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3 – 4 pages Ariel 12 Double Space

Please make sure to read the two cases about Disney before you answer the below questions. Use either the Bloomberg terminals located at the Feliciano School of Business or other reputable sources such as finance.yahoo.com, morningstar.com or Wall Street Journal etc. for the financial data you use in your answers. You need to provide the references regarding the financial data you use at the end of the finance portion of the term paper. 


1. Opening a new theme park, such as the Shanghai Disney Resort (company’s fourth and largest theme park in Asia), is a major capital budgeting project for Disney. A project of this scale requires coordinated planning across all functions of a business that you are studying in your Integrated Core classes. Choose and discuss three items on the income statement that you think will be impacted by this new undertaking. Explain why you chose those particular items, and how those items are impacted by the marketing, management and operations decisions of the company. 

2. Choose and calculate three financial ratios for Disney for the last two years. Make sure to select ratios that you think would be impacted by opening a new theme park in a foreign country and explain your reasoning. Identify a competitor of Disney and contrast the two companies’ ratios. Explain why you selected this competitor. Describe how the decisions made by management, marketing and operations functions of the company can impact, and hopefully improve, these financial ratios. 

3. Disney is a company with a significant brand value that is closely tied to its family friendly image. Discuss how any violations of business ethics in the company might affect its investors, customers and employees, and ultimately impact the company’s overall financial performance. Provide examples, if you’d like, to support your answer. 


Number of Visitors 5/26 to 6/29 Requiring Day of Visit Tickets
Period Date Day Visitors Day Index intercept 1000
1 26-May Mon 641 Mon 0.7 slope 100
2 27-May Tue 583 Tue 0.7
3 28-May Wed 1,433 Wed 0.8 stdev 400
4 29-May Thu 999 Thu 0.8
5 30-May Fri 1,165 Fri 0.95
6 31-May Sat 3,311 Sat 1.5
7 1-Jun Sun 3,244 Sun 1.55
8 2-Jun Mon 1,332 7
9 3-Jun Tue 894
10 4-Jun Wed 2,072
11 5-Jun Thu 2,112
12 6-Jun Fri 2,940
13 7-Jun Sat 3,167
14 8-Jun Sun 3,279
15 9-Jun Mon 1,255
16 10-Jun Tue 1,784
17 11-Jun Wed 2,209
18 12-Jun Thu 1,485
19 13-Jun Fri 2,959
20 14-Jun Sat 4,740
21 15-Jun Sun 4,878
22 16-Jun Mon 2,540
23 17-Jun Tue 2,187
24 18-Jun Wed 2,802
25 19-Jun Thu 2,509
26 20-Jun Fri 3,506
27 21-Jun Sat 5,486
28 22-Jun Sun 5,257
29 23-Jun Mon 2,762
30 24-Jun Tue 2,568
31 25-Jun Wed 3,228
32 26-Jun Thu 3,774
33 27-Jun Fri 4,282
34 28-Jun Sat 6,176
35 29-Jun Sun 6,884




Wiboon Kittilaksanawong and Yiwen Chen wrote this case solely to provide material for class discussion. The authors do not intend
to illustrate either effective or ineffective handling of a managerial situation. The authors may have disguised certain names and other
identifying information to protect confidentiality.

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Copyright © 2020, Ivey Business School Foundation Version: 2020-08-27

“In a strange way, I am the brand manager of Disney.”

– Robert Iger, chief executive officer (CEO) of The Walt Disney Company. 2

Between 2017 and 2019, The Walt Disney Company (Disney)—a 96-year-old diversified multinational
United States (US)-based mass media and entertainment conglomerate—faced two major scandals that
threatened to damage its family-friendly brand image.3 Disney’s brand value had decreased by 5 per cent
from 2017 to 2018, although it remained the most valuable media brand worldwide (see Exhibit 1).4 In
November 2017, John Lasseter, the executive producer who oversaw all the films made by Pixar Animation
Studios (Pixar), was accused of sexual misconduct at Pixar. Following the allegations, he left the company
in December 2018.5 Then, between June and September 2018 at Disney subsidiary Lucasfilm Ltd. LLC
(Lucasfilm), Rian Johnson, the writer and director of The Last Jedi, a major instalment in the pop-culture
phenomenon Star Wars, posted unprofessional, aggressive, and insulting remarks on his personal Twitter
account directed toward fans who hated the series.6 In April 2019, Iger announced that no new Star Wars
movies directed or written by Johnson would be put into active development.7

Given that Disney’s nearly 100 years of global success had been built on its family-friendly brand image,
why did the company not take immediate action to address these two scandals? Instead, Disney chose not
to make any comments about the scandals. Lasseter continued to work for the company for over a year after
the sexual harassment scandal broke, while Johnson remained affiliated with the company for almost a year
before the announcement that the development of his movie had been stopped. How could Disney mitigate
the losses from these two scandals and prevent the same thing from happening again? What should Disney
do to further grow its sustainably?


