Analysis: Status quo at Disney?

By PAT NASON, UPI Hollywood Reporter   |   March 14, 2005 at 5:51 PM   |   0 comments

LOS ANGELES, March 14 (UPI) -- The selection of Robert Iger to succeed retiring Walt Disney Co. Chairman Michael Eisner seems to represent a desire by the company's directors to maintain the status quo.

The board decided Sunday that Iger should succeed Eisner, following a 21-year run during which Eisner oversaw the transformation of Disney from an underperforming movie studio and theme-park operator into one of the largest and most powerful entertainment companies in the world. Iger was Eisner's choice to take over the top job when he leaves Sept. 30.

Iger will take over a company that has annual revenue in excess of $30 billion, with more than 100,000 employees at theme parks around the world, broadcast operations including ABC and ESPN, and a movie library that includes thousands of titles -- hundreds of which are classics that perennially generate muscular home-video sales figures.

Eisner will retain a seat on the board until early next year, when the company has it annual meeting. After that he is expected to sever his relationship with Disney entirely -- but his impact on Disney has been so strong that it is likely to influence the company's direction for some time.

In a conference call with entertainment journalists announcing the selection of Iger, Disney Board Chairman George Mitchell called Iger the most qualified candidate the board had considered over 11 meetings it had on the issue of a successor to Eisner.

"We believe Bob Iger represents the right blend of continuity," said Mitchell, "and the recognition of needed change."

Iger has been Disney's president and chief operating officer since 2000.

Gigi Johnson, executive director of the entertainment and media management institute at UCLA's Anderson School of Management, told The Los Angeles Times that, by choosing Iger, the board was endorsing continuity.

"He's got his mouse ears attached on solidly," said Johnson. "It will be hard for him to make changes."

Richard Greenfield, an analyst at Fulcrum Global Partners, told the paper the selection of Iger means "there will be no extreme makeover at Disney."

However, continuity at Disney right now is a two-edged sword. James B. Stewart, author of the current best seller "DisneyWar," told United Press International that Disney is in need of a creative revival.

"The status quo is not satisfactory," hew said.

Stewart pointed out that the company is nearing the end of an enormously profitable relationship with Pixar Animation Studios and has nothing in the pipeline to replace the revenue stream that was generated by such Pixar hits as "Toy Story" and "Finding Nemo." He also said Disney's live-action film operation has been faltering lately.

Continuity will also mean that Iger has to contend with dissident shareholders, led by Roy Disney and Stanley Gold, who are unlikely to be any happier with Iger's leadership than they have been with Eisner's.

"Iger is the one choice that keeps the war going," said Stewart. "It's hard for me to see how the directors would feel that it's in Disney's interest to keep the status quo going."

Stewart said the very process the board followed in searching for a successor to Eisner is likely to fuel dissatisfaction among shareholders -- 45 percent of whom voted no confidence in Eisner's continued leadership just one year ago.

"That's what set this in motion," said Stewart. "That's why Eisner had to resign."

Roy Disney and Gold, who quit the board in 2003 and led the shareholders' revolt against Eisner in 2004, posted a message on their Web site last week criticizing the board for reportedly deciding that Eisner would be present at all interviews with candidates to succeed him.

"If this is true, the practice could make a mockery of the idea that candidates should have meaningful interchanges with the non-management members of the board," said Disney and Gold. "Quite honestly, it would subvert the entire search process."

According to Daily Variety, Disney answered the objection by accusing Roy Disney and Gold of being "consistently wrong" in the past. However, Variety said the company wouldn't comment specifically on the complaints.

Disney shareholders will have to decide now whether they will accept the decision of the board or whether they will agree with dissidents that the selection process was a sham.

Stewart said that outcome will depend on how forthcoming Disney is with information about the search for a new chairman. So far, the company has shared very little information with the public, but Stewart said big shareholders -- including major pension funds -- could demand that Disney provide a more thorough account of how the board chose Iger.

Following Sunday's announcement by the Disney board, Roy Disney and Gold accused the board of handing the job to Iger "by default" by failing to identify any candidates from outside the company.

"Shareholders should seriously consider replacing this board and starting anew," they said in a statement.

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(Please send comments to nationaldesk@upi.com.)

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