July 17, 2006 For Ailing Disney, a Shot of Strong Medicine By LAURA HOLSON NY Times
http://www.nytimes.com/2006/07/17/business/17disney.html?pagewanted=print LOS ANGELES, July 16 Since last year, Hollywood has been expecting the Walt Disney Company to announce layoffs in its film division. But with two humbling years at the box office, the company is planning something bigger: a larger overhaul of its movie studio. After a yearlong review of its operations, Walt Disney Studios will soon announce a major reorganization of its live-action movie division, which will alter the way Disney movies are made and marketed, according to several people briefed on the plan. As of last weekend, Disney was still assessing how many jobs would be eliminated as a result. International and domestic marketing, which have been handled separately, are expected to be combined under Mark Zoradi, president of Buena Vista International, the studios overseas distribution arm, said these people. Another Disney veteran, Oren Aviv, who supervises Disneys domestic movie marketing, is to be promoted too, although it is unclear what his responsibilities will be. In elevating the two executives, both of whom are close to the studio chairman, Richard Cook, Disney is betting on a revolution from within, unlike Paramount Pictures, which quickly brought in outsiders to shake up a staid culture last year. Mr. Cook was charged with reinventing the studio last year. Robert A. Iger, Disneys newly appointed chief executive, has said that his priorities would be global expansion and promoting Disney products across all the companys divisions. The last two years have been disappointing for the studio despite the success of Pirates of the Caribbean: Dead Mans Chest (which remained in top place at the box office during the weekend with another $62 million in sales) and The Chronicles of Narnia last December. The studio produced a series of flops, many from its adult-oriented division Touchstone Films, including The Alamo, The Ladykillers and The Life Aquatic With Steve Zissou. Last year Disney fell to No. 5 in domestic box-office share, bringing in $962 million. In 2003 it was No. 1, with $1.5 billion in domestic ticket sales. Mr. Cook, who has been mulling possible changes since last year, presented his plan to Disneys board at a recent executive retreat in Orlando, Fla., said some of the people briefed on the meeting. All of the people interviewed for this article declined to be named, citing the delicate nature of the reorganization. Disney executives declined to comment as well. Mr. Zoradi has a reputation as a demanding executive, but one well versed in how to sell movies abroad, a matter of keen interest in Hollywood as movie attendance in the United States has flattened out in recent years and studios are looking overseas for growth. Having Disneys worldwide marketing team under one umbrella would allow for cost efficiencies, with the elimination of overlapping jobs. Those and other budget cuts are likely to help Disneys earnings prospects in the future. Three research firms recently downgraded Disneys stock, partly because of fears that gasoline prices would deter some people from visiting the companys theme parks. Other movie studios have considered but abandoned the concept of combining both international and domestic marketing. That was the case at Warner Brothers last year, which scrapped the idea after executives there appealed to run their own businesses. Mr. Aviv is highly regarded for his marketing acumen and was given the title of chief creative officer last year after Paramount tried to recruit him, said Hollywood executives apprised of those negotiations. He joined Disney in 1991 and has sought to expand his duties, particularly in movie production. He was an executive producer for two Disney films, the blockbuster National Treasure in 2004, a story idea he generated, and Rocket Man in 1997. As recently as last week, Mr. Cook was discussing with Mr. Aviv what his new responsibilities would be. Those could include overseeing the studios franchise films or new marketing ventures, according to some of these people. The changes are likely to affect Nina Jacobson, Disneys president of production, the people said. Ms. Jacobson, who recently renewed her contract with Disney, has been an advocate for smaller, quirky films from Touchstone, including The Ladykillers, starring Tom Hanks and directed by Ethan and Joel Coen. For months both Mr. Iger and Mr. Cook have been saying that Disney will cut the number of movies produced by Touchstone and more actively promote the better-known Walt Disney Pictures brand. The latter recently unveiled a redesigned logo, meant to give the brand a contemporary look. As important, the number of films released each year is expected to tally about 12 or 13 films by 2008, said some of the people, down from the 14 to 20 films it has made in the past. Those would include Disney and Pixar-branded animated films, Miramax Films, Touchstone and Walt Disney Pictures releases. Last year the studio conducted an internal review of its peers, said a Hollywood executive who talked with Mr. Cook about the results. The review showed that the least profitable studios had a rate of return on theatrical releases of 1 percent, while the most profitable studios earned 8 percent, said the executive. Disney ranked in the middle. That made it harder for Mr. Cook to demand a larger budget when other Disney divisions, like its cruise line business, showed more promising growth, the Hollywood executive said Mr. Cook told him. The smaller slate also would not support the studios present overhead. The size of any layoffs, predicted last December to be about 100 jobs, has grown several-fold as Mr. Cook has refined his reorganization plan. Some of those apprised of the studios plans suggest Disney could eliminate 20 percent to 30 percent of the studio staff, including some through attrition and lapsing of contracts. Mr. Iger also wants the studio to exploit Disneys brand better. Were about the whole, said Andy Bird, president of Walt Disney International, in a recent interview. Were about the totality of a franchise or a particular brand. (In the interview, Mr. Bird was discussing Disneys global ambitions, particularly in Russia.) Like Pixar Animation Studios, which the company recently acquired for $7.4 billion, Walt Disney Pictures is one of the few recognizable names in family entertainment. It is the one thing that differentiates them from other movie studios, said an executive at a competing studio. Another priority of Mr. Igers is global expansion. Consider last years The Chronicles of Narnia: The Lion, the Witch and the Wardrobe. It drew $447 million internationally, outstripping the movies domestic box-office revenue of $292 million. A sequel is in the works for 2008, although production has already been delayed. But in making fewer movies, Disney is also making a bigger financial bet. The runaway success of the first Pirates of the Caribbean movie, which cost $140 million, surprised both Disney and moviegoers. (Its two sequels cost more than $200 million each, according to industry estimates, or nearly 50 percent more than the original.) If the first had failed, there would be no sequels or revamped Pirates ride at Disneyland. The challenge is to create a steady diet of fresh, franchise-worthy projects that, like Pirates, can become dependable earners for years to come. Wall Street analysts, as well as Disney fans, are watching. Any doubts were not apparent at the recent Pirates premiere at Disneyland. There Mr. Cook surveyed the partygoers, who were sitting in bleachers facing Tom Sawyers Lake and waiting for the movie to begin. When the updated Walt Disney Pictures logo finally appeared onscreen, they cheered wildly. ================================ George Antunes, Political Science Dept University of Houston; Houston, TX 77204 Voice: 713-743-3923 Fax: 713-743-3927 antunes at uh dot edu Reply with a "Thank you" if you liked this post. _____________________________ MEDIANEWS mailing list [email protected] To unsubscribe send an email to: [EMAIL PROTECTED]