Founded in 1923 by Walt and Roy Disney, The Walt Disney Company was a multinational mass media and
entertainment company. 8 The company’s debut film was Steamboat Willie, a short animation that featured
the character Mickey Mouse. In 1990, Disney arranged for financing of $200 million from Nomura

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Securities Co., Ltd. to fund its growth.9 In 1991, it generated 28 per cent of its total revenues from its home
video distribution, hotels, and merchandising activities. 10 In 1993, Disney acquired Miramax, LLC
(Miramax Films) to broaden its movie offering for adults.11 In 1996, it acquired Capital Cities/ABC Inc.,
an American media company, in an effort to enhance its international competitiveness. 12 Disney’s
businesses experienced a steep decline during the global financial crisis of 2007–2008.13 In 2019, in one of
the largest ever media mergers, it acquired Twenty-First Century Fox, Inc. (Fox). Disney expected to lay
off 4,000 Fox employees after the merger.14

Alongside technological advancements, the global film industry continued to grow, with China being the
largest growth market, followed by India and the US.15 The technological advancements also led to new
distribution channels for animated films, ranging from cable networks to subscription video-on-demand
(SVOD) services. These new distribution channels changed customer expectations and opened up more
opportunities for artists around the world to develop and distribute their own original content.16

Robert Iger

In 2005, Iger became CEO of Disney, following the resignation of Michael Eisner, who had been in the role
for 21 years.17 Prior to Iger’s time in charge, Disney had not been performing well. In terms of innovation,
its animation department had created only one new character during the decade ending in 2005. Meanwhile,
the financial performance and rating of its major media subsidiary, ABC (American Broadcasting
Company) networks, had also fallen behind its competitors.18 As a result, in 2004, Comcast Corporation
proposed a hostile takeover of Disney for $54 billion.19 However, the bid was not supported by investors,
and it was rejected by Disney. During the 14 years of Iger’s tenure as the CEO, from 2005 to 2019, Disney’s
stock gained a total of 482 per cent, or 8.7 per cent annually.20 Iger’s strategic vision emphasized three
pillars, namely generating the best creative content, fostering innovation and utilizing the latest technology,
and expanding into new markets around the world.21 Iger considered it his job, in the words of the late Steve
Jobs, the founder of Apple Inc., to build more “brand deposits” than “brand withdrawals.”22 He believed
that a good leader should possess characteristics such as optimism, courage, focus, decisiveness, curiosity,
fairness, thoughtfulness, authenticity, integrity, and perfectionism.23

Business Model

Disney had four main business segments: media networks, parks and resorts, studio entertainment, and
consumer products and interactive media (see Exhibits 2, 3, and 4).24 According to Iger, “We’re in the
business of telling stories.”25 Disney’s business model involved building brands around its characters and
stories. Since its establishment, Disney had created a lot of original characters, which were registered
intellectual properties that allowed only Disney to produce any related products. Entertainment platforms
paid fees to broadcast Disney movies. Disney leveraged its brands and licensed its characters to
manufacturers for use in relation to their products, ranging from shows to souvenirs. Its business model was
scalable because its brands fuelled many value propositions and generated diverse revenue streams.26

Disney’s business was, therefore, not just making movies but also creating and sustaining brands. The more
characters it developed, the more revenues it could generate from its brands. This logic led to Disney’s
growth through an acquisition strategy. As Pixar, Marvel Entertainment, LLC (Marvel Entertainment), and
Lucasfilm were all good at storytelling, Disney acquired them in 2006, 2009, and 2012, respectively. In
2017, Disney also acquired Fox, which, according to Iger, helped Disney “to penetrate international markets
more deeply, more effectively.”27

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Human Resource Management (HRM) and Corporate Culture

Disney had to carefully plan ways to develop its HRM base to support its continuous expansion, especially
with regard to its parks and resorts around the world. A series of acquisitions, such as the acquisition of
BAMTech Media in 2017 and of Fox in 2019, required that Disney provide sufficient training for its newly
acquired employees to understand Disney’s culture.28 Meanwhile, Disney had to ensure that its employees
were kept up to date regarding newly introduced technologies.29 Disney was committed to encouraging a
culture of building inclusive, safe, and respectful working environments across its operations. Disney highly
valued its reputation and its history of focusing on ethics, quality, and social responsibility. Its HRM was
based on six principles:

Remember, everyone is important. [Disney utilized the acronym RAVE, which stood for
“respecting, appreciating, and valuing everyone.” Employees were expected to greet each other
with sincerity and to be ready to reach out to include everyone.]

Break the mold. [Disney’s structural changes, especially the integration of departments, had opened
up various opportunities for the company and its employees in the long term.]

Make your people your brand. [Disney hired the best candidates by defining and selecting on the
basis of essential qualities and skills.]

Create magic through training. [Disney implemented training and development at every level of
the company. All employees would be trained until they could “feel the pixie dust” before they
began to learn how to do a particular job.]

Eliminate hassles. [The leaders should identify and solve problems quickly.]

Learn the truth. [The leaders should never stop learning and experiencing new things.]30

Disney followed the philosophy of “Dream as a team.” Employees were divided into diverse groups that
worked as a team to realize big dreams through brainstorming sessions known as “blue sky” thinking
sessions. These sessions created a sense of belonging and inspired employees to contribute to the company’s
future. Employees became highly productive as they were more aware of their roles and free to think
independently beyond their imaginations.31 Each group of employees was assigned a mediator who owned
the project or problem to be solved. Each session was typically organized outside the routine office
environment to ensure that the group members were free of any constraints, including budgets. The
mediator then assembled all the diverse ideas and further divided the group members into smaller groups
to refine their ideas and eventually come up with the most appropriate ideas for further implementation.32

Risk Management

Disney placed corporate risk management among its priority strategies.33 The process would begin with
identifying, defining, and quantifying or assessing its risks, and it would move on to developing strategies
to manage those risks and then implementing them through the leadership within business units as well as
through partnerships with external resource providers. This risk management process focused on pure risks
(i.e., absolute risks), which were reported through the corporate treasury. 34 The treasury, finance, and
business units would manage financial and operational risks. Risk management specialists within the
business units would report operational risks to the leaders of the business units. 35

