Disney at Deutsche Bank Conference Notes

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Bob Iger CEO

10 Years ago when I came in I outlined the vision to the board that we should invest in high quality branded IP over distribution

“I will start with my thinking about 10 years ago, actually a little bit more, because I have been in the job for 10 years and went through pretty rigorous succession process way back and I had articulated the strategy to the board to convince them that they should give me the opportunity to run company. And I focused pretty heavily on what the world looked like then and what I thought it would look like and it seemed pretty clear that there would be a proliferation of distribution and with that proliferation of choices or intellectual property. So I thought, first of all, should we invest in distribution or should we invest in IP and it seemed pretty clear that distribution would be more and more of a commodity and while IP, you could argue would be a commodity, certain IP would not be and that was high-quality, branded, intellectual property. And that was what I articulated to the board. That’s who we were as the company if you consider back then, Disney and ESPN and ABC, but I thought we could do a lot more with our capital and with high-quality branded intellectual property.”

The early list included Pixar, Marvel and Lucasfilm

“early on we’ve put together a list of acquisition targets. I actually articulated a few of them to the board when they asked me like what, in other words, how could you expand. And the acquisition targets included Pixar, Marvel and Lucasfilm.”

There’s also been a definite strategy to diversify away from cable

“last thing that didn’t hit me right away, but pretty early on is that we were very heavily weighted in the direction of our Media Networks, cable in particular in terms of our value in our bottom line. And there was a definite, definite strategy to think about growing our other businesses or diversifying the company.”

We’ve made 26 films out of the acquired properties, 25 have been successful with average global box office of $750m

“So it was fairly straightforward in terms of the thinking. And just a few other facts that are interesting. Since we made the Pixar acquisition, we’ve made 26 movies – the Pixar, Marvel and Lucas acquisitions, we’ve made 26 films under those brand umbrellas and Disney Animation, because when we bought Pixar, we also used the talent at Pixar, John Lasseter and Ed Catmull to fix Disney Animation. The films that Disney Animation, Pixar, Marvel and Lucas has made, of the 26, 25 have been real successes. And I would ask you all to guess what the average global box office of those 25 – first of those 25 films are. The first 25, not including Zootopia, over $760 million, each one of those films has averaged.”

We were really careful to understand the creative soul of the businesses that we acquired and to protect that

“I had a fair amount of personal experience in basically the dynamics of an acquisition. Certainly when you are the acquired as opposed to the acquirer and one of the things that I learned is that you look at a company and assets and you value those assets and that sometimes the people, but you often overlook some of the dynamics of those companies that created the value that you are stepping up to pay for in the first place. Culture is one. I know that sounds sort of I don’t know granola-like in nature whatever, but culture can be a very, very important part of particularly creative entities, the value proposition of a company.

So I basically implied a deft hand to all three of them, spent a lot of time thinking about it in all three cases, what was the essence of the business, how did they create their value, what was the creative soul of these businesses, was it people, was it the brand, how they made things and tried really hard not to screw all that up, but to basically leverage – keep protected and leverage it.”

A lot of people thought we would kill the Pixar culture when we bought them

“there was a lot of skepticism when we bought Pixar because people thought that Disney would kill the Pixar culture. We would lose the key people and we would never make another good movie. And if you look at the success of those Pixar films over the years we haven’t done anything like that, the same with Marvel. There were a lot of questions about how could Disney own the Marvel brand. The people who are making the Marvel movies are the key management people over this creative processes are still doing that. They have a good place in our company in terms of their stature and the support that they get and the understanding they get from us. ”

We push really hard for perfection

“I don’t want to brag, but we spent a lot of time really thinking about the creative process and managing it in a careful way so that we are now encroaching on the process itself, but we’re pushing really hard for perfection. We are demanding basically to make things better. I learned a lot from Steve Jobs and from Ed Catmull and John Lasseter in Pixar and how they make their films and how they have a director and the idea comes from the director’s heart and passion, but when that director makes the film, he puts that film up in front of his peers and the peers go to work on giving him the feedback that he needs to make the film even better.”

Not seeing any softness in the US

“Not in the US, no. I think the conditions for all of our businesses actually worldwide, say for a few places is pretty strong. In the US, park attendance, advance bookings all very strong, the advertising marketplace is much stronger than we expected it would be. We’re not going to update our – what we said on the last earnings call but we gave some numbers that were certainly indicative of either a consumer or an economy that was stronger than a lot of people had considered. So, we’re feeling actually fairly bullish about our business prospects in this market.”

Some softness OUS though

“In Europe, there is still some softness although Star Wars, I don’t know maybe that defies all odds, had incredible results in Europe particularly in the UK, in Germany and in France. And consumer products has been fairly strong there too. Asia, Hong Kong has been soft, the theme parks had some difficulties this past year but we generally feel good about that market we feel very good about China and the prospects for Shanghai Disneyland, which I know you want to get into.”

Shanghai park will probably be largest at size of opening

“We’re probably about 90+ percent finished. We will open on time. It is big for an opening park meaning in terms of size it’s probably the size of – it’s the biggest park we’ve ever opened on opening day probably around the size of Tokyo when Tokyo opened, so many more attractions, more capacity in general.”

There are a lot of theme parks in China now, but none like this

“There are a lot of theme parks in China now. Some of them actually are impressive, they are good, but none of them have Disney IP and none of them are built at this scale, this quality, this attention to detail. And it’s quite amazing, very exciting, looking forward to sharing with everybody.”

We have lost patience as consumers. If we don’t find it right away we go elsewhere

“all consumers, we have lost patience when it comes to finding things and using things. And as soon as you hit a speed bump between yourself and something that you want, whether you’re searching for something or whether you want to watch something or buy something, as soon as you hit a speed bump, technologically or digitally, you go elsewhere. You just don’t want to tolerate it. And that’s something that I think the whole media industry needs to be mindful of”