bob Iger probably doesn't tire of telling. Addressing the audience at the Bear Stearns 20th Annual Media Conference, the Disney
It was a tough time for Disney. Outgoing chieftain Michael Eisner was leaving on a sour note. The Internet seemed to be more of a threat than an opportunity. And the animation studio's reputation was crumbling, just as Pixar was heading for the door.
Yet in a sense, Iger was blessed. He was making his way toward the big chair at a company in flux. Making the right choices would help cement his footing and silence the critics who believed that Disney settled when it hired him internally.
Disney battles back
It's amazing what fewer than 18 months of brand-revival bliss can do for you. One of Iger's first moves was to make nice with Pixar. Even though the deal that was originally valued at $7.5 billion was "fully priced in one fell swoop," according to Iger, it helped kill two birds with one stone. It kept Pixar in Disney's fold and also remedied its own animation studio's recent theatrical shortcomings.
The animation stumbles were a festering problem at Disney. The company had seen research showing that Pixar had surpassed Disney in terms of brand excellence to mothers of children 12 and younger. Disney had to restore its storytelling magic, and bringing in the Pixar talent to punch up Disney's own productions was another major selling point.
Meanwhile, the Internet was a liability waiting to be spun into an asset. Movie studios, music labels, and other creators of content often saw cyberspace as a bastion of piracy that was taking up the available leisure of its potential audiences. Iger didn't see it that way. He saw that the Internet was a growing platform for the consumption of entertainment.
Under Iger, Disney became the first major studio to team up with Apple
The sales have been rising incrementally. He refers to the amazing 130 million DVD units that the company moved this past quarter as proof that cannibalization is not happening.
Disney expects new initiatives, such as Wal-Mart's
Synergy without the sin
Cracking open more revenue channels is clearly a good thing. Just consider the company's approach to be more Disney-centric in the future. Disney ditched the Buena Vista label from its video game division. Now it's called Disney Interactive. That goes with the company's strategy to have Disney-based titles account for 80% of its releases.
The same thing is happening on the big screen, with Disney scaling back its non-Disney celluloid in favor of a narrower slate of Disney-branded flicks. Done right -- as was the case with Pirates of the Caribbean -- it can ripple throughout the company. A hit film that can boost theme-park attendance, licensing opportunities, and Disney Channel ratings is more valuable to the company than a one-off popcorn-munching pleaser.
If an investment can pay off in more ways than one, that's synergy at its finest. Iger mentions the company's decision to double the size of Disney's cruise-ship fleet to four vessels. Yet new boats don't come cheap. Just ask larger rivals such as Carnival
Iger didn't mention this, but put it all together and it probably won't be long before Castaway Cay -- Disney's own island off the Bahamas that serves as a port stop for its ships -- becomes a standalone movie property. I'm so sure about it, in fact, that I'll go ahead and punch out the script the next time I get a break.
The World Wide Walt
Iger is pleased to see such a wide adoption of high-def television sets. That proves to him that entertainment will continue to be served in rich detail in a somewhat conventional setting. However, Disney won't be left behind in the delivery of mobile or online entertainment.
Disney's ESPN may have come up short in its effort to provide a mobile-phone offering, but now ESPN is working with Verizon
There is even more potential to be had in cyberspace. Disney has been streaming some of its more popular television shows on ABC.com for months, and the early indications are encouraging. An hour-long show includes four 30-second spots from the same advertiser, and 85% of the viewers are able to recall the sponsor.
Disney also remodeled its Disney.com site earlier this year, and the new 'do is paying off. By providing a family-friendly online experience, Disney is trying to create an experience-driven destination that nurtures community. More than 100 million videos a week are being streamed off the site.
Character-based sites are also playing out well for the company. The recent launch of a Tinker Bell application that allows visitors to create their own customized fairies has been a smash. The company hasn't marketed that particular Internet destination, yet 550,000 fairies have been created in the first month. Similar experiences are in the works for other popular Disney properties, in moves that will give the company a way to reach like-minded individuals.
Yes, this is a story that Iger doesn't mind telling. It's also a story that seems to keep getting better and better under his leadership.
More Foolish magical analysis:
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Wal-Mart is an Inside Value pick.
Longtime Fool contributor Rick Munarriz enjoys taking his family to amusement parks of all sizes, all over the country -- including several yearly Disney World trips. He owns shares in Disney. He is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy.
