by Robert Iger;
Before we’d made the announcement, I’d assumed we would transition to the new model in baby steps, slowly building the apps and determining what content would live on them. Now, because the response was so positive, the entire strategy took on a greater sense of urgency. There were now expectations that we had to live up to. That meant added pressure, but it also gave me a powerful communications tool within the company, where there would naturally be some resistance to changing so much, so fast.
The decision to disrupt businesses that are fundamentally working but whose future is in question—intentionally taking on short-term losses in the hope of generating long-term growth—requires no small amount of courage. Routines and priorities get disrupted, jobs change, responsibility is reallocated. People can easily become unsettled as their traditional way of doing business begins to erode and a new model emerges. It’s a lot to manage, from a personnel perspective, and the need to be present for your people—which is a vital leadership quality under any circumstances—is heightened even more. It’s easy for leaders to send a signal that their schedules are too full, their time too valuable, to be dealing with individual problems and concerns. But being present for your people—and making sure they know that you’re available to them—is so important for the morale and effectiveness of a company. With a company the size of Disney, this can mean traveling around the world and holding regular town hall–style meetings with our various business units, communicating my thinking and responding to concerns, but it also means responding in a timely way and being thoughtful about any issues brought to me by my direct reports—returning phone calls and replying to emails, making the time to talk through specific problems, being sensitive to the pressures people are feeling. All of this became an even more significant part of the job as we embarked on this new, uncertain path.
We immediately began working on two fronts in the wake of our August announcement. On the tech side, the team at BAMTech, along with a group that was already in place at Disney, started building the interfaces for our new services, ESPN+ and Disney+. For the next several months, Kevin and I met in New York and Los Angeles with the team at BAMTech to test various iterations of the app: analyzing the size and color and placement of the tiles; honing the experience of moving through the app to make it more instinctive and easier to use; determining how the algorithms and data collection would function, as well as how our content and brands would be presented.
At the same time, back in L.A., we were putting a team together to develop and produce the content that would be available on Disney+. We had a vast library of films and TV shows (though we had to buy back some rights that we’d licensed to third parties over the years), but the big question was: What original content would we make for these new services? I met with the heads of our movie studios and television operations to determine what projects in our pipeline would be released in theaters or placed on our TV channels and what would go on the app. What new projects would we create expressly for the service, including original Star Wars and Marvel and Pixar stories, that would feel as ambitious as anything we make? I brought together the senior people from all of our studios and told them, “I don’t want to create a new studio to make products for Disney+. I want you to do it.”
These are all executives who have been trained for years to grow their own businesses and are compensated based on their profitability. Suddenly I was saying to them, essentially, “I want you to pay less attention to the business at which you’ve been very successful, and start paying more attention to this other thing. And by the way, you have to work on this new thing along with these other very competitive people from other teams, whose interests don’t necessarily line up with yours. And one more thing, it won’t make money for a while.”
In order to get them all on board, I not only had to reinforce why these changes were necessary, but I also had to create an entirely new incentive structure to reward them for their work. I couldn’t penalize them for the purposeful erosion and disruption of their businesses, and yet there were no early bottom-line metrics to assess “success” in the new business. We were asking them to work more, considerably more, and, if we were using traditional compensation methods, earn less. That would not work.
I went to our board’s compensation committee and explained the dilemma. When you innovate, everything needs to change, not just the way you make or deliver a product. Many of the practices and structures within the company need to adapt, too, including, in this case, how the board rewards our executives. I proposed a radical idea—essentially, that I would determine compensation, based on how much they contributed to this new strategy, even though, without easily measured financial results, this was going to be far more subjective than our typical compensation practices. I proposed stock grants that would vest or mature based on my own assessment of whether executives were stepping up to make this new initiative successful. The committee was skeptical at first; we’d never done anything like that. “I know why companies fail to innovate,” I said to them at one point. “It’s tradition. Tradition generates so much friction, every step of the way.” I talked about the investment community, which so often punishes established companies for reducing profits under any circumstances, which often leads businesses to play it safe and keep doing what they’ve been doing, rather than spend capital in order to generate long-term growth or adapt to change. “There’s even you,” I said, “a board that doesn’t know how to grant stock because there’s only one way we’ve ever done it.” At every stage, we were swimming upstream. “It’s your choice,” I said. “Do you want to fall prey to the ‘innovator’s dilemma’ or do you want to fight it?”
They likely would have come around even without the rousing speech (I’ve had a great relationship with our board, and they’ve been supportive of nearly everything I’ve wanted to do), but while I was finishing my diatribe, one member of the committee said, “I move on it,” and another seconded immediately, resulting in approval of my plan. I went back to our executives and explained how the new stock plan would work. I would decide at the end of each year how much stock would vest, and that it was going to be based not on revenue but on how well they were able to work together. “I don’t want any politics,” I said. “This is too important. It’s for the good of the company, and it’s good for you. I need you to step up.”
