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MarketScreener Homepage  >  Equities  >  Nyse  >  Walt Disney Company (The)    DIS

WALT DISNEY COMPANY (THE)

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Walt Disney : Can Kevin Mayer Deliver the Future of Disney?

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11/09/2019 | 07:36am EST

By Erich Schwartzel and Joe Flint

Burbank, Calif.

On the Walt Disney Co. campus, longtime executive Kevin Mayer has a nickname: Buzz Lightyear.

Mr. Mayer, 57 years old, has the self-confidence, swagger and jawline of the "Toy Story" character -- as well as the astronaut figurine's relentlessly hard-driving style and bravado.

Now he is getting a very public test. After more than two decades as one of Disney Chief Executive Robert Iger's top lieutenants, Mr. Mayer is launching Disney's bet-the-farm streaming service, Disney+, which will debut Nov. 12.

Success is critical for Disney. Rather than continuing to sell its movies and television shows to Netflix Inc., Disney is trying to become the Netflix alternative. The company has already spent billions of dollars producing programs for the service and constructing its technical underpinnings. Mr. Iger has told Wall Street he stakes the future of the company on it.

As Disney's longtime deals maven, Mr. Mayer has been an important architect of the company's recent success. He helped orchestrate the four acquisitions that expanded Disney into its modern incarnation as an industry colossus: Pixar Entertainment, Marvel Studios, Lucasfilm Ltd. and 21st Century Fox.

Not everything in Mr. Mayer's acquisition history has gone well. As he's been charged with finding -- or hedging against -- the next big thing in entertainment, Disney has made questionable investments in virtual reality, digital media, online video platforms and even 3-D printing.

Mr. Mayer has virtually no operational experience at Disney: He has never run a division such as the film studio or the theme parks. Now, as head of Disney's streaming strategy -- an effort that also includes Hulu and an ESPN service -- he directs a team of producers creating hundreds of hours of programming and dozens of engineers building a technical infrastructure that must handle millions of subscribers at once. He also oversees Disney's international operations, including broadcast holdings in dozens of countries.

The move has introduced Mr. Mayer to the entertainment side of the world's largest entertainment company. Unlike Mr. Iger, who rose to the top after several roles in programming, Mr. Mayer, an engineer by training, has had little interaction with the creative aspect of the company until now.

Then there's the question of Mr. Mayer's management style. Current and former colleagues say he confronts disagreements head-on, a departure from Disney's cautious company culture. When Mr. Mayer oversaw Disney's strategic planning unit, his employees would tell new hires which nearby convenience stores sold Red Bull and caffeine pills; long hours under him are a given. Disney declined to make Mr. Mayer available for an interview.

In recent years, Mr. Mayer has softened some of his rough edges, people who have worked with him said. And colleagues attribute some of his sharp-elbowed style to the job he held as head of strategic planning, which has little room for error or niceties.

"He has a relentless pursuit of excellence which can be stressful and exhausting at times," said Nick van Dyk, a former Disney executive who worked for Mr. Mayer for many years. "It is also the way his people get their best work done. And he generally uses that style to get results from a particular type of person -- he has more managerial versatility than people give him credit for."

Wall Street has responded favorably to Disney's streaming strategy so far, recovering losses generated when the company acknowledged long-term subscriber declines due to cable cord-cutting. Disney is pricing the service with an initial cost of $6.99 a month -- about half the cost of Netflix's most popular plan. The price is designed to bring on a large number of subscribers at once. Disney expects the service to have between 60 million and 90 million subscribers by the end of fiscal year 2024.

Mini-McKinsey

A native of Bethesda, Md., Mr Mayer worked as a movie-theater usher in high school and took to sales early in life. As a teenager, he sold his services as a window-washer to neighbors. A football career at MIT and a business degree from Harvard Business School followed before he joined Disney's strategic planning division in 1993.

The division, founded in the late 1980s to stress-test the business plans of Disney divisions, became Mr. Mayer's home at Disney. It was staffed by a small number of recent business-school graduates who were given carte blanche to weigh in on business plans from divisions across the company. Colleagues described it as a mini-McKinsey -- a place where future executives like eBay Inc. CEO Meg Whitman cut their teeth.

Mr. Mayer ascended quickly and was named senior vice president of strategic planning in 1998 at age 36. Mr. Mayer specialized in finding ways to connect Disney with new digital tools. One of his initiatives: an attempt to convince TV viewers watching the Tostitos Fiesta Bowl to go online and simultaneously follow the game with trivia and games on their personal computers.

