May 22, 2012
When the early trailers of The Avengers, the most recent Walt Disney movie, were released last year, the response was lukewarm. Though excited about seeing four well-known characters – The Iron Man, The Hulk, Captain America, and Thor – together in action for the first time, critics were skeptical if the scriptwriters could come up with an exciting but credible storyline to attract a new generation of viewers.
Few doubters now remain. The movie grossed more than $200 million in its first week, the biggest ever opening in the U.S. The Avengers continues to reign as the top box office holder across the world and, within two weeks of release, has crossed the $1 billion mark in gross collections. If movie buffs continue to throng cinema halls for another couple of weeks, The Avengers could easily become the biggest blockbuster ever. But for The Walt Disney Company and Bob Iger, its chairman and CEO, the movie is only the opening move in a well orchestrated business plan that will pay handsome returns for several years to come.
To capitalize on its success, Disney has already announced a sequel to The Avengers and is expanding the range of merchandise based on the movie. The characters are certain to feature prominently in new shows across all Disney theme parks and cruise ships. The company’s interactive media division is expected to launch new video games based on The Avengers. For Disney, the opportunities springing from one blockbuster movie may seem almost endless. It is a business strategy Disney has perfected, better than any of its competitors so far.
For Bob Iger, the success of The Avengers is yet another validation of his efforts to revitalize Disney after the company lost some of its luster during the first half of the last decade. The $4.3 billion acquisition of Marvel Entertainment and the production of very successful movies featuring comic book characters such as The Iron Man and Captain America were part of Iger’s strategy to broaden Disney’s collection of superheroes and adorable creatures that could capture the imagination of millions. It was Iger who also brought Pixar, the legendary animation studio co-founded by Steve Jobs and behind successful movies such as Cars, Toy Story, and Finding Nemo, into the Disney fold in 2005, soon after he became CEO.
“Bob is just very effective. He’s always calm and rational and
makes sense, and therefore he gets things done through other people.
He runs things without a heavy hand.”
— Warren Buffett, Fortune Magazine, May 2012
Considering his successes, it now seems ironic that Bob Iger was not the automatic choice to become Disney CEO, even though he had been the company’s president for five years beginning in 2000. It was reported that Michael Eisner, who was CEO for more than two decades since 1984, was doubtful of Iger’s ability to succeed him. On Eisner’s advice, Disney’s board of directors initially searched for an external candidate, but decided that Iger’s credentials were too strong to ignore.
Over a career now nearing four decades, Iger has gradually but surely worked his way to the top of one of the most influential companies in the media and entertainment industry. After graduating with a degree in television and radio, he started his career as the weather anchor at a local New York television station. He joined the ABC Network and worked in different positions for two decades, before becoming its president in 1993. Iger was expected to become the CEO of Capital Cities/ABC Inc., the parent company of ABC, but it was acquired by Disney in 1996. He then remained president of ABC Inc. and three years later, Disney gave Iger the additional responsibility of steering the company’s international operations. For the next five years, he was the second in command at Disney as the company’s chief operating officer. Incidentally, Iger is married to media personality and former model Willow Bay who is currently a Bloomberg Television contributor and a senior editor at The Huffington Post. Last year, Iger was appointed as an independent director of Apple, Inc.
Walt Disney has announced that Iger will step down as CEO to become executive chairman before the end of 2015, allowing time for succession planning. But, apart from identifying and grooming a successor, Iger has other challenges on his plate. The movie business is notoriously volatile and even established companies such as Disney can run up huge losses, such as the $200 million movie John Carter that flopped last year. That means Disney and Iger have to maintain the company’s theme parks and cable networks, including the Disney Channel, ABC Network, and ESPN, at the top of their game.
There is also the quest to expand to all corners of the globe. As purchasing power improves in large developing countries such as China, they will become very large media and entertainment markets and could eventually surpass the U.S. in revenues. For companies like Disney, establishing early beachheads in these fast growing markets is vital to secure a long-term future. Disney is now building a new $4.5 billion theme park in Shanghai that will open in 2015. But building businesses on foreign shores requires huge upfront investments with no prospect of profits for several years. Even seven years after opening, Disney’s park in Hong Kong is yet to break even.
Nevertheless, the growing popularity of its movie and animation franchises, as well as its television networks in foreign countries, will give Disney and Iger a head start over competitors. The Disney cruise ships are designed to take the theme park experience to a wider audience. Movies like The Avengers are dubbed in foreign languages and already fetch more revenues from international markets than the U.S. And, if Disney remains on the strategic course laid out by Bob Iger, before the end of the decade, not many will be surprised if they see a Mandarin-speaking Captain China in thousands of local cinema halls from Shanghai to Chengdu, defending the Middle Kingdom against evil aliens.
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