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How a Secret Meeting With Steve Jobs Led to Disney's 'Digital Wake-Up Call' - Inc.

When competing against Netflix, it helps to have Steve Jobs in your corner. During the early 2000s, Jobs played a critical role in shaping the business strategy of the Walt Disney Company. In this excerpt from their new book Binge Times: Inside Hollywood’s Furious Billion-Dollar Battle to Take Down Netflix (from William Morrow, an imprint of HarperCollins) Dade Hayes and Dawn Chmielewski reveal how Jobs inspired former Disney CEO Bob Iger to take the studio in an aggressive new direction by embracing technology.
In the official, corporate-sanctified narrative of the Walt Disney Company, its drive to invest in its technology capabilities began nearly a generation ago, long before streaming became de rigueur. In this account, two signature deals made with Apple’s Steve Jobs indicated the company’s bold new direction under Bob Iger, the affable, camera-ready former TV weatherman who rose through the ranks at Capital Cities/ABC to become Disney’s CEO in 2005. The first culture-shifting move, within two weeks of Iger’s taking over as head of the company, enabled customers to buy popular ABC television shows to watch on their new video iPods, and the second was the $7.4 billion acquisition months later of Pixar, the computer animation pioneer led by Jobs.
“It was an interesting time,” Iger mused about the 2000s in his memoir, The Ride of a Lifetime, “and marked what I saw as the beginning of the end of the traditional media as we knew it. Of great interest to me was the fact that almost every traditional media company, while trying to figure out its place in this changing world, was operating out of fear rather than courage, stubbornly trying to build a bulwark to protect old models that couldn’t possibly survive the sea change that was underway.”
The record of the 21st century, however, tells a far more complicated story about the timing and extent of Disney’s digital wake-up call. It would squander $1.6 billion on acquisitions as it chased fads, from social networks to social gaming to viral video, that mattered little to its core business. It launched a short-lived digital locker service designed to prop up flagging sales of DVDs years after millions of Netflix consumers demonstrated they preferred to watch Disney movies on demand. As with the music industry, piracy would play an irresistible role in forcing change.
Former Disney-ABC Television Group president Anne Sweeney recalls buoyantly striding into a Monday morning staff meeting on May 23, 2005, eager to share the overnight ratings for the season finale of ABC’s hit series Desperate Housewives. The sudsy primetime drama, which explored the dark undercurrents of seemingly idyllic suburbia, had become a cultural phenomenon whose final episode attracted 30 million viewers. But before Sweeney could share the good news from Wisteria Lane, ABC’s chief technical officer, Vince Roberts, asked to have the floor. He quietly placed a disc into a DVD player and pressed play, and the images of Eva Longoria, Teri Hatcher, and Felicity Huffman flickered across the television screen.
“I said, ‘Vince, that’s the finale.’ And he said, ‘Yes, and it was available online for download 15 minutes after it went off the air,'” Sweeney recounted years later. “Boy, talk about a killjoy. It totally gutted what we thought we understood about the size of our audience. Our audience was much bigger and we weren’t getting paid for it — and there wasn’t any legitimate way we could say to advertisers, ‘Hey, we actually had 10 million more viewers.'”
A few months later, Jobs would propose a solution to the television industry’s online piracy woes — as he had done years earlier, when he met with executives of the free-falling music industry. The Pixar CEO flew to Burbank to offer a personal demonstration of the video iPod. Sweeney recalls Iger arranging a phone conversation with Jobs, in which the lead of the most secretive company in Silicon Valley dangled a tantalizing proposition: “I’d like to show you what we’re working on.”
Jobs met the ABC network chief in a conference room of the Team Disney executive office building, where he cracked open his laptop to show a version of the iTunes store that featured a giant image of Lost. He talked her through the process of downloading the show, then handed her a device that looked like Apple’s popular music player, with a 1.8-inch video screen, and she watched an episode of the plane-crash survival drama. “It didn’t occur to me until he left. I thought, ‘Wait a minute, how did he get an episode of Lost?'” Sweeney says, though the answer was obvious. “Well come on, everybody else was downloading it.”
Disney and Apple quickly struck a deal and, in a stealthy logistics operation worthy of an episode of Narcos, used the company plane to transport master recordings of ABC’s Lost, Desperate Housewives, Night Stalker, and two Disney Channel shows to Apple’s headquarters in Cupertino, California. The chief of engineering hand-delivered the packages, wrapped in brown paper, into a locked room for uploading onto iTunes.
The partnership remained shrouded in secrecy until October 12, 2005, when Apple held a product unveiling at the opulent California Theatre, a restored 1927 movie house in San Jose, California. Iger appeared onstage and shook hands with Jobs in the first public demonstration of a thaw in Disney’s frigid relationship with Pixar’s controlling shareholder. Sweeney, who watched from the audience, said the iTunes deal marked the network’s first step toward battling piracy. But the affiliates didn’t see it that way. “That afternoon, we flew back to Burbank and my phone exploded,” Sweeney recalled. “Many of our broadcast affiliates called and were very upset by the announcement. Major advertisers called as well. Not upset but wanting to let us know that they wanted to be a part of whatever we did next.”
Having one foot in the future and one foot in the past made it difficult to maintain balance. From the dawn of digital through the modern streaming era, Disney has been a calculated risk-taker, mindful at every turn of its legacy and the billions of dollars being generated by traditional businesses.
The content deal with Apple was a building block in Iger’s efforts to repair Disney’s frayed relationship with Pixar’s chief executive and controlling shareholder, which had grown toxic under Iger’s predecessor, Michael Eisner. Disney’s audacious deal to acquire the studio behind such animated blockbusters as Toy Story and Finding Nemo had benefits that extended beyond the movie theaters, merchandise sales, and theme parks: Iger gained one of technology’s leading futurists as an advisor, confidant, and board member. Jobs’s innate appreciation of the importance of branding, and his uncompromising emphasis on quality, touched every corner of Disney — from its billion-dollar overhaul of Disney’s California Adventure theme park to its expansion of its cruise line. He believed that a golden age of content was coming, and that technology would deliver movies and television shows directly into the hands (and pockets) of consumers.
This future vision would inform Iger’s thinking — emboldening the chief executive to make brash digital forays that at times placed Disney at odds with the rest of the entertainment establishment, like rushing its content onto the latest Apple devices, which rivals grumbled threatened established business models. It helped that Iger was an unabashed tech enthusiast who loved to talk about the gadgets in his home, says ABC’s former chief product officer, Albert Cheng, who spearheaded development of the network’s online media player and its iPad app.
“He would tell me about all the stuff, and so he has a genuine interest in technology,” said Cheng, who is now co-head of television at Amazon Studios. “So when he became CEO, that gave us license to go further. I felt that set the tone for, like, ‘The CEO has given permission. So let’s do it.'”



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