Walt Disney CFO Tom Staggs may soon get some on-the-job experience in another corner of the Mouse House. Disney’s top financial executive is expected to swap jobs with Disney theme park chief Jay Rasulo, according to knowledgeable sources. The swap comes at a crucial time for Disney, which is planning to build a theme park in Shanghai.
No announcement has been made yet, but Disney CEO Bob Iger is expected to describe the swap as a new policy by which he moves longstanding executives into new roles to expand their knowledge of the company.
However, longtime Disney observers say this could buttress Staggs’ chances to contend for a more senior role later on. The 19-year Disney veteran is believed to have wanted for some to become Disney’s chief operating officer, a position that currently doesn’t exist. Disney insiders say Staggs has been keen on that job ever since Iger was elevated to CEO in 2005. Rasulo, who has run the theme parks since 2002, was a highly-regarded strategic planner for Disney and then oversaw the Disney-managed theme park outside Paris before being elevated to his current role. The move is reminiscent of efforts by former Disney CFO Richard Nanula, who switched jobs to run Disney theme parks in the mid-1990s in order to bolster his own bid for a more senior job.
Taking equity in MGM seems dicey given that the studio’s current equity owners, which include several private equity firms, Sony (SNE) and Comcast (CMCSA), have already written down their investments from their $5 billion purchase of the studio in 2004. But Cooper, who has previously been brought in to help resurrect the fortunes of Krispy Kreme and Enron, wanted the creditors to allow allow him to raise as much as $1.2 billion in fresh debt to help jumpstart MGM’s film production. That prompted the debt holders, which could push the studio into bankruptcy, to question Cooper instead about seeking a buyer. That discussion came at a Nov. 6 meeting.
The creditors have great leverage over Cooper. In October, the committee gave MGM until Dec. 15 to forgo paying interest on the studio’s debt and to keep the company out of bankruptcy court. In return, however, the creditors insisted upon a major restructuring. Now, their patience seems to be wearing thin, according to a source with knowledge of the meeting. Cooper is said to have told the creditors that it’s unlikely he can get more than $1.5 billion for the studio, which is roughly what MGM’s rights to the James Bond franchise alone might be worth. An MGM spokeswoman would not comment.
The creditors apparently are getting close to taking the haircut just to be rid of the troublesome studio, according to the source. Among those who have been mentioned as potential candidates to buy MGM are studios Warner Brothers (TWX), Fox (NWS)and Lions Gate (LGF)and private equity fund Qualia Capital, whose principals Amir Malin and Ken Schapiro are industry veterans who have a successful record at turning around wobbly entertainment companies. The studios are said to be primarily interested in getting their hands on MGM’s 4,000-title film library, the Bond franchise and MGM’s rights (along with Warner) to make the Lord of the Rings prequel The Hobbit.
Other potentially interested buyers could be former News Corp. president Peter Chernin and one-time Yahoo CEO Terry Semel, a former Warner Brothers studio chairman. Neither man could be reached for comment.
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The move, which has yet to be announced, is being driven by the Walt Disney Co.(DIS), which signed on to distribute Spielberg and Co.'s films in February. That deal included a provision by which Starz would distribute Disney's films under an existing agreement by which Starz distributes all of Disney's films to its pay TV customers. Now, it appears that Starz doesn't want to distribute Dreamworks movies to its cable and satellite viewers, and is pressuing Disney to find someone else to do it instead. Enter Showtime.
Why wouldn't Starz want to show films from the hitmakers at Dreamworks or, more importantly, give up a shot at Spielberg flick? Starz, Dreamworks and Showtime aren't commenting. But try to follow Starz' reasoning, if you can: pay channels like Starz get a piece of the annual $10-12 a month that a cable operation collects from customers who get the channel. So, let’s say that Starz has 18 million subscribers, the last number Liberty reported to the SEC. If it gets, say $5 a month from each of those subscribers, it generates revenues of $90 million a month or about $1.1 billion a year. The problem comes in the payout to Disney. Pay channels pay studios a fee on the number of films they get from the studio, but the fee escalates as the film does better at the box office.