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Risk identification at Disney was a constant process that operated on a repetitive loop. Disney identified
three key risk areas—property and business interruption, work injury or illness, and motion picture and
television production—and applied various risk management techniques according to the levels of risk
exposure. These techniques included risk mapping, risk modeling, and dynamic analysis and simulation.
The company determined the level of risk tolerance and risk taking based on its financial, operational, and
reputational impacts. A strong balance sheet and cash flow would increase the company’s financial
tolerance. After identifying risks, depending on the nature of those risks, the company would determine
whether a particular risk was insurable. The company used several types of risk financing; however, it
would use commercial insurance for pure risks that could be economically transferred. To mitigate such
risks, Disney developed long-term partnerships with insurers, made its partners understand Disney’s
businesses, and ensured compliance with respect to its people, processes, and infrastructure.36



Pixar was an American film studio that used computer animation to develop feature films. Acquired by
Disney in 2006 for $7.4 billion, it was an industry leader with many world-famous animations and
intellectual properties as well as diverse distribution channels.37 Prior to the acquisition, seven of its movies
had achieved total box office sales of $3.8 billion. All of its movies had high box-office rankings. 38 The
acquisition allowed Disney to recreate the Disney Renaissance (the period from 1989 to 1999), when it
achieved great commercial success with animated films featuring classic and famous cartoon characters.39

Pixar’s key success factors included the balance struck between business and creative decisions, whereby
the creative directors were given sufficient autonomy; the post-mortem system, whereby the developing
team learned from its experience after each movie was released; and the in-house training facilities, which
helped to improve the skills of its animators.40 According to Edwin Catmull, the president of Pixar, its
management principles were as follows:

Care about people first. [Leaders were responsible for prioritizing and protecting their people as
the source of ideas. This principle was similar to Disney’s HRM principle that “everyone is

Focus on a purpose that makes people feel proud. [As long as Pixar focused on producing high-
quality films, it would continue to make profits and attract good employees.]

Encourage self-expression and delivery of thought. [Good movies were made from so many ideas
throughout the development of the stories. As the best ideas could come from anyone, the leaders
needed to remove obstacles to sharing ideas while also encouraging self-expression. This

principle aligned with Disney’s “blue sky” brainstorming sessions.]41

Disney and Pixar shared several cultural similarities, including valuing employees, open communication,
and continuous employee training. By positioning people as the priority and encouraging expression from
every employee, the two companies focused on creating a sense of belonging so that valued employees
produced better products. However, to keep each studio’s culture unique, they established an absolute rule
that neither studio could do any production work for the other.42

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Disney acquired Lucasfilm for $4.05 billion in 2012 in order to leverage the Star Wars franchise.43 Five Star
Wars films were released after the acquisition, leading to total revenues of $5.92 billion. Among them, The
Force Awakens generated the highest revenue of $2.07 billion, followed by The Last Jedi with $1.33 billion
(see Exhibit 5).44 The key success factors associated with Star Wars, which began with the first movie in 1977,
were the innovative studio, business-minded orientation, and merchandise sales.45 When George Lucas, the
founder of Lucasfilm, created the design for Star Wars, he also thought about selling character-related toys.
Over the years, sales of Star Wars toys had made about $14 billion, twice the amount of the series’ box office
returns, with more than 1 billion toys having been sold since 1978.46 However, in 2018, the number of retail
orders for Star Wars toys, particularly for The Last Jedi, decreased by 56 per cent when compared with The
Force Awakens and by 47 per cent when compared with Rogue One: A Star Wars Story. 47

Lucasfilm used several innovations during the production of the original Star Wars trilogy. These
innovations included Dykstraflex, a computer-operated tool for mounting the camera and shooting the
movie; three-dimensional (3D) computer animation, the very first tool used to create incredible visual
effects; go motion, a technology that allowed frames to be created using images of a moving object; THX,
a quality assurance system for audio quality; and bluescreen technology, which allowed filmmakers to
construct a comparatively seamless and realistic picture.48

Lucasfilm emphasized trust as the core element in managing people. The top talents would earn basic
salaries, while sharing the profits from the movies. The profit sharing was based on trust rather than
contracts. While Lucasfilm’s organization was generally flat, its creative units had an absolute top-down
culture led by Lucas.49 However, after the acquisition by Disney, Kathleen Kennedy became the president.

She reorganized the creative units by forming 11-member story groups to develop projects that were
consistent with the existing characters and mythology.50


The first harassment incident occurred in November 2017 when Lasseter, the chief creative officer of Pixar
and Walt Disney Animation Studios (WDAS), was accused of workplace sexual misconduct. Aside from
his brilliant work making animated movies, he was notorious for being vulgar and making explicit and
offensive sexual references toward his female colleagues. His behaviour included lustful staring, suggestive
comments, unwanted hugs and touching, and even unwanted rubbing and kissing on the lips.51 Many female
employees felt very uncomfortable but also felt they could not do much about it due to the “boys’ club”
culture of the studio.52 Nevertheless, Lasseter addressed his behaviour as a “misstep” and apologized to the
victims, claiming that his intentions were harmless.53

The Pixar leadership tried to conceal the problem, although to prevent it from happening again, they banned
Lasseter from being in a closed environment with female colleagues during meetings. Allowing the culprit
to keep working freely may have hindered productivity and risked damaging the work environment and
career progression of female employees. It was clear that due to Lasseter’s experience and skills in making
animated movies, the management team decided to protect him.54

Replacement of Lasseter

Rather than being immediately replaced, Lasseter was allowed to continue working on some titles even
after the sexual harassment allegation was made public. It seemed that Pixar did not have qualified backup

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personnel resources available in case a top executive had to be replaced. Importantly, Lasseter had been
working with Disney since 1979 and with Pixar since 1986, and he had exerted a significant influence on
the company’s creative decisions, which had resulted in a very high level of achievement in the movie
industry.55 Disney’s strategy of not commenting on Lasseter’s behaviours in an effort to minimize the
damage to its brand caused people to be even more upset, and it also negatively signaled to the public
regarding the company’s ethical responsibility.56

