Iger: Disney innovated by Pixar, Marvel

Chief says company had not been enough of 'a wave maker'

The biggest challenge in running a company as big and varied as Disney is "to maintain the balance between heritage and innovation." Also tough is to resist those folks who want the company to invest in assets that are not "core or that don't enhance the brand."

So mused Disney president and CEO Bob Iger in a wide-ranging set of remarks Monday during the Business of Luxury Summit organized by the Financial Times.

"You have to protect but not be reverential to your brand, but also you have to be relevant and adapt to changing habits of a new world," Iger told FT editor Lionel Barber during the opening keynote session at the Beverly Hills Hotel.

As for specifics in extending the brand, Iger said that Disney is in the process of negotiating "the longform agreement" with China for opening a long-mooted theme park in Shanghai.

"We're making progress," he said. "It would be a huge step in providing the Chinese with the Disneyland experience."

During the 45-minute exchange, Iger put the emphasis on the need to continue to innovate and experiment -- like with forays into the digital space -- while never losing sight of the essence of the brand.

To this end, Iger continued, Pixar and Marvel bring added value to Disney, but those entities are allowed to retain their unique cultures. Keeping many different movie labels, however, seemed redundant and unfocused to Iger when he took over five years ago, hence the concentration on the Disney brand and the heave-ho given to Miramax.

Asked by Barber at what point a company needs to go outside for innovation, Iger said that animation at Disney reached a point where it wasn't enough of "a wave maker." When Disney is successful, he pointed out, "it has a ripple effect throughout the company. The absence of quality animation has a dramatic effect, on value and on creative perspective.

"When I came into the job, I weighed the options. I felt that losing the relationship with Pixar when their contract expired would be a shame. And so we brought into the company a culture of innovation, of never accepting mediocrity."

He also benefited from "good timing" in that Pixar's Steve Jobs was ready to consider such a deal. "I was trying to establish a direction for Disney. Also, $7.3 billion was "just around," Iger quipped, then correcting himself, "actually $1 billion (was) in cash."

"Money isn't everything; it wasn't and isn't what drives Pixar then, or today," he added. "I benefited from being bought twice: I was at ABC and it was bought by CapCities, and then 10 years later Disney bought CapCities/ABC. "In some cases you can destroy the very quality you set out to buy."

As to Disney's "aggressive" push into online and digital ventures, Barber asked Iger to talk about the resistance to such moves within the company and what such deals mean for the cannibalization of traditional revenue streams.

"We looked at digital media and believed that there was a migration there by consumers whether we were there or not," he said. "We didn't want to be marginalized. We have to be where the fish are."

One reason for resistance at Disney, Iger said, was that compensation packages at the company were geared for short-term results. "We were incentivizing a whole group of people to focus on current business," rather than, as he put it, "getting a foot in the future."

In describing the Disney deals for the iPhone and other digital ventures, Iger said his team had to "put our current business at some risk. We're in business with a lot of important third parties -- theater owners, big-box retailers, satellite providers, TV affiliates -- and this was deemed threatening. That was difficult to manage. But I felt it was important to do."

Now though, via social networks, "we have a direct relationship with our consumers," he said. "We can sell and market and communicate with consumers -- that's really powerful if used right." For example, Disney runs 130 member groups on Facebook, and there are 33 million folks in those groups. The average person on those sites has about 250 friends. In short, messaging to a whole bunch of people can be done cheaply and quickly.

On the other hand, it's scary.

"If the movie isn't good, there's no hiding that," Iger said. "It's a more challenging environment -- for almost all products."