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LESS THAN TWO weeks after the August earnings call and our BAMTech announcement, I got a call from Rupert Murdoch asking me to come by his house late one afternoon for a glass of wine. Rupert lives in Bel Air, in a beautiful 1940s home that overlooks his winery, Moraga Vineyards. He and I come from very different worlds; we’re of different generations; we have different political views, but we’ve long respected each other’s business instincts, and I’ve always been impressed with how he built his media and entertainment empire from scratch.
Since 2005, when I became CEO, Rupert and I would occasionally get together for a meal or a drink. We were both partners in Hulu, so sometimes we’d have specific business to discuss. More often we’d just chat about the changing media landscape and catch up with each other.
When he invited me to come to his house, though, I suspected Rupert was probing whether I was considering a 2020 run for the White House. There was already a fair amount of “chatter” about my interest in politics and the possibility of my exploring a run for the presidency. Some members of the Trump administration, including Kellyanne Conway and Anthony Scaramucci, had raised the question with people within our company, so I suspected Rupert wanted to find out for himself if this was true.
I have always been interested in politics and policy, and I often thought about serving the country after I left Disney. Many people had planted ideas in my head over the years about what office I might run for, including the presidency, which intrigued me but also had an absurd ring to it. Before the 2016 election, I was convinced America was ready t
o elect someone from outside the political system, that there was rampant dissatisfaction with traditional politics, including our political parties, and, like our businesses, government and politics were being profoundly disrupted. (Donald Trump’s victory was proof, at least in part, that my premonition was correct.)
At the time I met with Rupert, I had in fact been exploring a run for the presidency, even though I knew it was a terrific long shot. I’d spoken with a couple dozen influential people within the Democratic Party—a few former members of the Obama administration, some members of Congress, pollsters, and fundraisers and staffers from previous presidential campaigns. I also started studying like crazy, reading papers and articles about everything from healthcare to taxation, from immigration law to international trade policy to environmental issues to Middle Eastern history and federal interest rates. I also read some of the greatest speeches ever delivered, including Ronald Reagan’s speech on the fortieth anniversary of D-Day; Robert Kennedy’s impromptu speech in Indianapolis when Martin Luther King, Jr., was killed; Franklin Roosevelt’s and John F. Kennedy’s inauguration speeches; Obama’s speech after the massacre at the A.M.E. church in Charleston, South Carolina; and numerous Churchill addresses. I even reread the Constitution and the Bill of Rights. (I don’t know if this was a sign that I should or shouldn’t run, but I was waking in the middle of the night with nightmares about being on a debate stage and feeling unprepared.) I was also trying not to be presumptuous. The simple fact that I ran a large multinational company did not necessarily qualify me to be president of the United States, nor did it create a clear or easy path to winning—so I was far from committed to doing it. (In actuality, I was skeptical of the Democratic Party’s willingness and ability to support a successful business person.)
When I walked into Rupert’s home, we sat down and an aide poured us wine, then the first thing he said was “Are you running for president?”
Well, I thought, I was right about that, but I had no desire to be candid with Rupert about my thinking, figuring it would end up on Fox News. So I said, “No, I’m not. A lot of people have talked with me about it, and I have given it some consideration, but it’s a crazy idea and it’s very unlikely I would ever give it a try. Plus,” I said, “my wife hates the thought of it.” That was true. At one point Willow had joked, “You can run for any office you want, but not with this wife.” She knew me well enough to know the challenge would appeal to me, but she was terribly worried about what it would mean for our family and our lives. (Sometime later she said that she’d married me “for better or worse, so if you feel you have to do it, I’ll stand by you, but with tremendous reluctance.”)
I wondered what Rupert and I would talk about for the rest of our time together, but he proceeded to spend most of the next hour talking about the threats to our respective businesses: the incursion of big tech companies, the speed at which things were changing, how much scale mattered. He was clearly worried about the future of 21st Century Fox. “We don’t have scale,” he said several times. “The only company that has scale is you.”
As I said goodbye to him that evening, I couldn’t help but think he was signaling an interest in doing the unthinkable. I called Alan Braverman on my drive home and said, “I just met with Rupert. I think he might be interested in selling.”
I asked Alan to start making a list of all of the Fox assets that, from a regulatory perspective, we could or couldn’t buy, and I called Kevin Mayer to tell him about the meeting and get his initial reaction. I asked Kevin to assemble a list, too, and to start thinking about the feasibility of acquiring all or some of Fox’s assets.
The next day I followed up with a phone call to Rupert. “If I am reading you right, if I said we are interested in acquiring your company, or most of it, would you be open to it?”
“Yes,” he said. “Are you seriously interested in buying?” I told him I was intrigued, but to give me some time to think about it. Then he said, “I would not do anything unless you agree to remain at the company beyond your current retirement date,” which at that point was June 2019. I told Rupert I didn’t think our board would ever consider an acquisition of this magnitude unless I agreed to extend my term, and we ended our call with an agreement to talk again in a few weeks. I suddenly had the feeling that my life was about to change, and a run for the presidency wasn’t going to be the catalyst.
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OVER THE NEXT couple of weeks Alan and Kevin and I began to wrap our minds around whether a Fox acquisition was possible and what it might mean for us. Alan ruled out several Fox assets right away. Rules dictate that you can’t own two over-the-air broadcast networks in the United States (it’s a little dated and silly in today’s world, but it’s the rule), so the Fox television network was off the table. We compete with their two primary sports networks, so owning them would result in too much market share in the business, so we wouldn’t be buying them.
Then there was Fox News. This was one of Rupert’s prize possessions, so I never expected him to offer it up. Plus, I didn’t see us buying it. If we ran it as it is, we would be the scourge of the left; and if we dared try to move it to the center, we would be the scourge of the right. It didn’t matter what I thought about Fox News, though, since there was no way Rupert was ever going to put it on the table.
There were some other smaller assets, but those were the big ones that were off-limits. That left us with a broad portfolio of assets: the movie studio, including Fox Searchlight Pictures; their stake in Hulu, which would give us a majority stake in that platform; the FX Networks; the regional Fox Sports Networks (which we would later have to divest); a controlling stake in National Geographic; a sprawling and varied set of international operations, particularly in India; and a 39 percent stake in Sky, Europe’s largest and most successful satellite platform.
Kevin was tasked with doing a financial and strategic analysis of these assets. In very basic terms, that means putting together a team to do a painstaking examination of all of the businesses, not only looking at how they were performing at the moment but projecting what they would do in the future, and how they would perform in the disruptive world we were now witnessing. We also brought in our newly named CFO, Christine McCarthy, who had not been involved in our previous acquisitions but was eager to pitch in on this one—and it was going to challenge her to the extreme.
Once we got a sense of the present and future worth of their businesses, the next question was: What are these two companies worth together? How could we mine more value by combining them? Clearly there would be efficiencies by running them together. For instance, we would now have two movie studios, but under one umbrella, they could be run more efficiently. Then there’s leverage in the marketplace. What improved access to markets would we achieve because of suddenly owning more local assets? They had a big business in India, for instance, where we had only nascent operations, and they’d already placed big bets on direct-to-consumer businesses there. They also had a great television studio and had invested heavily in creative talent, and we lagged far behind them. As with our other acquisitions, we assessed their talent.Would bringing in their people lead to more success for our businesses? The answer was a resounding yes.
The upshot was that we estimated that the combined company would be worth billions more than the two separately. (That number grew even larger when the corporate tax laws changed.) Kevin gave me a fairly comprehensive look at the whole thing, then said, “There are some great assets there, Bob.”
“I know there are a ton of assets,” I said. “But what’s the narrative?”
“It’s yours!” Kevin said. We hadn’t even begun to negotiate, but the gears in Kevin’s mind were already turning. “It’s your narrative! High-quality content. Technology. Global reach.” It got even greater, he said, when you viewed all of those assets through the lens of our new strategy. They could be pivotal to our future growth. Kev
in, Alan, and Christine all gave me their support to move forward with Rupert, even though it would represent an acquisition far bigger than Pixar, Marvel, and Lucasfilm combined. The potential felt almost limitless, and so did the risk.
CHAPTER 13
NO PRICE ON INTEGRITY
RUPERT’S DECISION TO sell was a direct response to the same forces that led us to create an entirely new strategy for our company. As he pondered the future of his company in such a disrupted world, he concluded the smartest thing to do was to sell and give his shareholders and his family a chance to convert its 21st Century Fox stock into Disney stock, believing we were better positioned to withstand the change and, combined, we’d be even stronger.
It’s hard to overstate how sweeping the disruption is in our industry, but his decision—to break up a company he’d built from almost nothing—was as good a marker as any of its inevitability. Just as Rupert and I were entering the beginning phase of what would become an almost two-year journey to close a massive deal that would alter the media landscape, a transformative social change was also under way, one more profound than the mega-technology changes we were experiencing. Numerous serious allegations about thoroughly unacceptable behavior, specifically in our industry, became the catalyst for long overdue action—about sexually predatory behavior, and about equal opportunity and equal pay for women in Hollywood and elsewhere. Specific and horrific allegations against Harvey Weinstein opened the floodgates and emboldened many others to come forward with their own claims of abuse. Nearly every company in the entertainment industry had to contend with and adjudicate complaints within their organizations.
At Disney, we always believed it was vital to create and maintain an environment in which people felt safe. But it was clear now that we needed to do even more to make sure that anyone who’d been abused—or anyone who’d witnessed abuse—could come forward knowing their claims would be heard, taken seriously, acted upon, and they would be protected from retribution. We felt an urgent need to assess whether our standards and our values were being adhered to, and so I charged our human resources team with doing a thorough analysis, which included opening a dialogue and putting in place processes at all levels of the company that would allow for candor and would reinforce our promise to protect anyone who came forward.