Reference no: EM132149906
Case- Conflict at Walt Disney Company: A Distant Memory
Even in the midst of a severe recession in 2009 that depressed tourism and a digital revolution in the media business, the Walt Disney Company fared better than many of its rivals. Although spending at Disney theme parks was down and fewer consumers bought DVDs of its movies, Disney positioned itself well to ride out the recession by having a broad mix of businesses in its portfolio. For example, Disney’s sports cable network, ESPN, and ABC Family and Disney channels reported increases in operating profits in 2009. The creation and marketing of well-known franchises such as the Jonas Brothers helped fuel the company’s success. Also, in an attempt to capture a larger share of the growing online viewer market, Disney bought an equity stake in Hulu, the online video-streaming platform. In addition, the Disney Pixar creative partnership continues to produce popular and profitable animated movies such as Toy Story 3 and Inside Out.
To what degree have these business decisions been successful? Disney was ranked 57th in the Fortune 500 list of largest companies in 2015. Also, it surpassed other media companies, including Time Warner and News Corp., in terms of its stock performance and return on invested capital. Disney has become the largest media conglomerate in the world with a market value of about $49 billion.
Who has been the driving force behind many of these business decisions? Robert (“Bob”) Iger took over as CEO in 2005. Known to many as “hardworking and likable,” Iger has not only had to make a series of important business decisions regarding Disney’s current businesses and future direction, but he has also had to repair several important relationships that the former CEO, Michael Eisner, strained during the later stage of his 22-year tenure.
Disney’s controversial ex-CEO, Eisner, was credited with helping to turn around Disney in the 1980s and Page 306once again making it into a formidable American company. In the mid-1990s, Eisner astutely guided the company to add Capital Cities/ABC and ESPN to its theme park and film businesses. Following these and other well-received decisions, Eisner’s abrasive style and tendency toward micromanagement led to a series of public disputes and feuds with key players in the Disney world. Eisner fought with Miramax founders Harvey and Bob Weinstein over the financial details related to Disney’s purchase of Miramax films. Eisner and Steve Jobs, then CEO of animated film producer Pixar, bumped heads several times. While testifying in front of Congress about movie piracy, Eisner made some negative comments about Apple Computer (of which Jobs was also CEO). Jobs took this jab personally and did not forgive Eisner for making these comments. This feud eventually culminated with Jobs threatening to not renew the Disney–Pixar partnership after the release of Cars in 2006 if Eisner was still CEO of Disney. Eisner had a long-running dispute with two (former) influential members of Disney’s Board of Directors, Roy Disney and Stanley Gold, both of whom were outspoken critics of Eisner and his management team. For several years, these long-standing board members repeatedly called for Eisner’s resignation.
Soon after Iger took over as CEO at Disney in 2005, he reached out and reconciled the company’s differences with Roy Disney and Stanley Gold. They agreed to cease their “SaveDisney” campaign and work cooperatively with Iger. The dispute with the Weinstein brothers was resolved by making a settlement payment of $100 million (Disney kept the Miramax name and film library estimated at a worth of $2 billion). Iger repaired the relationship with Steve Jobs and Pixar, ultimately paving the way for Disney to pay $7.4 billion in stock to acquire Pixar Animation Studios in 2006 and adding Steve Jobs to the Disney Board of Directors.
In sum, the change in leadership at Disney from Michael Eisner to Bob Iger seems to have been a prudent one. Iger and his management team have made a series of good business decisions while systematically repairing key relationships that were strained during Eisner’s reign as CEO.
Questions
How would you describe the conflict between Michael Eisner and the Weinstein brothers, the two board members (Disney and Gold), and Steve Jobs? Was it functional or dysfunctional?
Which of the following best describes Michael Eisner’s and Bob Iger’s approaches to resolving conflict: dominating, problem solving, avoiding, or accommodating? Explain.
To what degree do you think Iger’s calmer and less confrontational approach to running Disney helped the company survive a major recession and position itself for continued success?