More Imagineering Downsizing

[raidermatt]

Jim Hill Article (http://www.jimhillmedia.com/mb/articles/showarticle.php?ID=1634)

[DoxaRich]

Will the last Imaginear out please turn off the lights.

Someday someone is going to have to explain to me how outsourcing is more profitable. Take the Kirk family for instance. They were on payroll, doing a great job, kept their great ideas in house at Disney. Now they are an independant company who will probably wind up designing something for Disney. My assumption is that they will charge a premium price, especially since they will probably have to sign over the creative rights to their design to Disney. Is this cheaper then simply having them on the payroll ?

[raidermatt]

In the short run its cheaper, because you don't have to pay those people while they brainstorm.

In the long run, its a little more cloudy, and depends on a lot of variables. Its logical that the new company will need to charge a premium for its ideas, which would cost Disney more. Also, these companies will of course try to encourage competition for it's ideas, which could drive the price up.

But if Disney is simply going to reject any ideas that cost too much anyway, then who knows?

This isn't the overseas outsourcing that is so popular with technical, phone, and operational positions, so you've got a point that the business case might not even be there in the long run.

However, this is more about the strategic direction of the Disney company. They are moving towards being a distribution company, not a creative company. Distribution companies don't need Imagineers.

[Above_the_Rim]

The good thing is that Iger is coming in, and he might take this company back in the right direction. Note that the Imagineer lay offs have been over the last 9 months meaning Iger hadn't even been elected as CEO yet. I've looked at it, and from different evidence it seems as if to me Iger might also stop doing all those sequels, saying he does have some interest in actual product and quality. This imagineer trend started by Eisner could be stopped by Iger, but no one knows yet

[DoxaRich]

While I'm hopefull that Iger will lead Disney in a different direction then ME, I'm far from convienced that he will. While Iger is not officially the CEO yet, ME has allowed him to make some considerable changes so far. If Iger was against the lay offs he should have done more to save their jobs. Why risk losing experienced Imaginears to the competition.

While I don't think Iger has the ego issues ME does, I believe his business model is much closer to ME's then Walts.

[Above_the_Rim]

While I'm hopefull that Iger will lead Disney in a different direction then ME, I'm far from convienced that he will. While Iger is not officially the CEO yet, ME has allowed him to make some considerable changes so far. If Iger was against the lay offs he should have done more to save their jobs. Why risk losing experienced Imaginears to the competition.

While I don't think Iger has the ego issues ME does, I believe his business model is much closer to ME's then Walts.
I know ME has let him do some things, but htat doensn't mean Iger has complete control yet, I think it's just too early to tell. We all know that Steve Jobs has been praising Iger, so there must be something behind the curtains that we dont know. Steve Jobs isn't one of those corporate business guys like ME, and the fact that he's praising Iger and vice versa I think says something. I wish I did, but I just dont know everything about Iger yet. But chances are if he is just a puppet or even a more Michael Eisner then he'll just get kicked out too.

[DoxaRich]

I hate the Dallas Cowboys. Who's my favorite team ? Whoever the Cowboys are playing on Sunday. Jobs hates ME but he also knows the most profitable distributor he can sign with is Disney. So yeah, he's going to praise Iger. It's ALL about the $$$$.

The only hope we have to a return to the old Disney is if Iger truely believes he can turn double digit returns doing things the way Walt did and quite honestly I don't see that ever happening again, regardless of who's in charge. The money mongers out there are not concerned with "creative content" or being "an original". Instituitional investers want huge returns, not "show".

I read an interview with Roy where he was asked what kind of growth and returns he thought were acceptable. His ( and Walts ) business model included heavy reinvestment into the company with a steady 5% annual profit. Sorry to say it, but today, that's not acceptable.

[cteddiesgirl]

Part of the fact with outsourceing is also that they don't have to pay these people any benefits and they usually outsource to other countries where they can pay lower prices.

That's why they are outsourcing everything.

[YoHo]

Robert Iger was the #2 man at Disney. If you're gonna blame Eisner for this, then you have to blame him too. He's not in some middle managment position.

Now granted there's a chance he'll go in a different direction, but come on, his background is ABC, a company that made money from buying other people's creative product and reselling it. What possible logical reason could you have for believing he has the first clue in running a content creation business?

[DoxaRich]

Terri, I understand the business reason for outsourcing tasks like 800 # help lines and labor intensive jobs like the textile industry. The savings in Workmans Comp Ins & S.S.I. alone can almost justify out sourcing.

But while the world may be full of ditch diggers there are a limited number of people with the skill & creativity to be an Imaginear. The return on investment for a great idea is astronomical. Sure, Disney could possibly get the same results paying the Kirk Family a fee to develope the next Widgit, but what happens if US/IOA outbids Disney. Maybe the next PotC or Tree/TTBaB is located about seven miles north of Lake Buena Vista.

[crusader]

What are we talking here in terms of real numbers?

This article fails to provide anything factual. So is this a real corporate epidemic at Disney?

How do we know we're not just seeing some heads roll following the Save Disney campaign or related to some other private internal matter?

