Keeping Disney’s kingdom magical
BURBANK, CALIF. — “I always liked Tinkerbell,” says Bob Iger, Disney’s chairman and chief executive. “She had a real attitude. I kind of like that. And being able to spread fairy dust around? That’s kind of what I do for a living.” He’s not wildly off. Few companies in the world can claim to have pervaded Western culture over the past century to quite the same degree as Disney. Coca-Cola, perhaps, or Ford or McDonald’s — but however recognizable those juggernauts have become, they have not played the same role in shaping popular culture.
It would take an unusual existence for a child to grow up without clapping eyes on Mickey Mouse, for example, or watching one of Disney’s other animations. Snow White did for one generation of children what The Jungle Book, Ariel the Little Mermaid and Aladdin have done for successive others.
Their popularity has helped Disney to become a commercial machine, with a market capitalization of $112.3 billion US, annual revenues of $42.3 billion and $5.7 of profits. But it is also a machine that can go awry if it loses the creative spark at its heart.
When Iger took the helm of the company in 2005, it was heavily dependent on nostalgia brands. The Walt Disney Animations Studio had been riding high in the early 1990s, with box office hits such as Beauty and the Beast and The Lion King. But then came a series of more forgettable animations.
The wider Disney company was still raking in cash from its myriad theme parks and merchandise based on classic Disney characters, but analysts feared that the studio’s creative drive was waning. Disney appeared to have lost that fairy dust it needed to deliver future hits, and fuel the rest of the empire.
The studio was growing increasingly reliant on its partnership with Pixar Animation Studio, a much smaller cartoon business co-founded by Steve Jobs and John Lasseter, which specialized in computer-generated animation. The pair struck a threefilm deal, delivering movies such as Toy Story which were revolutionary at the time, and have since become the benchmark for contemporary animation.
In 2006, Iger decided to spend $7.4 billion on taking full ownership of Pixar.
For Iger, he was buying a culture. Pixar had mastered the art of storytelling in a way that Walt Disney Animations appeared to have forgotten. The smaller company was allowed to continue as it always had, while Lasseter was named creative director of Walt Disney Studios, so that he could import some of Pixar’s lessons to its new parent.
Pixar’s nine-hectare campus in Emeryville, just outside San Francisco, arguably has more in common with the technology companies of Silicon Valley than the studios of Hollywood. Its main building was named after Steve Jobs last November, but the Apple co-founder’s influence is evident even without his name above the door.
For starters, the building was designed by Bohlin Cywinski Jackson, the architects who also created the blueprint for Apple’s retail stores. It is all glass and symmetry, with the creative animators separated from coding staff in two opposing wings, supposed to mirror the right and left sides of the brain.
But the real powerhouse of Pixar is across the lawn, in the so-called “Story building.”
Here, Pixar’s storyboarders spend years plotting and blocking every title. Each film takes four to five years to make, so the studio will have a few in the works at any one time, but painstaking care is taken to keep tweaking stories, often pulling them apart and starting again just when they seem assembled and ready.
Pixar also puts a very heavy emphasis on innovation, taking full advantage of advances in technology. It took the company four hours to render one frame of Toy Story. The same process would take just four minutes using today’s machines, but the company is now pursuing such complex animation techniques that the rendering time has barely budged a fraction.
The rest of the Disney business has not put in quite such a spectacular performance. At its third-quarter results earlier this month, the company wrote down more than $160 million on The Lone Ranger, a live-action film that flopped at the box office despite its promise of Jerry Bruckheimer as director and Johnny Depp in the role of Tonto. John Carter, released a year earlier, was even more of a catastrophic failure.
But while Pixar has justified Disney’s $7.4-billion outlay, its metronome delivery of a film per year was not enough to fuel growth as fast as its parent company required. In 2009, Iger blessed the $4-billion acquisition of Marvel, the comicbook creator of Captain America and Spider-Man. Then, last year, it spent around the same again on Lucasfilm, the home of George Lucas’s Star Wars franchise.
Disney has three Star Wars films in the works. It has not confirmed any plans for a Star Wars theme park, but it feels like an inevitable next step.
The Lucasfilm studio, this time in San Francisco proper, has the feel of a gentlemen’s country club. The shelves are lined with Star Wars memorabilia, often cast in bronze or mounted on the walls in the same way as someone might hang a hunting trophy.
Elsewhere, space is devoted to props used in the scores of movies Lucasfilm’s special effects arm, Industrial Light & Magic (ILM), has worked on.
Disney insists Lucasfilm and ILM will keep operating as usual, the latter company serving any Hollywood studio willing to pay for its services. But the company’s rivals are nervous that Disney will ultimately get first refusal on its time and technology, or that it will stop ILM from serving third parties altogether.
Analysts, on the other hand, have been almost unanimously positive about the Lucasfilm deal, which will become accretive in 2015.
There has been a major shift in the company’s international outlook over the past decade. Disney will always be intrinsically American, but it has devolved power to the emerging markets.
In India, it has bought a controlling stake in UTV Software Communications to help it make Disney films that have more in common with Bollywood than anything emanating from Los Angeles. In China, Disney is investing in a theme park and resort in Shanghai, worth $4.4 billion and jointly owned with the Shanghai Shendi Group.
The Asia-Pacific region is still relatively small in the grand scheme of Disney’s global business, but it is one of the fastest growing, even before the Shanghai theme park whirrs into action. Revenues jumped by 19 per cent last year to $3 billion, a growth rate outstripped only by the region Disney calls “Latin American and other,” which saw revenues climb 21 per cent to $1.3 billion. Disney’s much more established business in the U.S. edged up just shy of three per cent to $31.8 billion, while the European business shrank by nearly four per cent to $6.2 billion.
Disney will celebrate its 90th anniversary this year. The Tinkerbell-loving chief executive is bent on laying the foundations for it to maintain its momentum for at least another 90. He will need some of that fairy dust to spur creativity and open new markets, so that Disney can stamp its imprimatur on the developing world, just as it has done in the West.