]]> Starz execuitves, as I understand, were concerned that they hadn’t bargained for a slew of big blockbusters when they initially signed their deal with Disney. In its most recent SEC filing, Starz parent company Liberty Media Entertaiment says that “the number of qualifying films under Starz Entertainment’s output agreement with Disney may be higher than it would have been otherwise” as a result of the Dreamworks deal. The point is that Starz, which through the first six months of this year had seen its operating earnings increase to $187 million from $113 million a year ago, is in a bind. Its revenues were fixed, while its faced the prospect of skyrocketing costs.On the other hand, Showtime could use a boost in the number of films that it puts on its service. That’s because last year it lost the films it had distributed from Paramount(VIAB), MGM and Lionsgate (LGF). After a nasty negotiation over the fees that Showtime was willing to pay, the trio left to start their own pay channel, Epix, which is just now rolling out. As Showtime starts lining up for its next round of negotiations over fees with cable and satellite operators, it likely would love to have Spielberg & Co. as one of its headline acts.
Dreamworks already has plenty of ties to Showtime. Spielberg is executive producer for the show United States of Terra that Showtime airs. Spielberg and Snider are also producing a show on the behind the scenes making of a Broadway play for the pay channel. When will the first Dreamworks flick appear on Showtime? Probably not until next year. The studio is making Dinner for Schmucks, a comedy starring Steve Carrel with Paramount, but that’s being distributed on HBO. The first Dreamworks movie for Disney – and presumably for Showtime – would likely be Real Steel, a futuristic boxing film that The Pink Panther director Shawn Levy has signed to direct.
BusinessWeek staffers learned of Neal’s departure through a memo sent out by Norman Pearlstine, Bloomberg’s chief content officer. “We are grateful for the tremendous foundation that he has built for the digital properties,” Pearlstine said. “Roger’s digital team will report to Bloomberg’s Kevin Krim.”
Earlier, BusinessWeek President Keith Fox and Editor-in-Chief Stephen J. Adler announced they would be leaving the magazine. Fox will remain at BusinessWeek’s parent, McGraw-Hill Cos.
Neal was recruited to BusinessWeek from eBay in 2006 where he served as director of strategic partnerships. During his tenure at BusinessWeek, traffic to the magazine’s website grew from 6.4 million average monthly unique visitors to more than 10 million. Among Neal’s other initiatives was to create the Business Exchange, a social networking site for the business community in which McGraw-Hill invested more than $20 million. While accounting for 16% of digital revenues so far in 2009, BX has yet to meet online traffic and revenue goals.
"I'm enormously proud of the great strides we've made growing Businessweek.com, launching Business Exchange, and finding a great home for the franchise at Bloomberg," said Neal, who was directly involved in presentations during the sales processs. "There is enormous potential in the continuing evolution of digital media and I'm very excited to pursue new opportunities in this arena."
In other personnel news, Pearlstine said BusinessWeek publisher Jessica Sibley would remain in her job following the transition to Bloomberg, as will Carl Fischer as head of marketing and communications. Tania Secor, BusinessWeek’s vice president of finance, will also be retained and fill a larger finance role with Bloomberg News, including at BusinessWeek and at Bloomberg Markets magazine.
Pearlstine said executive editors Ellen Pollock and John Byrne and managing editor Ciro Scotti would continue in their roles. He also reassured the staff that the majority of BusinessWeek employees would be hired by Bloomberg.
The search for a new editor-in-chief of BusinessWeek continues, said Pearlstine.
Sometimes even a wheeler-dealer like John Malone outsmarts himself. That’s seems to be the situation at DirectTV. (DTV), where the razor sharp media baron seems to have dealt himself out of installing his own choice as CEO of the satellite TV giant despite once owning 57% of the company’s stock. Instead, he controls 24% of the company’s votes, but seems to have been bottled up by a very independent DirecTV board.
Those are the details that are emerging from a recent SEC filing by DirecTV. The satellite company clearly wanted to stop Malone, who buys and sells companies faster than most people change socks, from exerting too much control over the company. So in what has to have been a wing ding of negotiations, the DirecTV board swapped the DirecTV stake that Malone’s Liberty Media (LMDIA) once held for shares in DirecTV that Liberty will distribute to its shareholders. In addition, DirecTV took a $2 billion loan off Liberty’s hands that it used to buy those shares in the first place, but took Liberty’s 65% stake in the Game Show network and three Fox Sports regional networks. Malone got super-voting shares that are capped at 24% of the company’s voting shares.
What motivated DirecTV’s board to do the deal? They were angling for “the elimination of a single shareholder …with the ability to veto change of control provisions,” the company said in its SEC filing. More important, the board wanted to “reduce the level of influence that Malone could exert,” they added. Anyone need more of a roadmap than that?
