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Company Update
A review of the Walt Disney Company
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Alex Stroup, editor

Welcome to the jungle

A new monthly look at the Walt Disney Company

Wednesday, May 25, 2005
by Alex Stroup, editor
Go directly to: Television Networks and Cable | Hong Kong Disneyland | Disneyland Paris | Corporate Stuff

The Company Update is a new (and for now) monthly column at MousePlanet. It is still very much in a defining stage, so any comments or suggestions you have are more than welcome (e–mail). We're always pleased by just how many people read our daily articles on MousePlanet and participate in discussion on our MousePad message board. Particularly popular are our Park Updates for Disneyland and Walt Disney World. They keep the readers informed on the little things and they give us an outlet for minor updates that don't necessarily warrant a full column. Unfortunately, those little things don't restrict themselves to Disneyland and Walt Disney World.

This column is essentially a Park Update for the rest of the Walt Disney Company. Anything of interest from the many arms of the Mouse may be included, though it can't possibly be all–inclusive.

Television Networks and Cable

The 2005 Upfronts

Every year in May, the major television networks gather the press around and announce their fall schedules. This year's “upfront” for ABC, in particular, has a lot riding on it. In April 2004, ABC was sitting in last place among the four major networks—a performance so bad that it was thought to have contributed to the historic no–confidence vote on Michael Eisner at the 2004 shareholders meeting.

So as the 2004 season wrapped up, it came as no surprise when Entertainment Chairman Lloyd Braun and Entertainment President Susan Lyne were fired and replaced by Steve McPherson. This change meant that while it was McPherson who announced the 2005 fall schedule, he was really announcing the decisions made by his predecessors. Check out this April 2004 article by Tim Goodman of the San Francisco Chronicle to get a good sense of where McPherson stood. The one thing Goodman got wrong in that article, though, was the assumption that 2005 was going to be worse than 2004, with McPherson able take solace in knowing he could shift the blame.

Instead, Lost and Desperate Housewives became instant phenomena and a surprising number of new shows did well enough to survive for a sophomore season (particularly mid–season replacement Grey's Anatomy). By halfway through the 2004 season, ABC regularly competed for second place among the networks, and McPherson is now facing a different problem: How to put his own imprint on the schedule without screwing up a good thing.

First up is culling the herd. These shows, which were on the schedule in 2004, will not be back this fall.

  • 8 Simple Rules – after three seasons and 76 episodes
  • The Benefactor – Mark Cuban is no Donald Trump, apparently
  • Blind Justice
  • Complete Savages – just making it official, the show didn't last half a season
  • Eyes – probably the cancellation with the most vocal fans
  • life as we know it – another one that was killed in the middle of the season
  • My Wife and Kids – after five seasons and 123 episodes
  • NYPD Blue – died a natural death after 12 seasons and more than 260 episodes

Next, you tweak the returning shows. There is a lot of movement in the fall schedule for ABC. Outside of Sunday, which will remain completely the same, only four other time slots will be filled by the same show: Hope & Faith and 20/20 on Friday nights, Saturday remains a movie night, and of course Monday Night Football will be around until January. Some people are scratching their head at executives moving Lost and Alias. With its move to Wednesday nights at 9 p.m., Lost will be going against American Idol on Fox; moving Alias to Thursday night is probably an attempt to take advantage of NBC's increasing weakness on that night.

Finally, you add in the new shows. 12 new shows were announced. Five will debut in the fall, two will debut on Monday nights when Monday Night Football is done for the season, and the other five are benchwarmers waiting to get in the game when someone else gets canceled.

The scheduled new shows are:

Commander–in–Chief – Ladies and gentleman, the president of the United States. Has the luster faded sufficiently from West Wing for the country to be ready for a new presidential drama? If not, is the hook of this president being not only a woman but much taller than Martin Sheen going to pull them over, anyway? Geena Davis returns to network television, this time with a drama. The first thought was that she isn't old enough to play the president, but she's almost 50 years old—older than when Clinton took office. A strong supporting cast includes Donald Sutherland.

Emily's Reasons Why Not – This sitcom sees another female movie star trying to make it on TV. Heather Graham apparently enjoyed her multi–episode gig on NBC's Scrubs last season. Graham plays a big–city professional woman who has very strong thoughts on how to get through life (her reasons why not). Until, that is, she meets a guy who makes her want to break all of those rules.

Freddie – Freddie Prinze, Jr., is a free–swinging kind of guy. Living the good life with his great job, great apartment, and great freedom. This is ruined when several of his female relatives move in unexpectedly. Sounds like two–dozen other sitcoms—who knows if Prinze can somehow make it fresh?

Hot Properties – Four high–powered Realtors live out their assigned archetypes in this office sitcom. You have the older woman starting a new family with a much young husband; the addled self–help addict; the naive rich girl; and the woman back in the dating pool after divorcing her gay husband.