Boys’ Club Mentality

As a leader, Lasseter was accused of having fostered a culture based upon a “boys’ club” mentality.57 There
was a clear bias against women and in favour of male employees. Male employees acted like frat boys,
while female employees became their targets. Several men other than Lasseter had been reported for
sexually harassing behavior.58 Female employees were treated differently and not given much opportunity
to lead the company. For example, there was an instance where a female leader asked her team to work and
was ignored until she became emotionally exhausted and decided to give up. Later, the company replaced
her with a male employee who led the team’s work on the same task.59 She was then given a review of
“trying too hard” and “asks too many questions.”60 Female employees realized that speaking up, telling the
truth, and asking for justice could lead to them being demoted or even laid off.61


Within the US movie industry, around 94 per cent of female employees had experienced sexual harassment.
Such behaviours included “unwelcome sexual comments, jokes, or gestures” (87 per cent), “being touched
in a sexual way” (69 per cent), and “being shown sexual pictures without consent” (39 per cent). Even
worse, 21 per cent and 10 per cent of them said they had been, respectively, “forced to do a sexual act” and
“ordered unexpectedly to appear naked for auditions.”62 According to Leah Meyerhoff, the founder of Film
Fatales, a non-profit organization working for gender parity in the entertainment industry and a community
of women feature-film directors, “The root of the harassment issue is actually inequality in employment.”
She also said, “When the majority of people in power are these able-bodied straight white men, a side effect
is sexual harassment on set and in the world.” According to San Diego State University, among the top 100
grossing films in 2017, women represented only 10 per cent of writers, 8 per cent of directors, 24 per cent
of producers, 2 per cent of cinematographers, and 14 per cent of editors.63

Three Possible Responses

To tackle the problem, Meyerhoff suggested that, first, Hollywood simply hire more talented women.
Adding more women as creative talents and leaders would accelerate the process of changing the workplace
culture.64 Second, 300 of the most famous names from Hollywood, including America Ferrera, Ashley Judd,
Donna Langley, Natalie Portman, Shonda Rhimes, Jill Soloway, Emma Stone, Kerry Washington, and
Reese Witherspoon, teamed up to launch the sexual harassment prevention initiative “Time’s Up.” This
initiative focused on empowering all women to have access to fair, safe, and respectful work environments.
The initiative provided a legal defense fund for women in relatively labour-intensive industries, such as
retail, manufacturing, food service, and construction,65 so that they could fight against sexual harassment.66

It also supported “the 50/50 by 2020” movement, which aimed to achieve gender equality at the executive
level in Hollywood.67

When announcing the Time’s Up initiative, Rhimes said:

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Earning a living should not come at the cost of anyone’s safety, dignity or morale. . . . Every person
should get to work in an environment free from abuse, assault, and discrimination. It’s well past
time to change the culture of the environment where most of us spend the majority of our day—the
workplace. Fifty-one per cent of our population is female, over thirty per cent of our population is
of colour. Those are important, vital, economically powerful voices that need to be heard at every
level. Time’s Up is working to make sure the people walking the corridors of power within the
workplace and in politics truly reflect the full mix of America—the real America that looks like
and includes all of us. Look, this isn’t going to be easy, but it is right. And fighting for what is right
can seem hard. But letting what is wrong become normal is not easier—it is just more shameful.68

The third response came from the movie audience. The audience had the power to change the tide by
choosing to support films or television shows with women either at the centre or behind the scenes. The
industry usually listened to what the audience wanted and followed such trends in order to obtain greater
revenues. In fact, there had been an increasing number of female-centered productions, which was a positive
sign of gradual change in Hollywood.69


According to the US Civil Rights Act of 1964, sexual harassment was a form of gender discrimination that
was illegal, regardless of whether the alleged perpetrator was a person’s supervisor or co-worker. The
process of achieving justice for victims in the US started with filing a complaint with the Equal Employment
Opportunity Commission (EEOC). The EEOC would then notify the victim’s employer and begin an
investigation. The EEOC might try to settle the complaint through a mediator. If the parties could not reach
a settlement, the EEOC might file a lawsuit in federal court or choose to dismiss the charge. In such cases,
the EEOC would advise the victim to sue in court. However, many states had additional ways of filing
discrimination and harassment complaints against employers.70

According to the high court, quid pro quo and hostile work environment harassment represented two types
of sexual harassment. The former occurred between subordinates and their superior. In the case of this form
of harassment, the superior often asked the subordinates to tolerate the harassment in order to gain a higher
salary or promotion. The supervisor might even blackmail the subordinates by threatening them not to
reveal any harassment if they wanted to keep their job. The latter form of harassment occurred when anyone
in the workplace engaged in sexual misconduct, such as groping or unwanted touching. However, from the
legal perspective, it was unclear how severe such behaviors would have to be before they could be regarded
as harassment. Judges and juries would also consider several other factors, such as the frequency of the
harassment, the number of persons involved, and even the positions of those involved. This latter type of
harassment was the one that judges most often dismissed.71

Sandra Sperino and Suja Thomas, law professors and the authors of Unequal: How American Courts
Undermine Discrimination Law, reviewed …

9 – 7 1 7 – 4 8 3

R E V : D E C E M B E R 6 , 2 0 1 8

Professor David Collis and Research Associate Ashley Hartman prepared this case. It was reviewed and approved before publication by a company
designate. Funding for the development of this case was provided by Harvard Business School and not by the company. HBS cases are developed
solely as the basis for class discussion. Cases are not intended to serve as endorsements, sources of primary data, or illustrations of effective or
ineffective management.