Why’d Malone do the deal? Mostly for tax reasons, which seem to drive much of what the media baron does. The stock-for-stock swap allows him to avoid a ton of taxes on the appreciation in DirecTV’s stock in 2006. DirecTV sweetened the deal by giving Liberty shareholders a 5.6% premium on top of that tax-free treatment. DirecTV’s shareholders will vote on the transaction on Nov. 12.
Instead, the DirecTV board, which has eight independent members (Malone is the company’s chairman and Maffei is a board members,) blocked Maffei, who now tells folks he is no longer interested. In August, the board created a search committee, which Malone heads. But the board has clearly no intention of allowing him to railroad them into taking his choice as CEO. “They gave him what he wanted with the stock swap,” says one source close to the dealmaker.” “And that’s about all they intend to give him.”
More than likely DirecTV will name its CEO sometime in late November or early December. The candidates include Bruce Churchill, who heads DirecTV’s Latin American unit, and Cablevision president Tom Rutledge. The search committee was created after DirecTV CEO Chase Carey’s resignation in June to become News Corp(NWS)president and chief operating officer. Larry Hunter, the satellite opeator’s excecutive vice-president for legal, human resources and administration, has been serving as interim CEO since Carey’s departure.
]]>The panel was assembled to help promote a new book, “The Curse Of The Mogul, What’s Wrong With the World’s Leading Media Companies,” in which the co-authors skewer media executives for their companies’ poor financial performance over the years and for propagating a “myth” about the necessity to do mergers. Needless to say, there was no shortage of opinion on Monday night.
Lead panelist and co-author of the book, investment banker Jonathan Knee, kicked it off by saying that media executives have essentially tried to merge their way to excellence by “convincing the world there is something special and magical about media.” To hear more from Knee, click here
]]> Here are a few more highlights from the panel, moderated by New York Times media columnist David Carr, who described The Curse of the Mogul “an intellectually honest book” but then drew laughs when he said he worried that its title is “vaguely satanic.”
Former cable executive and now partner of investment firm InterMedia Partners, Leo Hindery Jr. slammed Barry Diller’s dealmaking record. “Do you think (Time Warner CEO) Jeff Bewkes and (News Corp. Chairman) Rupert (Murdoch) go to sleep at night worrying about what Barry did today? They could care less.”
Hindery said he admired Murdoch for his vision and said today’s media executives are “mushy” and have “no soul, no vision….Can anybody tell me what the vision at Viacom is today?”
Time Warner CFO John Martin, who spent a lot of night distancing himself from the disastrous AOL-Time Warner deal that happened when he wasn’t in his current job, said his company is now moving toward becoming a more focused company. He emphasized that it doesn’t need to do deals. “Abstinence is the best policy.”
When Carr asked what media company has done a good job, Susan Lyne, the former CEO of Martha Stewart Omnimedia and currently CEO of Gilt Groupe, cast her vote for ESPN, which she says has “stayed true to its mission.” But she did note that its one mistake was getting into restaurant business.
On the possibility of a merger between NBC Universal and Comcast, Hindery said “both guys really need it,” referring to (NBCU parent) General Electric CEO Jeff Immelt and Comcast CEO Brian Roberts. “Brian has the carryover (from the failed attempt to buy the Walt Disney Co.) and he can’t lose another one.” That said, Hindrey wouldn’t predict whether the deal would be a success.
In a closing shot, Hindery told Knee that after writing this book “you are never going to have another investment banking client again.”
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Details are still be worked out, according to those with knowledge of the arrangement, but it is being portrayed internally as a promotion for the 49-year old Grainge, who is highly regarded by executives at Universal’s Vivendi parent company. When they signed Morris to a four-year contract extension last year, Vivendi top executives encouraged their long-time Universal chief to bring in a successor, BusinessWeek has been told. Morris will continue to work on key projects for Universal, but will turn over day-to-day operations. Morris expects to maintain his seat on the Vivendi management board, which includes top executives from the French conglomerate’s business units.
Morris, a one-time songwriter with wrote the 1966 Chiffon’s hit “Sweet Talking Guy,” was a record producer before becoming president of Atlantic Records in 1980 and president of Warner Music (WMG) in 1994. In 1995, he moved over to Universal Music’s predecessor, MCA Records, as its chairman and CEO. The company was renamed Universal the next year, and acquired Polygram in 1998. That deal gave Universal labels like Motown and A&M Records. Universal currently sells more than one-third the music sold in the U.S..
