Iger's challenge: how to reanimate Disney

The new test for media firms, increasingly, is balancing creativity and bottom lines.

The latest chapter in the saga of Mouse House underlines a larger story unfolding in the media business, in which economies of scale are matched by the hazards of scale.

The announcement this week that Robert Iger will move from the No. 2 spot at Walt Disney Co. to replace Michael Eisner as CEO has met mixed reviews, but what no one disputes is the magnitude of the challenges facing whoever runs a mammoth entertainment company where the pressures of creativity and financial performance collide.

Some say that by tapping a man with inside knowledge of the company, Disney's board is finally moving toward a sounder footing, replacing the often-abrasive Eisner a year earlier than expected. In that sense, the move may portend changes elsewhere, as aging media moguls hand the reins of American culture to a younger - and perhaps more temperate - generation. (Next up, perhaps: Viacom, News Corp., Time Warner, Comcast, NBC/Universal).

Others see the choice of Iger as not so much safe as sorry. They say it's more evidence that bottom-line concerns are squashing the creativity out of American entertainment. The larger a conglomerate gets, the harder it is to maintain a unique and vibrant culture - especially one spawned by a founder such as Walt Disney.

"Pleasing stockholders is a very different goal than pleasing audiences or critics," says media analyst Robert Thompson. "Here you have a company that for a good portion of the 20th century had cultural dominance comparable to the church in medieval times ... reduced to a revolving door of interchangeable beancounters."

He and others see a steady shift from creative to business values in America's top media companies.

By some measures, the results are impressive: Although Disney's stock faltered as this decade opened, it has far outpaced the Standard & Poor's 500 stock index over the longer span of Eisner's 20-year tenure - something it failed to do during the 1970s.

But such corporate expansion - ownership of other movie studios, more theme parks, ABC television - also makes it harder to maintain a unique identity.

To critics, the selection of Iger - a man known more for organizational and financial skills than an eye for hit films and TV shows - does little to ease concern that Disney, despite the famous name it bears, has become just another media conglomerate.

In the case of Disney, insiders say that the studio lost its way when it gave up on the founder's core vision and shifted the focus to profitability. Many say that began in the mid-1980s when new CEO Michael Eisner began to churn out cheap, direct-to-video sequels of Disney hits (such as "Aladdin," "Beauty and the Beast," "Little Mermaid," "Lion King," and more).

In more recent years, the traditional animation done by hand - the Disney hallmark worldwide, which started with "Snow White" and "Bambi" some 70 years ago - has been cut back, relegated to cheaper, direct-to-video and Saturday morning style cartoons, says longtime animator Lee Crowe, who worked on numerous Disney features, including the recent "Brother Bear," and "Little Mermaid."

"Disney has undercut itself with all these cheap products," says Crowe, who is now on the faculty of the Art Institute of Atlanta. "Walt himself ... never wanted to do sequels to classics," she points out, adding even the theme parks have changed focus. "Now," she says, "they're more like shopping malls with a few rides at each end."

Like other visionaries-turned-businessmen, such as Ted Turner (CNN) and Steve Jobs (Apple and Pixar), Roy Disney, the last remaining family shareholder, charges that the company has lost its soul by emphasizing profits over innovation. But that charge overlooks one important distinction, say other observers. These are publicly owned companies. And in the words of the incoming Iger, "shareholder value is of utmost importance."

"I don't think the issues are particular to Disney," says Chris Lanier, president of the Motion Picture Intelligencer, a consulting firm. "Everyone is in the same boat. Hollywood has been looking to other strategies for making money, rather than focusing on the core product of figuring out what audiences really want and giving it to them."

All the above leads to the $64,000 question facing much of Hollywood, say industry observers. Is it possible for a profit motivation to coexist with innovation? The trick may be to balance the profit drive with the cultivation of risk-taking and individuality in each division.

Disney is now a mature titan in a marketplace saturated with choices, says Joel Goldhar, professor at Illinois Institute of Technology. "We now have lots of ways to be entertained," he says, making a distinct identity more important than ever, he says.

The management style the company adopts, now that the twin issues of Eisner's departure (this fall) and his successor have been resolved, will determine its future, says George Geis of the UCLA Anderson School of Management. "Iger's particular form of creativity is more as a creative executive," says Geis. "Whether that will translate into Disney creativity, is in question."

Industry watchers suggest that unless Iger can come up with a plan to encourage creativity at the same time as he nurses the company's bottom line, he will suffer the same fate that bedeviled Eisner through much of his reign - the continued exodus of top talent. The list of creative executives as well as creative partnerships in trouble during the current CEO's tenure is long and well-publicized. These include relationships with the highly successful Pixar and Miramax.

Wall Street may be comfortable with Iger, who is a longtime corporate manager, but unless creativity comes first, corporate culture has a way of selling the goose that lays the golden eggs, says media analyst Thompson.

"American business has never known what to do with with the flaky, unpredictable, seat-of-the-pants kind of thought that is the essence of creativity," he says. "They can't handle it because it's irrational. Good storytelling and innovation and pushing the envelope are all things that might be the foundation of a whole new kind of programming, which is of course, just what companies most need. But," he adds with a laugh, "none of that is rational. Market research can't produce it, no matter how hard they try."

Disney is not the only company facing the same challenge of creativity vs. bottom line. "Films are designed primarily to be entertainment," says Chris Lanier of Motion Picture Intelligencer. "But the entertainment content of Hollywood films has been dropping steadily for decades. Until studio heads address that, the outlook will be grim, at Disney and everywhere else."