[WDWHound]

I can not beleive they layed off Bruce Gordon (perhaps the most creative of the second generation of imagineers),

Will Iger turn this around? I hope so, but I'm not sure the stockholders will let him do it. Outsources is seen as the key to profits these days by those who pull the financial strings. Iger's job is to answer to the stockholders, and stockholders care a lot less about creativity, quality and innovation than most of us do.

[manning]

In reality, Iger is already calling the shots. This may be different with Disney, but when a CEO has announced his departure he loses most if not all of his power.

[DoxaRich]

In reality, Iger is already calling the shots. This may be different with Disney, but when a CEO has announced his departure he loses most if not all of his power.

I think ME may disagree with you manning, but I understand the point you're making.

I can see ME making short term decisions during his remaining days as CEO, but any long term business ideologies should be left up to the new guy. Turning WDI into a shell of its former self would not be considered "short term". I only see this happening because Iger agrees with it, not because it was mandated by ME.

Hope I'm wrong, but it appears Iger is a fan of out sourcing.

[WDWHound]

I think ME may disagree with you manning, but I understand the point you're making.

I can see ME making short term decisions during his remaining days as CEO, but any long term business ideologies should be left up to the new guy. Turning WDI into a shell of its former self would not be considered "short term". I only see this happening because Iger agrees with it, not because it was mandated by ME.

Hope I'm wrong, but it appears Iger is a fan of out sourcing.
Actually, though this might be called a long term policy, it could also be seen as the continuation (nearing completion) of an Eisner policy begun before Iger was apppointed. Downsizing has always been something the Eisner pursued, and the downsizing of imagineering has been going one for a long time. Given this, the downsizing of imagineering may be something that Eisner wont allow Iger to interfere with.

I hope you are wrong to about Iger's preferences. He has made some very good policy moves so far, but as I said earlier, this may be a area where the stockholders will insist on short term profits over creativity. The jury is still out. We wont know for sure until around this time next year, once we have seen a few quarters under an untethered Iger.

[raidermatt]

The insitututional investors are not micromanaging to the point of requiring Disney to layoff imagineers. They merely want to see returns. Disney has been downsizing in creative areas for years, and if the stockholders really cared that much about it, the stock price would reflect it.

Sure, in the short run, since the investors are usually number crunchers, they generally like to hear about things like "reduced capital investment", and "staff reductions". But that is in the short run, and clearly its not enough to move the stock price.

If Eisner/Iger/Whoever said they were going to truly invest in creativity, yes, there would be some skepticsm on the Street. But its not like that would hold the stock price back any more than its been held back in the last 12 years or so. If, however, it produced results, the investors would be very happy, and the stock would reflect that.

Let's face it, we've been hearing the "they have to do what the investors want" mantra for years now. Disney continues to do it, yet the stock performance has been "unimpressive". Something doesn't add up here.

[DoxaRich]

While Disney's stock price has been stagnant at the mid-upper $20's level for some time now, it's EPS is fairly impressive and they have been paying cash dividends. Major brokerage houses are now upgrading their position of Dis stock from Hold to Buy. They are anticipating at stock price in the low 30's. Why it''s not climbing may have more to do with the overall market right now then anything Disney has done.

IMO it comes down to how many of the 40 million or so guests that visit the parks care where the idea or concept came from. I doubt less then 1 percent really understand what has happened to Disney over the years.

I expect Ex:E to be the next classic e-ride at WDW. Just using the Kirk name as an example, would the masses care if the Kirks designed the ride as an Imaginear or as an outside contractor ? Would they even know to ask " Who designed this " ? In the long run, provided Disney builds quility rides, I think out sourcing will go unnoticed.

[raidermatt]

IMO it comes down to how many of the 40 million or so guests that visit the parks care where the idea or concept came from.

That's never had anything to do with it, and it doesn't now. The people have never really cared where it came from, and they don't now. It comes down to whether the ideas or concepts impress those visitors. Therefore what matters is what processes will produce more of those "products" that impress those visitors.

And in the bigger picture, again, its a matter of whether Disney wants to be a creator or a distributor. There's nothing wrong with distribution as a business. But the irony that continues around here is that its the creative side that is the only reason we are even here discussing this company, yet few care when the creative side is "de-emphasized".

Let's be honest. If Eisner/Iger came out and said they were returning to the strategy of investing in creativity (and meant it), and that is the basis of how they would differentiate themselves from the competition, would you applaud the move, or pan it?

On the stock, there's always an excuse for the short term. A few brokerage houses upgrade, yet investors don't care. I'm not talking about a stock that's been sluggish for a few months or even years. Its been over a decade. EPS was nice, but revenue missed targets. THAT'S why the stock didn't climb. Disney's priority of cost-cutting over creativity has been excused away for years as something they had to do to keep investors happy, yet investors have not been happy.

You can't look at how a stock performs over the course of a few months and make defintive judgements about the company's long term strategies. But either way, short term or long term, Disney's stock has not performed in a way that would indicate investors are happy with the results.

The strategic direction hasn't been producing the desired results, and that has to make one question the continuation of those same strategies.

