2005 was a year of transitions - both large and small - for The Walt Disney Company. After the tumultuous year of 2004 (link), it looked like things were going to continue and even accelerate. The year started with continuation of the shareholder lawsuit regarding the hiring and firing of Michael Ovitz, the ongoing campaign by the quickly-fading Save Disney movement and furor over succession of leadership in the company from Michael Eisner to Robert Iger (link). But then a funny thing happened. Things quieted down - quickly.
Iger came in with a plan. He wanted to take the management of Disney out of the spotlight and let the company speak for itself. It was a major change from the self-aggrandizing approach used by Eisner, and taking himself out of the limelight also helped to take him out of the crosshairs.
At the same time, Iger was exercising his skills as a fence-mender. He began a campaign to restore friendly relations with Steve Jobs, after the stormy relationship and falling-out between Jobs and Eisner. He persuaded Roy Disney to drop the Save Disney campaign and come back to the company in an advisory role (link). He also made a few small moves shortly after his appointment to show the business and fan communities that he planned to run things differently. Less than two weeks after his designation as CEO-elect, Iger disbanded Disney's Corporate Strategic Planning Division - referred to many inside the company as the "Business Prevention Department" - one of Eisner's creations, which had the reputation of interfering and planning the spontaneity and creativity out of each corporate project.
Another transition was the increasing speed at which the company embraced new technology, one of Iger's favorite subjects. From the purchase of British-based interactive TV games developer Mind's Eye and German game developer and publisher Living Mobile, to the launch of ESPN Mobile and announcement of Disney Mobile, to the groundbreaking sale of Disney, ABC and ESPN television shows for iPod portable video players through the iTunes Music Store, to launching podcasts for several arms of the company, taking Disney content with you became much easier this year.
Even the theme parks division got into the fray, as Walt Disney Parks & Resorts Online (WDPRO) launched the popular Virtual Magic Kingdom game, which integrated at-home play with in-park quests and merchandise tie-ins. But WDPRO didn't stop there.
In the spring, they launched an online component of the new Buzz Lightyear's Astro Blasters attraction at Disneyland, giving park guests a two-way tie between the park and their home. Upon exiting the attraction, guests could send a digital on-ride photo of themselves (with their scores showing) to their own email address for free (an almost unheard-of thing at Disney parks, of late) and, after viewing the photo, they could play an online Astro Blasters game that would help to light targets for players on the actual attraction inside the park.
In the fall, WDPRO tested two interactive handheld games inside Disneyland Park, trying out a new way to bring technology inside the park to enhance guest experiences (link). While many decried the handheld games as antithetical to the "Disney theme park experience," one could argue that the games only affected those using them, who might otherwise not be interested in the traditional Disney experience.
Other technology spread at the theme parks, as well. The "ticket tag" system, which had been tested with Walt Disney World Annual Passholders, was rolled out to all guests at the resort. Rather than requiring guests to get a hand stamp each time they left the parks in order to prove that they matched the already-used ticket when reentering a park the same day, biometric scanning was used to tie the guest to the ticket. Because the new system no longer required one cast member at each turnstile, this allowed Disney to reduce the workforce at the gates and redeploy the thinly-spread cast elsewhere. (We'll get back to the casting situation later).
Technology was also in the spotlight at the Disney Studios, as Chicken Littlebecame the first fully-digital animated Disney film. (Yes, Dinosaur was digitally-animated, but the backgrounds were largely live film footage.) In addition, the studios led the push for the installation of digital projectors in theaters, which allowed Chicken Little to be shown in Digital 3-D on 79 screens. Disney continued to push the format, and next year's "Meet the Robinsons" is targeted to be released on 750-1,000 digital screens.
Speaking of the studios, it was a fairly weak year for the company that dominated the box office two years earlier. The Chronicles of Narnia (3), Chicken Little (14), The Pacifier (16) and Flightplan (19) were the studio's only films in the top 20, only the first three cracking the $100 million mark. Disney was only the third-ranked studio this year, when including their Dimension and Miramax labels. (With Paramount acquiring DreamWorks, that combined company would bypass Disney, dropping it to fourth.)
Weighing heavily on the studios was the departure of the Weinstein brothers, who had built Miramax and eventually butted heads with Eisner one too many times. Iger was able to ease the negotiations for their departure, but could not stop them from leaving. Before their departure, they released a huge slate of films that had been piling up waiting for release dates. The resulting glut of smaller films resulted in none of them receiving much press individually, and they all quickly sank.
At the beginning of the year, it seemed an extremely long shot that Disney would ever come to terms on a new contract with Pixar Studios. The extremely profitable relationship had been torched by conflict between Eisner and Pixar (and Apple) boss Steve Jobs. Immediately upon ascending to the CEO-elect position, Iger began trying to break down the walls between the companies, and by year's end the work seemed to be paying off. Not only were most news sources reporting that a Disney-Pixar deal were imminent, but rumors were even flying of Disney buying some or all of Pixar, with Steve Jobs possibly being offered the position of Chairman of the Board at Disney. We shouldn't have to wait too much longer to find out how this story plays out.
Iger wasn't above raising his own ruckus, though. He incensed theater owners by suggesting that movies should be released on DVD much sooner, maybe even while the movie was still playing in first-run theaters. As the year ended, more people seemed to be warming to the idea, though no theater owners had broken ranks yet.
The ABC television network kept building on 2004's successes. As some shows cooled, other shows got hot to pick up the slack. ABC became so confident of their nightly programming that they agreed to pass Monday Night Football, an institution on the network for 33 years, to sibling network ESPN, one of the hottest brands at the Walt Disney Company. While ABC's ratings are still good, it is not the number one network this year. Revenues remain strong, and the network should get a boost from broadcasting this year's Super Bowl on February 5.
The Disney theme parks had a year of extremes. From the excitement of the Happiest Homecoming on Earth at Disneyland Park with the reopening of Space Mountain and refurbishment of the Enchanted Tiki Room to the Florida version of Disneyland's 50th birthday celebration with newly-cloned attractions opening in each of the four theme parks, the year had a whole host of highs.
At the other end of the spectrum, Walt Disney World suffered a series of public relations nightmares, as first a 4-year-old boy died after riding Mission: Space at Epcot, then a British teenager had a massive heart attack after riding the Twilight Zone Tower of Terror and - at last report - still remains in a vegetative state in the hospital and, finally, a 12-year-old girl died after collapsing at Typhoon Lagoon. While none of the deaths were related to the operation of the attractions and were in fact due to pre-existing medical conditions in the victims, the three series of "Disney Death" headlines in the span of just over two months set the year's celebrations back a bit.
Other highs included record attendance at all stateside parks, the ranking of Disney parks in the top eight slots worldwide in terms of attendance, the successful West Coast trial of the Disney Cruise Lines, a restructure of Euro Disney, SCA (the owner/operator of Disneyland Paris) that seems to be moving the company to a slightly more stable financial footing, and the opening of Hong Kong Disneyland.
Lows included lower-than-expected attendance and revenues at the new Hong Kong park, a pair of chemical spills at the California parks in December, a fire at the Grand Californian Hotel, an accident on the California Screamin' coaster at Disney's California Adventure, and the admission of liability in the fatal 2003 accident on Big Thunder Mountain Railroad in California.
In corporate news, Disney Chairman George Mitchell agreed to stay on one additional year beyond his planned retirement date to allow for more time to search for a suitable replacement (and, perhaps, to woo Steve Jobs?). Two new independent directors were added. Many of "Eisner's boys" were reassigned to other positions or agreed to leave the company as the changing of the guard continued. Eisner himself left the board of directors on the day that he retired as CEO (link), rather than finishing out his term.
In the meantime, both the Southern Baptists and the American Family Associate ended their boycotts of the company, partly implicating the departure of Eisner as one of the primary reasons for the change.
The company's stock price dropped nearly four points in 2005, returning the point it was at when 2003 ended. This may be seen as taking a "wait and see" approach to Iger's leadership, or as a retrenchment now that the company has stabilized following the tumult of 2004. Analysts predict, however, that the company's outlook is good, and that the stock price will rise in 2006.
The 2005 annual shareholder meeting was held in the wintry climate of Minneapolis in February (link). It was thought to be a response to the large, raucous crowd at the previous year's meeting in Philadelphia, intended to shrink the crowd and create a much quieter event. Of course, by the time that the meeting rolled around, Save Disney was largely in hibernation and the meeting was largely uneventful. It's still anybody's guess where and when this year's meeting will be held, but if Iger is as good a fence-mender as I think he is, I would expect the meeting to return to Anaheim, or perhaps to Walt Disney World. We'll have to wait and see on that one.
Some other transitions this year came in the area of staffing. A great deal of downsizing and outsourcing took place in many areas, including Information Technology, Imagineering and Feature Animation (link) early in the year. These moves received mixed reviews and even inspired angry responses from some quarters. However, when asked about Imagineering in particular, Iger noted that "any steps taken are not designed to dismantle the group or its capabilities."
Larger problems presented themselves in the areas of theme park staffing, as the "presenteeism" crackdown at Disneyland caused major staffing shortages (link) and the lack of available workforce to fill the 55,000 positions needed at Walt Disney World had a similar effect there. Part of these problems are due to the low wages being paid by Disney to front-line staff on both coasts, especially in light of what is being paid by the non-theme park employers to job seekers. Walt Disney World has resorted to trying to bus people in from surrounding counties, holding job fairs for Hurricane Katrina victims and other, even more desperate measures to fill the job vacancies.
Compared to the busy 2004, the year 2005 was downright quiet (at least outwardly), yet it still held some significant changes for the company. From the CEO succession to the end of the shareholder lawsuit, from the end of the Miramax saga to the thawing relations with Pixar, the listing ship appeared to slowly right itself.
It will be interesting to see what new technological directions Bob Iger takes the company in. The date and location of the annual shareholder meeting should be announced soon. New attractions at both Disneyland (Sully and Mike to the Rescue) and Walt Disney World (Expedition: Everest) are due to open soon. Cars, Pirates of the Caribbean 2, and other major motion pictures are due to debut. A new Pixar deal may be done. A new chairman should be named.
There's much in store for 2006, and we at MousePlanet look forward to continuing to bring you the news and analysis that you've come to expect from us. Stay with us for what looks to be an interesting year.
(Send an email to Mark Goldhaber)
Mark (@MPMark) is a veteran of many trips to Walt Disney World starting in 1972, with a few Disneyland trips thrown in for good measure. He is also a Disney stockholder and a Disney Vacation Club member. Mark brings you the latest news about Walt Disney World in the weekly Walt Disney World Update. He also fills you in about behind-the-scenes stories and other points of interest in his World View column and occasionally contributes stories about the Walt Disney Company itself in the Business of Magic column. Mark is an information technology administrator working for the State of New York. He lives in the suburbs outside Albany, New York, with his wife and son.