"I don't think he had a particular fascination with Disney," said Jake Winebaum, the chair of Disney's internet division in the late 1990s. "He had a real fascination with the power of its brand and its various distribution channels."

Mr. Mayer started overseeing Disney's internet ventures before leaving in early 2000 for a very different company: Playboy Enterprises Inc.

Mr. Mayer was hired to broaden the Playboy website's audience and turn it into a destination for more than just pictures of naked women. The partnership didn't last.

"Kevin is a square-jawed, corporate executive soldier, and Playboy had a cast of characters," said Allen Blankenship, a Los Angeles real-estate agent who sold a men's entertainment site to Playboy soon after Mr. Mayer took over. "It was not as polished a crew as I'm sure he was used to."

Mr. Mayer's strategy failed to catch on, and he left the job less than a year after he started. After a few years working in media at Clear Channel Communications and LEK Consulting, he returned to the G-rated fold of Disney in 2005, when Mr. Iger took the top job. Mr. Mayer's Playboy tenure does not appear in his Disney company bio.

The Deal Maker

After returning to Disney, Mr. Mayer began working on a series of big-ticket mergers that remade the company over a decade of growth. While Mr. Iger remained the public face of the strategy, Mr. Mayer was often in charge of the nuts-and-bolts of each deal.

Pixar Entertainment came first -- a $7.4 billion deal for the studio behind "Toy Story." Mr. Iger won over Pixar founder Steve Jobs, and Mr. Mayer befriended Ed Catmull, a company executive who specialized in the technical details as president of Pixar and co-head of Walt Disney Animation Studios after the sale.

He was an early champion of the plan to buy Marvel Studios at a time when only a handful of superhero films had hit at the box office. Mr. Mayer led negotiations for the 2009 sale.

"Kevin got it when most everyone still didn't," said David Maisel, then Marvel Studios' chairman.

Marvel would go on to produce a string of hits unprecedented in recent Hollywood history, including this year's record-setting "Avengers: Endgame."

Disney bought Lucasfilm for $4 billion in 2012, acquiring the "Star Wars" franchise in the process and capping a trifecta of deals costing about $16 billion that had transformed the company into a stable of Hollywood's most valuable brands.

A less heralded but crucial deal Mr. Mayer made was getting control of BAMTech LLC, a technology company known for creating the well-regarded architecture of Major League Baseball's streaming service as well as HBO Now.

"That is probably the best acquisition by any traditional media company ever," said Marty Yudkovitz, who worked alongside Mr. Mayer in the strategic planning unit for years. "It was not at all sexy. But it was the critical factor of making this whole over-the-top plan work."

All of Mr. Mayer's previous acquisition campaigns were puny compared to the value and industry-shaking impact of Disney's Fox deal. Mr. Mayer presented the case for buying Fox to the Disney board, traveling to Mr. Murdoch's Moraga winery in Los Angeles to hash out terms. He was at Mr. Iger's side through a bidding war for the Fox assets launched by Comcast Corp., eventually helping to close the deal for $71.3 billion.

Fox Corp. Chief Executive Lachlan Murdoch said he was struck by the ambition of Mr. Mayer's strategy, saying he was the "problem solver" during Fox negotiations who helped resolve both minor roadblocks and complex issues.

Fox Corp. and Wall Street Journal parent News Corp share common ownership.

Winning the deal proved critical to the job Mr. Mayer now holds, since the Fox library of films and television shows, including "The Simpsons" and "Avatar," is bolstering its streaming service's offerings.

"This deal wouldn't be possible without Kevin's unbelievably hard work," said Mr. Iger on a call announcing the Disney-Fox tie-up. "He's probably the only one in the company who's had less sleep than I have."

Succession Planning

In March 2018, about a year before the Disney-Fox deal closed, Mr. Iger reconfigured his company and placed two longtime lieutenants at the top. Mr. Mayer would be in charge of direct-to-consumer and international operations; Bob Chapek, who ran Disney's theme parks, would take over licensing and consumer products such as Disney toys, apparel and stores.

Many in the industry see the promotions as a bake-off to be Mr. Iger's successor as CEO.

Mr. Iger is scheduled to retire in 2021, though he has already delayed his retirement several times. In 2016, his longtime heir apparent, Chief Operating Officer Tom Staggs, stepped down after Mr. Iger and Disney's board declined to give him assurance that he was in line for the top job.

(MORE TO FOLLOW) Dow Jones Newswires

11-09-19 0736ET

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Robert A. Iger Chairman & Chief Executive Officer
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