[DoxaRich]

That's never had anything to do with it, and it doesn't now. The people have never really cared where it came from, and they don't now. It comes down to whether the ideas or concepts impress those visitors. Therefore what matters is what processes will produce more of those "products" that impress those visitors.

I could be wrong, but I think we're argueing the same point. Those of us that do post on boards like this do care about what is happening within Disney. The other 99% don't which has allowed ME to make wholesale changes within the company - its entire business philosophy - without so much as a peep of outcry until the last couple of years.

As for the stock, 3 years ago it was under $13.00. Lately its been bouncing between 25-30. It's still nowhere near what it was during the market balloon years, but we all knew it was overvalued then as was the rest of the market.

PS: Enjoy watching Randy last nite ?

[WDWHound]

Let's face it, we've been hearing the "they have to do what the investors want" mantra for years now. Disney continues to do it, yet the stock performance has been "unimpressive". Something doesn't add up here.
I actually agree with you that following the desires of Wall Street in regards to downsizing is not the way to go in this case, but Disney (along with most other big companies) has been trying to do so for many years. The large funds (who hold the lion's shares of the stock), still love to hear that a business has been made "more efficient" and they do excert preasure for things like outsourcing to be done. The don't care specifically about imagineering, but they do like to heare that outsourcing is taking place somewhere in the company and they don't care if what department its in.

You would think someone on Wall Street would notice that this stagegy stopped reaping benefits years ago, but apparently they haven't.

[raidermatt]

I could be wrong, but I think we're argueing the same point. Those of us that do post on boards like this do care about what is happening within Disney. The other 99% don't which has allowed ME to make wholesale changes within the company - its entire business philosophy - without so much as a peep of outcry until the last couple of years.

We agree that most don't care how or why things happen, but I'm also pointing out that how/why they happen has a direct impact on the quality of products Disney produces. Disney's customers most certainly care about that, and they have been seeing less consistency in this as time has gone buy.

Disney used to "out-content" their rivals. Now they increasingly rely on outside companies to supply the content, and then try to "out-distribute" and "out-market" their rivals, where its much harder to differentiate yourself. The Street may like the idea of spending less money up-front, but if the results on the backend don't measure up, they won't cut you any slack.

Which brings us back to the stock. Any chart longer than 3 years shows Disney falling short of both the S&P and DJIA. Disney had a decent run-up in the last couple of years, but even that didn't leave them much better off than the S&P, and the DJIA has been closing the gap, despite a few positive brokerage comments.

But debating where the stock is going is almost as pointless as debating who will win the Super Bowl in 5 years. What was said was that the investors were dictating policy to Disney, and Iger had little choice but to go along with it. The point I'm making is that Disney has been doing this for years now, yet the investors have not responded. So perhaps decisions should be made based on what will actually be the best strategic direction for the company rather than what some Wall Street number crunchers think is best.

Now, if Disney's management team thinks that cutting loose its creative soul is the best strategic direction, and apparently they do given how they've handled animation and Imagineering, then I submit that this management team has not been the best team for Disney, and isn't the best team for the future. Not that anyone in any position of power gives a rat's patoot what I think, but then again, at least we're all in the same boat on that front.

You would think someone on Wall Street would notice that this stagegy stopped reaping benefits years ago, but apparently they haven't.

I don't blame the guys/gals on Wall Street, though. They're going to stick with what they know, and if they knew how to create entertainment, they probably would have chosen a different career path.

Its up to Disney's management team to tell Wall Street what will work. True, if its not exactly what the Street was expecting, then they will be skeptical. But what's going to happen that hasn't already? The stock will stagnate "more"?

Of course, the pressure will then be on Disney to deliver results, which is all the Street cares about, but how is that any different than now?

[DarkSideMoon]

disney,disney,disney, what the heck are you doing? getting rid of imagineers is dumb, plain and simple. guess where they go with some of the ideas they brainstormed U-N-I-V-E-R-S-A-L! first the imagineers, now resort staff, what next? one of the reasons i love disney is they hire people others wont, older ppl, imagrants ect. why does disney act like they are losing money like an airline? they are MAKING money, generrally you dont change stuff like this unless you are not making money in which case outsourcing is ok because it would keep disney above the red.

[k5thbeatle]

I hate the Dallas Cowboys. Who's my favorite team ? Whoever the Cowboys are playing on Sunday. Jobs hates ME but he also knows the most profitable distributor he can sign with is Disney. So yeah, he's going to praise Iger. It's ALL about the $$$$.

The only hope we have to a return to the old Disney is if Iger truely believes he can turn double digit returns doing things the way Walt did and quite honestly I don't see that ever happening again, regardless of who's in charge. The money mongers out there are not concerned with "creative content" or being "an original". Instituitional investers want huge returns, not "show".

I read an interview with Roy where he was asked what kind of growth and returns he thought were acceptable. His ( and Walts ) business model included heavy reinvestment into the company with a steady 5% annual profit. Sorry to say it, but today, that's not acceptable.

Well said. Let's face it. Walt Disney is a person that only comes around once every few hundred years. The machine is now in motion and barring some miracle where another genius like WD gets the reigns, even if someone like this did come around it would be hard to reverse course!