Copyright © 2017, 2018 President and Fellows of Harvard College. To order copies or request permission to reproduce materials, call 1-800-545-
7685, write Harvard Business School Publishing, Boston, MA 02163, or go to www.hbsp.harvard.edu. This publication may not be digitized,
photocopied, or otherwise reproduced, posted, or transmitted, without the permission of Harvard Business School.



Reawakening the Magic: Bob Iger and the Walt
Disney Company

We’re the Walt Disney Company. It’s a brand that means a lot, not just to the people in the company, but to
the world.

— Bob Iger, Chairman and CEO of the Walt Disney Company

I only hope that we never lose sight of one thing—that it was all started by a mouse.
— Walt Disney

Mickey Mouse, Snow White, and Buzz Lightyear strolled down Main Street at the grand opening
of Hong Kong Disneyland in 2005, pausing to snap selfies with enthusiastic children in their Mickey
Mouse ears. Bob Iger, newly appointed CEO of the Walt Disney Company watched the parade go by,
but concerned for the future, he turned to colleagues and asked, “How many characters in this parade
were created by Disney in the last 10 years?” There was one. But the languishing Disney Animation
department was not the company’s only problem. Disney was under pressure: the company had
recently delivered poor financial results; ratings at the ABC network had fallen below competitors;
Walt’s nephew, Roy E. Disney, had stepped down from the board after expressing his displeasure with
the direction of the company under Iger’s predecessor, Michael Eisner; and Comcast had made a $54
billion hostile bid to take over Disney only one year before. The situation for Disney looked bleak.

Yet within a few years, the tide had turned (Exhibit 1). By December 2015, the much anticipated
Star Wars: The Force Awakens became the highest-grossing film in the U.S., earning over $2 billion
worldwide. Frozen surpassed $1.3 billion in box office to become Disney Animation’s biggest success
ever. Disney franchises, like Pirates of the Caribbean and Iron Man, had produced multiple live-action
blockbuster hits. ESPN, ABC, and other media properties were producing record profits. Attendance
was up at Disney parks, while Shanghai Disney Resort, the company’s fourth and largest theme park
in Asia, was opening in June 2016. Iger thought back to the Hong Kong Disneyland parade, reflecting
on how far the company had come and what he had learned about reawakening the Disney magic.

In 1923, a Missouri farm boy, Walter Elias Disney, who was determined to be an artist but whose

Kansas City cartoon business had failed after only one year, moved to Hollywood. There he founded
the Disney Brothers Studio with his older brother Roy1 (Exhibit 2). Walt was the creative force, while

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717-483 Reawakening the Magic: Bob Iger and the Walt Disney Company


Roy handled the money. Quickly concluding that he would never be a great animator, Walt focused
on overseeing the story work.2

A series of shorts starring “Oswald, the Lucky Rabbit” became Disney Brothers’ first major hit, but
Walt was outmaneuvered by his distributor, who hired away most of Disney’s animators. 3 Desperate
to create a new character, after discovering that the distributor owned the copyright to Oswald, Walt
made some changes to the rabbit’s appearance and created Mickey Mouse on a train trip from New
York. Failing to find a distributor for this character, Walt added synchronized sound—something that
had never been attempted in a cartoon.4, 5 His gamble paid off handsomely with the release of Steamboat
Willie in 1928, and, overnight, Mickey Mouse became an international sensation, known by different
names, such as “Topolino” (Italy) and “Musse Pigg” (Sweden), around the world.

Despite successfully introducing new characters such as Goofy and Donald Duck, Walt realized
that cartoon shorts could not sustain the studio indefinitely. 6 In 1937, Disney released Snow White and
the Seven Dwarfs, the world’s first full-length, full-color animated feature. 7 In a move that would later
become standard Disney practice, Snow White products were stocked on the shelves of Sears and
Woolworth’s the day of release. With the success of Snow White, the company scaled up, building a
new studio in Burbank and going public in 1940 to finance the expansion and the making of Fantasia.

Snow White was rereleased for the first time in 1944, setting the precedent for the reissue of cartoon
classics to new generations of children as an important source of profits. After World War II, Disney
diversified into live-action movies, music, and TV specials; during the 1950s, One Hour in Wonderland
reached 20 million viewers when there were only 10.5 million TV sets in the U.S.8 This was followed
by regular television shows, such as the Mickey Mouse Club, featuring preteen “Mouseketeers” as hosts.

In 1953, Disney created Buena Vista Distribution, ending an agreement with RKO, in order to save
distribution fees of one-third of a film’s gross revenues. By 1965, Disney was averaging three films per
year, mostly live-action titles, such as Swiss Family Robinson and Mary Poppins, but including a few
animated films like 101 Dalmatians. Disney avoided paying exorbitant salaries by developing the
studio’s own pool of talent. Observed one writer: “Disney himself became the box office attraction—as
a producer of a predictable family style and the father of a family of lovable animals.”

Disney also expanded by creating Disneyland, a giant outdoor entertainment park in Anaheim,
California. The park was a huge risk for the company, as Disney took out millions of dollars in loans.
But the bet paid off. The success of Disneyland, which opened in 1955, was a product of both technically
advanced attractions and Walt’s commitment to excellence in all facets of park operation. His goal had
been to build a park for the entire family, since he believed that traditional parks were “neither amusing
nor clean, and offered nothing for Daddy.” 9

Disneyland’s success finally put the company on solid financial footing,10 and although Walt
dreamed of building another theme park—in 1965, he secretly purchased over 27,000 acres of land near
Orlando, Florida, on which he planned to build Walt Disney World—he was never able to see his
dream come to fruition; he died just before Christmas 1966.11

Walt Disney was a strong believer in the importance of family life, and the company always looked
to foster experiences that families could enjoy together. As he said, “You’re dead if you aim only for
kids. Adults are only kids grown up, anyway.” The huge number of “firsts” that the company could
claim was a tribute to the success of this philosophy, but Disney recognized that they were not without
risk: “We cannot hit a home run with the bases loaded every time we go to the plate. We also know the
only way we can ever get to first base is by constantly going to bat and continuing to swing.”