Morris is currently lining up advertisers for the expected launch next month of VEVO, an online service he masterminded for streaming music videos on YouTube (GOOG). Morris has already signed Sony and several independent labels, who will also provide their videos, and is in talks with Warner Music and EMI. The service is envisioned to be a music version of the video site Hulu, a free service by which TV networks generate revenues by selling advertisements. Universal, which has built a large business to sell artists’ merchandise, would also use the service for e-commerce.
Universal wouldn’t comment on the music company’s ongoing succession plans. But the London-based Grainge, who has three school-age children, recently purchased a house in Connecticut and is expected to wait until his kids school year ends in June before making the move to New York.
Grainge, who became Universal’ international chairman in 2005, began in the music business as an A&R executive in 1978 for CBS Records, and rose through the ranks as at Polygram before becoming chairman of Universal’s British operation in 2001.
]]>Fox, 44, informed colleagues of his decision in a staff memo Friday afternoon, less than three weeks after McGraw-Hill announced it had reached an agreement to sell BusinessWeek to Bloomberg LP.
"I am proud that I played a role in ensuring that BusinessWeek has a new home at Bloomberg, where it will thrive under the leadership of Norman Pearlstine," Fox told staffers (see full memo below). "I am committed to the transition and helping in any way that I can." A veteran of McGraw-Hill, Fox did not specify the new role he will play at the company. He said he will take on new responsibilities in 2010, after assisting the BusinessWeek team with the transition to Bloomberg. The sale is expected to close in early December.
Norman Pearlstine, Bloomberg's chief content officer, who will serve as chairman of BusinessWeek, said: "I got to know Keith during the weeks we were doing due diligence prior to agreeing to acquire BusinessWeek. In the weeks since the acquisition was announced, my admiration for Keith and the team of senior managers he assembled
-- many of whom will continue in leadership roles after BusinessWeek is acquired by Bloomberg -- has only grown. McGraw-Hill is fortunate to have Keith in the company. We wish him and McGraw-Hill all the best."
Fox's resignation from his post follows a similar announcement from BusinessWeek editor-in-chief Stephen J. Adler, who told staff on Oct. 22 that he was stepping down. “Keith has been an extraordinary leader in the most difficult of times. He built a stellar business team, created a culture that combined high performance with exceptional collegiality, and won the respect and affection of the entire staff," Adler said of Fox on Friday. "To me, he was the ideal collaborator and the most generous of colleagues.”
Previously, Fox was president of McGraw-Hill Professional, a publishing unit, and senior vice president of marketing and business development at BusinessWeek.
KEITH FOX'S MEMO
When we announced that McGraw-Hill was exploring strategic options for BusinessWeek, I promised to communicate with you as openly and often as I could. In this spirit, I wanted each of you to know that I will be remaining with McGraw-Hill after the deal with Bloomberg is closed. I will continue to play a role in the integration post-close and plan to take on a new role at McGraw-Hill in 2010.
During this process, our collective goal was to find the best buyer for BusinessWeek. I am proud that I played a role in ensuring that BusinessWeek has a new home at Bloomberg, where it will thrive under the leadership of Norman Pearlstine. I am committed to the transition and helping in any way that I can.
It’s been a privilege to be the President of BusinessWeek. I thank Terry McGraw for his confidence and trust in me and Glenn Goldberg for his support, direction, clarity, and sense of humor. I’ve also been a member of an amazing team which has navigated the transformation of the media environment with agility, focus, passion, and integrity. The team – Steve Adler, Jessica Sibley, Tania Secor, Linda Brennan, Roger Neal, and Carl Fischer – is the best in the industry. Like BusinessWeek, they have bright futures ahead of them. I will miss the daily interaction, but I am wiser (and a little grayer) because of their collaborative spirit and desire to make BusinessWeek the global leader in business that it is today.
I also have a special thanks to Patricia Hipplewith, my assistant, who juggled my calendar, protected me from solicitors, and kept me on schedule and well fed! She is the personification of commitment and integrity.
I am humbled by BusinessWeek’s 80-year history. Thank you for allowing me to play a small part in it.
The Journal's newsroom has been abuzz for several weeks about possible layoffs. This comes as the period to accept attractive severance offers, made to senior staffers following News Corp.'s acquisition of Dow Jones at the deal's close two years ago, is set to expire in December. That could prompt additional resignations from editors not wanting to miss out on a lucrative buyout deal.
Since late 2007, The Journal has laid off about 50 people, mostly due to the closing of the news desk in South Brunswick, N.J. and its fashion industry reporting bureau. