Case 111 Conflict Walt Disney Company Distant Memory Even Midst Severe Recession 2009 Depr Q28689118

Case 11.1: Conflict at Walt Disney Company: A DistantMemory?

Even in the midst of asevere recession in 2009 that depressed tourism and a digitalrevolution in the media business, the Walt Disney Company faredbetter than many of its rivals. Although spending at Disney themeparks was down and fewer consumers bought DVDs of its movies,Disney positioned itself well to ride out the recession by having abroad mix of businesses in its portfolio. For example, Disney’ssports cable network, ESPN, and ABC Family and Disney channelsreported increases in operating profits in 2009. The creation andmarketing of well-known franchises such as the Jonas Brothershelped fuel the company’s success. Also, in an attempt to capture alarger share of the growing online viewer market, Disney bought anequity stake in Hulu, the online video-streaming platform. Inaddition, the Disney Pixar creative partnership continues toproduce popular and profitable animated movies such as ToyStory 3 and Inside Out.

To what degree havethese business decisions been successful? Disney was ranked57th in the Fortune 500 list of largest companies in2015. Also, it surpassed other media companies, including TimeWarner and News Corp., in terms of its stock performance and returnon invested capital. Disney has become the largest mediaconglomerate in the world with a market value of about $49billion.

Who has been thedriving 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 seriesof important business decisions regarding Disney’s currentbusinesses and future direction, but he has also had to repairseveral important relationships that the former CEO, MichaelEisner, strained during the later stage of his 22-year tenure.

Disney’s controversialex-CEO, Eisner, was credited with helping to turn around Disney inthe 1980s and Page 306once again making it into a formidableAmerican company. In the mid-1990s, Eisner astutely guided thecompany to add Capital Cities/ABC and ESPN to its theme park andfilm businesses. Following these and other well-received decisions,Eisner’s abrasive style and tendency toward micromanagement led toa series of public disputes and feuds with key players in theDisney world. Eisner fought with Miramax founders Harvey and BobWeinstein over the financial details related to Disney’s purchaseof Miramax films. Eisner and Steve Jobs, then CEO of animated filmproducer Pixar, bumped heads several times. While testifying infront of Congress about movie piracy, Eisner made some negativecomments about Apple Computer (of which Jobs was also CEO). Jobstook this jab personally and did not forgive Eisner for makingthese comments. This feud eventually culminated with Jobsthreatening to not renew the Disney–Pixar partnership after therelease of Cars in 2006 if Eisner was still CEO of Disney.Eisner had a long-running dispute with two (former) influentialmembers of Disney’s Board of Directors, Roy Disney and StanleyGold, both of whom were outspoken critics of Eisner and hismanagement team. For several years, these long-standing boardmembers repeatedly called for Eisner’s resignation.

Soon after Iger tookover as CEO at Disney in 2005, he reached out and reconciled thecompany’s differences with Roy Disney and Stanley Gold. They agreedto cease their “SaveDisney” campaign and work cooperatively withIger. The dispute with the Weinstein brothers was resolved bymaking a settlement payment of $100 million (Disney kept theMiramax 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 stockto acquire Pixar Animation Studios in 2006 and adding Steve Jobs tothe Disney Board of Directors.

In sum, the change inleadership at Disney from Michael Eisner to Bob Iger seems to havebeen a prudent one. Iger and his management team have made a seriesof good business decisions while systematically repairing keyrelationships that were strained during Eisner’s reign as CEO.

Questions

How would you describethe conflict between Michael Eisner and the Weinstein brothers, thetwo board members (Disney and Gold), and Steve Jobs? Was itfunctional or dysfunctional?

Which of the followingbest describes Michael Eisner’s and Bob Iger’s approaches toresolving conflict: dominating, problem solving, avoiding, oraccommodating? Explain.

To what degree do youthink Iger’s calmer and less confrontational approach to runningDisney helped the company survive a major recession and positionitself for continued success?