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Reawakening the Magic: Bob Iger and the Walt Disney Company 717-483


Walt Disney attempted to retain control over the complete entertainment experience. Cartoon
characters could be perfectly controlled to avoid any negative imagery. Disneyland had been
constructed so that once inside, visitors could never see anything but Disneyland. According to Walt,
“The one thing I learned from Disneyland [is] to control the environment. Without that we get blamed
for things that someone else does. I feel a responsibility to the public that we must control this so-called
world and take blame for what goes on.”12

The Disney brothers ran their company as a nonhierarchical organization in which everyone,
including Walt, used their first names and no one had titles. “You don’t have to have a title,” said Walt.
“If you’re important to the company, you’ll know it.” Although a taskmaster driven to achieve
creativity and quality, Walt emphasized teamwork, communication, and cooperation.

The realization of Walt Disney World consumed Roy O. Disney, who succeeded his brother as
chairman and lived to open the park in 1971. It almost instantly became the top-grossing theme park
in the world, with its two on-site resort hotels being the first hotels operated by Disney. To generate
traffic in the park, Disney opened an in-house travel company to work with travel agencies, airlines,
and tours. Disney also started bringing live shows, such as “Disney on Parade” and “Disney on Ice,”
to major cities all over the world. The next major expansion was Tokyo Disneyland, announced in 1976.
Although wholly owned by its Japanese partner, it was designed to look just like the U.S. parks.
However, film output during these years declined substantially. Creativity in the film division seemed
stifled, and rather than push new ideas, managers were heard asking, “What would Walt have done?”

Michael Eisner, 1984–2004

In 1984, Michael Eisner took over a Walt Disney Company that had fallen into a lull, eerily similar
to the one Bob Iger faced in 2005. The company’s financial performance had recently deteriorated as
Disney incurred heavy costs to finish EPCOT and started its first cable channel, the Disney Channel.
Film performance remained erratic and production of animated cartoons languished, with a reliance
on sequels and the release of only one new full-length feature about every four years.13 Disney had no
shows under its own name on network TV. Corporate raider Saul Steinberg even launched a takeover
bid in 1984,14 as Walt’s nephew, Roy E. Disney, left the board, upset at the company’s direction.

Into this breach came Michael Eisner as CEO, with the support of investors, including Roy E.
Disney, who returned to the board. Eisner had been head of programming at ABC before becoming
CEO of Paramount and was noted for being the producer of Happy Days. He brought with him a lawyer
and ex-head of Warner Bros., Frank Wells, as President and Jeffrey Katzenberg to lead the movie studio.
Together, the three rejuvenated Disney, delivering the 11th highest total return to shareholders of the
Fortune 500 over the next 10 years (Exhibits 3a and 3b).

Initial moves that quintupled net income in three years included raising prices in the theme parks
at rates well above inflation, as market research revealed that attendees believed they got good value
for money from a day in the park; opening the parks seven days a week by moving maintenance, which
had previously been performed when the park was closed on Mondays, to the nighttime; cutting the
re-release cycle for classic Disney animated movies from every seven to every five years; extending the
licensing of Disney brands to more categories; and committing whatever it took to produce a block-
buster animated cartoon for release over the summer every year. Eisner supported Imagineering (the
company’s research and development arm responsible for the creation, design, and construction of
theme parks and attractions worldwide) as a way to reinvigorate the culture and promote creativity
and innovation, and created a synergy committee to coordinate marketing activities across the portfolio
and lead collaboration on major initiatives, like Mickey’s 60th birthday, while for the first time pursuing
national television advertising.

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717-483 Reawakening the Magic: Bob Iger and the Walt Disney Company


As Disney Studios released a series of successful animated cartoons, beginning with Roger Rabbit,
and continuing with such classics as The Little Mermaid (1989), Beauty and the Beast (1991, the first
animated cartoon ever to be nominated for an Oscar as best picture), Aladdin (1992), and The Lion King
(1994, which generated over $1 billion in operating income over the years), Eisner expanded the scope
of the company. Euro Disney opened outside Paris in 1992 with support from the French government,
enabling Disney to earn 10% of revenues and a 50% share of the profits, having invested $200 million
of the park’s $4.4 billion cost. Annual throughput of live-action movies increased to more than 14 in
order to reach scale in distribution, including from its newly formed adult studios Touchstone and
Hollywood Pictures, as well as from the acquisition of the independent art movie company Miramax.
Disney reappeared on national television with the Sunday evening Wonderful World of Disney show and
Disney cartoons on Saturday mornings. It founded the Anaheim Mighty Ducks ice hockey team, named
after the Disney movie, Mighty Ducks, reflecting Eisner’s love of the sport. Output of syndicated
television shows increased, and the company embraced new ideas, like waterparks and nightlife at
Disney World, and opened a chain of Disney retail stores after 1987.