Invasion – Another suspenseful mystery show that explores whether aliens are among us. NBC has one this season as well (Fathom), but Invasion has the benefit of the time slot after Lost, which is a decent pairing.

The Night StalkerWhy not remake a failed series from the '70s? Really, it is hard to think of a reason why a new version of 1975's Night Stalker wouldn't be an instant hit. Piling onto the supernatural bandwagon, this series stars Stuart Townsend as a reporter suspected of killing his wife. In the pursuit of the truth, in each episode he stumbled furthers into a supernatural world of crime and oddity.

What About Brian? – Brian is in his mid–30s an the last one in his social circle not yet married. Apparently at least 22 hours of drama every year can be mined from this.

As those shows get canceled (or more hopefully, According to Jim), waiting in the wings are:

Crumbs Jane Curtin gets the plumb role in this sitcom, playing the mother of two sons who return home after she is released from a psychiatric hospital following a breakdown in which she tried to run over their father. Yes, it's a comedy. Eddie McClintock and Fred Savage play the sons (apparently, Savage is gay and, at least with his mother, in the closet).

The EvidenceEvery episode of this police procedural will begin with a videotape summary of all the evidence in a case. Then the episode will show two detectives (Orlando Jones and Nicky Katt) figuring out how all the evidence connects together to find the perp.

In Justice Another procedural, this time legal instead of police. Kyle MacLachlan's character is a lawyer in charge of a nonprofit that tries to free the wrongfully convicted.

The Miracle Workers Thankfully, the only new reality show announced by ABC (though four others remain on the schedule), this team of doctors and specialists tour the country looking for those in need of their services.

Sons & Daughters A sitcom from Fred Goss about small–town family life. Similar to Goss's Significant Others for the Bravo Network, much of each episode will be improvised by the actors.

  8:00 8:30 9:00 9:30 10:00 10:30
Sunday
Extreme Makeovers:
Home Edition
Desperate Housewives
Grey's Anatomy
Monday
The Bachelor
Emily's Reasons
Why Not
Jake in Progress
What About Brian?
Tuesday
According to Jim
Rodney
Commander–in–Chief
Boston Legal
Wednesday
The George Lopez Show
Freddie
Lost
Invasion
Thursday
Alias
The Night Stalker
Primetime Live
Friday
Supernanny
Hope & Faith
Hot Properties
20/20
Saturday
ABC Movie of the Week

Television Ratings

It doesn't seem like many, but as the May sweeps come to a close it looks like ABC will have put four shows into the top 20. While this is nowhere near CBS's dominating nine (including CSI, the top–rated show of the 2004–05 season) it is a vast improvement over 2003–04 when only Monday Night Football made the list. The four are Desperate Housewives (4th), Grey's Anatomy (9th), Monday Night Football (11th), and Lost (15th).

Emmys

Disney took home 16 Daytime Emmys in two ceremonies held on May 14 and May 20. Winning shows include General Hospital, One Life To Live, and All My Children on ABC, Who Wants to Be a Millionaire in syndication, and Kim Possible, Brandy & Mr. Whiskers, and Rolie Polie Olie on the Disney Channel.

All My Children tied The Ellen Degeneres Show for most wins with five.

Hong Kong Disneyland

Skip the soup?

Several environmental groups have gone public after Disney rejected a request that they not offer shark fin soup as part of high–end wedding banquets that they'll be offering at the Hong Kong Disneyland Hotel. Hong Kong is the world center for the harvesting of shark fins and the most common harvesting method is illegal in the United States.

While shark fins sell on the open market for several hundred dollars per pound, shark meat is only pennies per pound. As a result many fisherman will catch a shark live, remove all its fins and then throw the rest back into the ocean where they leave the shark to die. The U.S. Shark Finning Prohibition Act of 2001 prohibits this practice on U.S. vessels anywhere in the world, but no similar prohibition exists in Hong Kong.

Environmental and animal rights advocates, including Greenpeace and Worldwide Fund for Nature requested that Disney remove this dish from their banquet menu. While legal in Hong Kong, they say serving the soup is contrary to Disney's stated environmental policies (link), particularly this clause:

“Work to identify issues that may not yet be identified by law, but could result in adverse environmental effects. Strive to exceed required levels of compliance wherever feasible.”

In response to their request, Walt Disney Company spokeswoman Esther Wong provided this prepared statement:

“Hong Kong Disneyland takes environmental stewardship very seriously and we are equally sensitive to the local cultures.

“It is customary for Chinese restaurants and 5–star hotels to serve shark fin soup in Hong Kong as the dish is considered as an integral part of Chinese banquets.”

Kodak extends

In an announcement surprising nobody, it has been announced that Kodak will be the official supplier of camera productions and photo processing at Hong Kong Disneyland. In addition to the mandatory fleet of roving photographers, Kodak will also provide kiosks that allow guests to print photos from their digital cameras or cell phones.

Disneyland Paris

A new leader

Karl Holz has been announced as the new CEO of Euro Disney SCA, the holding company that operates Disneyland Paris. Holz replaces Andre Lacroix and is the sixth CEO since Disneyland Paris opened in 1992.

Lacroix was brought into the company in March 2003 after the opening Disneyland Paris's second gate, Walt Disney Studios Park, failed to meet expectations and began a cash hemorrhage after several years of profitability. Lacroix spent most of his two–year tenure working on deals to restructure the massive debt held by Euro Disney SCA, both from Disneyland Paris's initial construction and the €600+ euro price tag for the Studios park.

Now that those deals are done, the task will fall to Holz to find ways to draw people to his parks and reverse the operating losses that are likely to continue for years. Unlike Lacroix, who came from Burger King, Holz is an internal promotion. He was named president of Disneyland Paris last year, and before that he served as president of Disney Cruise Line, and was a senior vice president of Walt Disney World operations where he managed Epcot, Disney–MGM Studio, Downtown Disney, and 11 resort hotels. Before all of that, he was an executive with Knott's Berry Farm.

Corporate Stuff

An end to an era

After nine years, the American Family Association has ended its boycott of the Walt Disney Company (link). Citing the resignation of Michael Eisner and the change in relationship with Miramax as examples of positive changes, they are moving on to other fronts in the “culture wars.”

There is no indication that the 9–year boycott by AFA had any significant financial impact on the Walt Disney Company. AFA President Wildmon did not rule out reinstating the boycott if they feel Disney backslides. “If, for example, Disney removed the clear Christian symbolism from The Lion, the Witch and the Wardrobe film, then all bets would be off,” he said. Disney is, as far as he is concerned, “on probation.”

FAQ: What is a 10b5–1 Trading Plan?

Though I've spent my fair share of time working the financial services industry (five years developing Web products for a major financial services company), I have no formal training in it and lived with my Dictionary of Finance and Investment Terms by my side. So I frequently see terms in business coverage of the Walt Disney Company that I don't understand, and I'm sure it is the same with you. So one feature I'd like to have in this column is an attempt to define those terms. I'll do them as I stumble across them, or as they're requested of me. So, if you see a term you don't understand or want to know why something works the way it does (not just with stock, but any part of the company) feel free to ask me and I'll do my best to figure it out.

Today's new phrase is a 10b5–1 Trading Plan. While compiling this article, news came across the wires that CEO–Elect Robert Iger had sold more than 124,000 shares of Disney. The shares were part of a stock option grant set to expire in February 2006, and he made a profit of about $870,000 before taxes. The part that got me wondering, though, was the tag that the transaction had been executed under a “Rule 10b5–1 Trading Plan.”

Just what is a Rule 10b5–1 Trading Plan? It turns out it is a tool available to company executives to sell their employer's shares. If you think about it, how can a high–level executive within a company not have inside information? Section 10B of the Securities Exchange Act of 1934 prohibits fraud and deceptive practices in trading securities, and various Securities Exchange Commission rules defined exactly what constituted fraudulent and deceptive practices.

Over the years, though, contradictory case law developed on whether it was illegal to act on insider information or to simply possess insider information at the time you acted. To settle these questions, in 2000 the SEC put forward Rule 10b5–1, which created an opportunity for corporate executives to predefine the basis on which they would purchase or sell stock. As long as any relevant “insider information” was learned after the plan was created, it would not be considered insider trading.

Robert Iger had a Rule10b5–1 plan filed that dictated these 124,00 shares of stock would be sold when the stock price reached $28, which happened last week. So even if it turned out that Iger learned something last Wednesday to indicate that the share price would fall precipitously, he would not be charged with insider trading.

Price Report

Though the price of shares in Disney briefly spiked over $28 on May 20 before falling back down to $27.66 on May 24, prices are still up 4.3 percent from the May opening of $26.40. The big boost came on May 11 with the announcement of Disney's 2nd quarter earnings, in which earnings per share were up 27 percent from the same quarter a year ago. The stock is up more than 17 percent from a year ago.

Shares in Euro Disney SCA, the holding company that runs Disneyland Paris, have been bouncing around pretty consistently between €7.5 and €10 euros and remains well off from the €25 euros it was at a year ago.


Send your news tips, rumors, and comments to Alex here.

ABOUT THE EDITOR

Alex Stroup is a degreed librarian with an undergraduate degree in history. An avid reader, movie buff, and devoted “information junkie,”Alex currently lives in the Northern California Bay Area, where he spent several years developing Web products for a major financial services company. Alex is also the CEO of MousePlanet, and regularly reviews movies for MousePlanet's Screen reViews.

Click here to contact Alex.

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