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Redirecting Disney CEO Iger’s Push for ChangeGoes Far Beyond iPod Deal;Fewer Films, Evolving Parks

‘s larger-than-life chief executive officer, Michael Eisner. Now, having ascended to the CEO post himself, Mr. Iger has been making his own mark on the 82-year-old media giant.

Sixty days into the job, the former ABC executive has made headlines with a groundbreaking deal to sell television shows including “Desperate Housewives” and “Lost” on Apple Computer Inc.’s new video iPod. He also scrapped Disney’s unpopular internal strategy unit and has been taking on the movie establishment with calls for a new business model.

So far, the 54-year-old Mr. Iger has succeeded in quieting critics who questioned his path to the top. When Mr. Eisner earmarked Mr. Iger as his successor last year, there were howls of protest from doubters who griped that Disney should be casting its net more widely. A grueling race ensued, and Mr. Iger fought off rivals such as eBay Inc. CEO Meg Whitman to land the post.

His success in the role ultimately will be judged on his ability to tackle a number of key issues. They include setting Disney on a path for long-term growth against the backdrop of a fast-evolving digital landscape, overturning the company’s trapdoor culture and firing up its creative engines.

In a lengthy discussion with The Wall Street Journal, Mr. Iger talked about his approach to his new role and the challenges he faces. Excerpts:

WSJ: You smashed the glass with the deal to sell episodes of “Desperate Housewives” and “Lost” for $1.99 on the new video iPod. What were the most important achievements of that agreement?

Mr. Iger: Firstly, we’ll learn more about consumer behavior and using new technology in a new window with different pricing. Secondly, I really wanted to use it as a catalyst to get the company thinking more about breaking with tradition and following the consumer. Interestingly enough, nothing has done more to reignite the company than this deal. It almost has created more value for the company than the deal itself.

WSJ: How have your troops responded?

Mr. Iger: I think the troops love the fact that we were first. It’s had a great impact on the company’s spirit. The feeling is tangible; whether that translates into behavior change is a little too early to tell, except that I do sense that there is a lot of exploration going on at all of our businesses. The other thing that’s good is that the company seems to have learned very quickly that it shouldn’t be about just making a deal, it has to be the right deal. We’ve been besieged with other opportunities but instead of just getting in line and just checking off 25 other deals, we’re actually being very selective.

WSJ: Did advertisers complain about the iPod arrangement?

Mr. Iger: We heard from just about everybody. Affiliates, advertisers, mass retailers. No one quite knew what to make of it. Everybody wanted either to make a little noise or register a complaint almost in advance of any change in the marketplace conditions.

WSJ: So what happens to the advertising revenue model?

Mr. Iger: The argument to advertisers is that people who are watching the shows on this screen are people who would not have watched them on television to begin with. So they’re not really losing consumption. Committed viewers to the most popular shows only watch about half of the episodes that are available over a given season. So if you can give these people an opportunity to catch up, you’re providing them a service and they probably would pay for it.

WSJ: You’ve previously suggested that the gap should be narrowed between a movie’s theatrical release and its availability on DVD. Can you unilaterally change the DVD window?

Mr. Iger: We’d be better off as a company and an industry if we compressed that window. We could spend less money pushing the box office and get to the next window sooner where a movie has more perceived value to the consumer because it’s more fresh. The problem is the theater owners threaten that if you do that, then you’re not going to run your film on as many screens.

WSJ: Isn’t there a way to work with the theater owners?

Mr. Iger: There are some that are interested but as you find with any industry, there are others that just want to do anything they possibly can to fight change. … No movie studio really wants to be first because it’s like going over the hill first in battle. They don’t want to take the most bullets. We’ll have a conversation with theater owners to see whether we can move them more peacefully. But I think in the end, it’s going to have to be more by force than through negotiation or diplomacy.

One idea was to sell “Chicken Little” DVDs in the theater. So you’ve seen the movie and just as when you go to a play on Broadway or a concert, you can buy the DVD, that’s when people are feeling best about it, and you cut the theater owner in to the video sale. But there’s so much fear now about change that no one wants to sit down and have a frank discussion.

WSJ: How do you maintain the value of your content if such windows are collapsed? It seems there’s every chance the overall pie will shrink.

Mr. Iger: I think there will be a lot of trial and error. … The system right now feels like it’s under stress and the consumer is definitely changing from a behavior perspective, and technology is allowing more change to occur either in distribution or consumption patterns. I think it behooves us to test the marketplace a fair amount and see what it will tolerate.

WSJ: You mentioned that too many movies are made these days. What do you mean by that?

Mr. Iger: I think the business has changed, it’s gotten more competitive, but movie companies are following a business-as-usual approach. I’d rather that everybody made fewer movies and they were more selective in the movies they made. I don’t think the talent pool has expanded enough to feed the number of movies being made.

WSJ: Will the slate in 2006-2007 reflect that criticism?

Mr. Iger: It will at Disney. I can’t speak for the others. We’re reducing the number of films. At Miramax, we’re using the opportunity of ending the relationship with Harvey and Bob Weinstein to cut back our investment in that business by hundreds of millions of dollars.

WSJ: Disney and Mr. Eisner were synonymous for so long. Now that you’re CEO, do you want to change the culture of the company?

Mr. Iger: The answer is yes, but it’s not something you state in an obvious or defined way — it’s more behavioral in nature. While I’m not suggesting that’s the No. 1 priority, it is something I feel the company would benefit from. I’m trying to take the spotlight off any one individual and put it more on the company. I think the company is ready for a change. Not that there was necessarily anything wrong with Michael’s approach, but he’d been there for a while, and change is something the company could use and wants.

WSJ: As you change things, what do you lose sleep over?

Mr. Iger: I’m blessed with being a great sleeper. The only thing I worry about is wholesale creative failure because it drives the company so much. I don’t think it could happen overnight, but who knows. There are a lot of questions that need to be asked and ultimately answered, but I don’t feel a burning need as a company or as a person to answer them all at once. I think if I tried to, then I’d end up driving the company in directions that strategically would probably be foolhardy.

WSJ: How do you encourage creativity in core businesses such as animation?

Mr. Iger: One of the best ways to do it is not to take a hierarchical approach to the whole creative process. In a hierarchy, the organization is relying on its top to drive too many decisions, whether strategic or creative, and I don’t think that’s healthy. So one of the things I’m trying to do in terms of cultural change is not be the hierarchy that we once were. That’s a little hard because of the level of responsibility that you feel today, running any of these organizations. The board is looking to me, the shareholders are looking to me. The buck stops here seems even more acute today.

WSJ: Do you ever get involved in the creative process?

Mr. Iger: I definitely get involved, it’s just what role I play and how I get involved. I’m responsible [for making] sure that we’re making the right decisions financially. I’m trying not to create a process that’s unduly rigorous so that by the time ideas run through the process, they’re watered down or the passion has gone. It’s a fine line and I’m still trying to find it.

I spent a fair amount of my career making creative decisions. They’re processes I feel very comfortable with, but I realize that either you do the job full-time or you don’t do it at all. Even though I may not agree with all the decisions being made under me, I just feel the track record or batting average is going to be better if they’re made by people who are responsible for that entity.