The major move Eisner made in 1995 came a year after Frank Wells was killed in a helicopter crash
and Jeffrey Katzenberg had left to found his own studio, Dreamworks, with Stephen Spielberg. In a
$19 billion deal, financed with $14 billion of debt, Disney acquired CapitalCitiesABC—the first major
acquisition Disney had ever made. Assets included the ABC television network—then the third-ranked
national network—television and radio stations, and the nascent ESPN cable sports channel (which
was reputedly valued at less than ABC during the acquisition process). While Eisner had previously
preached that content was king and that distribution and content did not belong in the same company,
the merger made Disney “the world’s most powerful media and entertainment company.”15

Hiring Michael Ovitz from Creative Artists Agency to be President in late 1995 turned out to be a
mistake; Ovitz was fired in 1997 after failing to find a clearly defined role. Disney continued to expand,
planning Hong Kong Disney; embracing technology by introducing DVD versions of its movies;
buying New Amsterdam Theatre on Broadway to host Disney shows, starting in 1997 with a successful
theatrical version of The Lion King; investing in two cruise ships at a cost of $1 billion each to bring in-
house the previously licensed Disney Cruises; and buying a cable network in 2001 and renaming it
ABC Family to extend the array of cable channels offered to an older audience. Yet Eisner and the
strategic planning group began to exercise more control over business units. Deals such as the price
paid to sports leagues for broadcast rights or programming choices at ABC gradually came more under
Eisner’s remit, while he became “famous for managing every aspect of Disney’ business from
approving carpet patterns in hotels to commenting on TV and movie scripts.” 16

In the new century, performance of Disney cartoons at the box office deteriorated, with summer
releases such as Dinosaur (2000) and Lilo and Stitch (2003) failing to find big audiences. Only Pixar hits,
Toy Story (1995), Toy Story 2 (1999), and Finding Nemo (2003), distributed by Disney through a
contractual arrangement that generated over half of Disney Studios income, produced good results.
Although Eisner remained skeptical of technologies that posed a threat to traditional distribution
channels, attempts to capitalize on the emergence of new technologies like video games, personal
computers, and the internet led to the creation of a discrete unit, Disney Interactive, in 1994 and an
online unit in 1995. This launched Go.com as a destination media portal in 1999, but it was shut down
in 2001, with $900 million in write-offs, including for the purchase of search engine Infoseek.17

Iger’s Succession
After years of financial underperformance (Exhibit 3b), by 2004 investors were increasingly

disgruntled with Disney management, culminating in an unsuccessful hostile bid by Comcast. Eisner

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Reawakening the Magic: Bob Iger and the Walt Disney Company 717-483


insisted the company would soon turn around, but others had lost faith, particularly since relations
with Steve Jobs, the main owner of Pixar, had deteriorated to the extent that it was looking for a new
distribution partner. Morale at Disney was at an all-time low, and employees were not excited to come
to work. The company was floundering instead of thriving. It was as if Disney had become a “company
that simply didn’t believe in itself anymore, or in its future,” Iger later observed.18

Discontent became clear at a shareholder meeting in 2004 when 43% of shareholders withheld their
support for Eisner’s reelection. Dissident shareholder Roy E. Disney, who had abruptly quit the board
a few months earlier, made his case for Eisner’s removal and was met with resounding applause.
Shortly after, Eisner announced he would retire when his contract expired in September 2006.

Disney conducted a thorough search for a new CEO, retaining an executive search firm and
interviewing numerous external candidates along with one internal candidate, Bob Iger, President and
COO. Iger had originally aspired to become a newscaster and, after graduating with a degree in
television and radio, had begun his career as a weatherman for a local TV station in Ithaca, New York.
He joined ABC in 1974 as a studio supervisor and worked his way up through programming roles to
become President of ABC Entertainment in 1988 and of Capital Cities/ABC in 1994. He remained in
that position after the acquisition by Disney until 2000, when he was promoted to be President and
COO of Disney under Eisner. Iger acknowledged the CEO interview process was brutal; he completed
17 interviews, including two full-board group interviews as well as individual meetings with each
board member. In March 2005, Disney announced that Iger would become CEO in September 2005.

As CEO-in-waiting, Iger took steps to rekindle frayed relationships even before officially taking the
helm. Roy E. Disney had sued Iger and the board, claiming that the CEO selection process was unfair,
so Iger reached out and negotiated a settlement that welcomed him back to the company. The day
before the board announced Iger’s new appointment, Iger also called Steve Jobs to personally tell him
the news, as he wanted the opportunity to prove Disney would be a new company, one that was Pixar-
friendly and open to negotiations. Although talks stalled over the summer, the two reached a
breakthrough in fall 2005. Iger suggested adding TV shows to iPods so users could watch television, as
well as listen to music, on the go. Jobs then revealed a video iPod, which was set to be released a few
weeks later. Iger and Jobs hammered out a deal in five days, and at Apple’s announcement, Jobs
revealed that the new video iPod would feature content from ABC. The agreement made hit shows,
such as Desperate Housewives, available for download within 24 hours of their broadcast on network
television—when most competitors were striving to protect shows from online distribution. 19

Over the summer, Iger also reflected on what his new strategy should be and how to shift the culture
at Disney. He felt that “[t]he Walt Disney Company can be and should be one of the most admired
companies in the world. . . . [Yet] we wouldn’t be admired by customers and shareholders unless we
were first admired by ourselves.”20 To identify a way forward, he asked a reconstituted strategy team
to take a detailed look at the entertainment industry and formulate a new corporate strategy.

Disney’s corporate strategy became to “deliver the highest quality branded entertainment franchises
on all relevant platforms, employing the most effective technology in service of our customers around
the world.”21 Throughout his tenure, Iger consistently reiterated the strategy, honing in on areas where
Disney added value and exiting noncore businesses, even if they were attractive.

The strategy focused on three strategic pillars: creativity, technology, and global expansion.
Analysis showed that developments in technology were both creating new distribution avenues for
people to consume media, and supporting the development of ever more content. In this environment,
success would only come from having “great branded content [that] would never be commoditized.”
To deliver this, Iger wanted to stimulate creativity and focus on creating content that consumers would

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717-483 Reawakening the Magic: Bob Iger and the Walt Disney Company


actively seek out. Iger also emphasized the importance of leveraging technology and distributing
content in a user-friendly way that appealed to consumers. Iger viewed technology as a friend, not a
foe, that would increase demand for Disney content by making it available anywhere, at any time, on
any device. The third pillar, global expansion, reflected a wish to develop underpenetrated markets,
notably the BRIC countries, by expanding relationships with local customers.

