Building a Better Mouse

By Sonja Steptoe / Burbank

Walt Disney chief executive Bob Iger is the antithesis of a brash showman. At last January's Consumer Electronics Show, a high-tech hype-fest in Las Vegas, another CEO peddled a two-wheeler onstage to tout his company's new bicycle-powered cell-phone charger. The understated Iger, wearing spectacles, a dark suit and white shirt, talked about strategy and happily let Pirates of the Caribbean producer Jerry Bruckheimer, ESPN commentators and Lost cast members take the lead in unveiling Disney's multimedia-entertainment fare.

When Iger took over the top job at Disney in 2005, many dismissed the new chief, a onetime local-TV weatherman who had risen steadily through the corporate ranks, as a lackey of the previous CEO, the notoriously difficult Michael Eisner, whose boldness was often considered an asset. Many inside and outside Disney questioned whether Iger, 56, had the maverick's instincts to run the storied company. Shareholders Stanley Gold and Roy Disney even filed a lawsuit to void his election by Disney's directors.

What Iger lacks in personal pizazz, however, he has made up for in strategic smarts. He's charting an ambitious course to recast the 84-year-old former cartoon studio as a creatively nimble, technologically savvy global-entertainment company. The results so far have won over even jaded money managers and analysts. Disney's stock has soared 42% since Iger took over, and its profits in the first half of fiscal 2007 jumped 79% over last year, to $2.63 billion. More important, "He has succeeded in persuading the Street to think of him as a technologist," says David Miller, media-and- entertainment analyst at SMH Capital. That's a new and crucial part of the CEO job description at Disney, where creativity and dealmaking have traditionally been more essential.

Iger proved he is a shrewd operator early on. The day he was named CEO in the spring of 2005, he spoke to Steve Jobs, the Apple Computer and Pixar Animation chief executive whose stormy relationship with Eisner led him to court new production and distribution partners for Pixar's films. By the time Iger officially took over in October of that year, he and Jobs had mopped up the bad blood and discussed ways of adopting the iTunes model for selling video. They shook hands two weeks later on a pioneering deal to sell ABC programs on the video iPod. In January 2006, Disney purchased Pixar for $7.4 billion, and Jobs joined the company's board. "On paper, [Iger's] strategy is just as good as any of his competitors'," says Miller, "but Bob has been more proactive, especially in getting those agreements with Apple and Pixar."

The Apple partnership gives Disney an elegant solution to a dilemma facing every entertainment company in the digital age: Will the content companies (movie studios and TV producers) rule the day, or will the distribution channels (cable companies and devicemakers) prove more powerful? The deal with Apple gives Disney a strong presence on both sides. But Iger hopes to go much further--he wants Disney and Pixar characters and programs on the screens of every type of electronic gadget imaginable. "More and more people are using this technology to do all sorts of things," he says. "We need to be in the digital space at a much higher level to serve them better."

In his living room, Iger saw the way the world was changing. "My two sons, who are 4 and 8, were turning more and more to the computer--rather than the TV, DVD or the video-game console--as their primary form of entertainment," he says. Iger, a longtime technophile, prefers viewing early cuts of his studios' movies and TV shows on the 30-in. cinema-display computer screen on his credenza, not the 50-in. flat-screen television nearby. "The question became, 'What are we as a company going to do about this trend?'" he says. "You can't stand in the way of the consumer juggernaut that technological advances have created because, if you try, you'll lose or be marginalized."

The makeover of Disney.com unveiled in February, reflects that mind-set. The content of the site used to be heavy on information and light on entertainment. Now the portal is billed as a one-stop shop for all things Disney, from fan chat rooms to interactive games to video of movies both vintage and new and do-it-yourself vacation planning to Disney destinations. To capitalize on the mania surrounding the release of Pirates of the Caribbean: At World's End, the elaborate DisneyPirates.com site plunges visitors deep into the virtual world of Captain Jack Sparrow, beyond the usual trailers, screensavers and photo galleries. Cell-phone users can buy ringtones based on songs from the movie soundtrack. There are online games--downloadable to mobile devices--in which players build their own ships, outfit their own pirates and search for buried treasure.

Producers at the ABC, ESPN and Disney Channel sites also dreamed up derivative content based on the TV networks' programming, including live webcasts of stage concerts by the cast of High School Musical and interactive podcasts for devotees of Lost. "The Internet is not just an information, communication and commercial medium anymore," Iger says. "It's now an entertainment medium, and so it's essential for us to find ways to use it to deliver our branded products and programs."

As his strategic goals are revamping Disney's business, Iger's loose-reins management style is breathing some air into the corporate culture. He abolished the Politburo-like strategic-planning unit that was created and run by Eisner, and encourages senior executives to be more entrepreneurial. Iger tapped Anne Sweeney, who runs Disney's television group, to negotiate the iPod deal with Apple and gave her the autonomy to close it in three days. While the Internet group rebuilt the Disney website, Iger made himself available as a sounding board but left them alone--until the one night when he personally delivered moral support, in the form of two cases of Red Bull. "My role is to create a vision and strategy and then lead people in the direction," Iger says. "But I allow them to get there on their own."

Looking ahead, investors want to see the fruits of Iger's fresh direction: new revenue streams from Disney's maturing broadcasting business, higher profit margins at the consumer-products unit, another year of box-office winners from the movie studio and signs that Disney's revamped online operation can contribute significantly to the bottom line. "The $64,000 question is: Where does Disney go from here?" says Miller, of SMH Capital. The Internet Group is working on YouTube-style user-generated content, MySpace-style personal Web pages and online social networking on Disney.com that is safe and family-oriented.

Gold and Disney, who eventually dropped their lawsuit over Iger's appointment, now count themselves among the Iger believers. "The ultimate outcomes of the technological changes that are occurring in the business aren't clear to anyone," Gold says, "but Bob is working hard to figure it out."