At Disney’s first board meeting as CEO, Iger painted a stark picture of Disney’s animation
performance over the past 10 years and proposed buying Pixar as one solution. Since the early 1990s,
Disney had co-financed and distributed Pixar’s computer-animated films in a co-production agreement
in which Disney received about 60% of a movie’s profits; it was Pixar’s hits, such as Toy Story and
Finding Nemo, that had buoyed Disney’s recent profitability. That distribution agreement was set to end
in 2005, largely due to personal rancor between Eisner and Jobs. As the board did not officially say no
to the acquisition, Iger began personally courting Jobs, who was receptive to talks. By January 2006,
the deal was announced, with Disney purchasing Pixar for $7.4 billion. 22 Iger noted: “I want to return
Disney to greatness in [animation], and this was the way to do it fastest.”

Two Pixar executives, John Lasseter and Ed Catmull, who became Chief Creative Officer and
President, respectively, of both Pixar and Disney Animation Studios, were tasked with reinvigorating
Disney Animation by injecting Pixar’s director-driven culture, its emphasis on exchanging ideas and
feedback among directors, and extremely high standards. As former CFO Tom Staggs said, “[M]aking
movies is not the same as an assembly line,” and the amount of sway the finance team had held over
Disney Animation had hindered the creative process. Pixar, which had a “brutally honest, high-energy,
collaborative [movie making] process,” remained separate from Disney.23 Post-acquisition, the two
companies had “thoughtful interaction” between them to ensure the Pixar culture was preserved.

The value of Pixar was not immediately obvious; the price tag was hefty, but it was seen as “an
antidote to creative issues in Disney Animation” 24 where Pixar values were enthusiastically embraced.
As one Disney executive said, “Frozen never would have happened without the Pixar acquisition. . . .
[I]t had been languishing in Disney Animation under a title called Snow Queen for a long time, and John
[Lasseter] and Ed Catmull kept at it, kept at it, and didn’t force it into production until it was ready.”25
As a result, Disney made a film that in 2013 became the fifth biggest in box office history, creating a
new Princess character, Elsa, and the hit song, “Let It Go.”

One of Iger’s early actions ended the strategic planning group as run under Eisner that had grown
to oversee many business decisions. Indeed, one of the first meetings Iger was asked to attend as newly
appointed CEO was called by the strategic planning group to decide the price of theme park tickets at
the launch of Hong Kong Disneyland. Iger canceled the meeting, noting, “If the [business unit head]
can’t come up with the price point, he shouldn’t be in the job.” 26 Iger asked the head of the group to
resign and in June 2005 hired Kevin Mayer, lead partner in the media practice at consulting firm LEK,
who had impressed Iger in earlier roles at Disney. Mayer redesigned the group to become a sounding
board and a resource, instead of one that oversaw the business units. The group, cut from 45 to 15
people, focused on finding and exploiting growth opportunities and M&A, as it was rebuilt over time
to a team of 27. Such actions shifted Disney from an authoritative, centralized culture to a collaborative,
creative one, chipping away at the underlying dissatisfaction of Disney employees. Iger himself
observed, “You can completely change a corporate culture in three months.” 27

With Iger at the helm, attention shifted to acquiring, managing, and leveraging Disney’s key

franchises across its four segments and many individual businesses (Exhibits 4 and 5). By 2015, the

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Reawakening the Magic: Bob Iger and the Walt Disney Company 717-483


company thought of itself as owning six brands—Disney, ABC, ESPN, Marvel, Lucasfilm, and Pixar—
and many individual franchises, like Princesses, Winnie the Pooh, ESPN Sports Center, or Good Morning
America. In turn, franchises were classified into evergreen, like Mickey Mouse, that sold steadily, and
cyclical ones whose sales were more driven by new content. Cars, for example, was one of Disney’s top
franchises, but it was only a priority for the entire company when a new Cars movie was released. By
2015, 11 franchises had revenues above $1 billion (Exhibit 6).

After Woody and Nemo joined the Disney stable in the Pixar acquisition, Captain America and Thor
joined the ranks in 2009 when Disney acquired the comic book and action hero company Marvel
Entertainment for $4 billion. Iger stated that the acquisition was “perfect from a strategic perspective,”
noting that Disney could sell Marvel’s characters across media and consumer product platforms and
in additional markets. 28 Although it was not the primary motive, the Marvel acquisition was also
attractive because it gave Disney exposure to content for teenage boys, a demographic Disney was
eager to develop further. Disney had long had success with marketing blockbuster Princess
merchandise that appealed to young girls, but franchises for boys were more challenging to find.29

In October 2012, Disney announced it would acquire Lucasfilm, the maker of Star Wars, for
$4 billion. The deal continued Disney’s strategy of purchasing companies that had franchise-worthy
characters that could drive revenues for Disney in many different areas. Star Wars, for example, was
expected to generate $5 billion in retail revenue from consumer products during the first year, and
Disney announced in 2016 that it would build a new land in its theme parks featuring the characters
and locations. 30 George Lucas was impressed with how Disney had handled past acquisitions, notably
letting Pixar maintain its culture and significant control over filmmaking.31

All Disney’s acquisitions were carefully planned; the company had a list of enterprises to buy, and
while the timing of the deals was opportunistic, the company was mindful of which brands would fit.
Although most purchases were U.S.-based, Disney was open to cross-cultural franchises, either
purchasing a foreign brand or developing new products, …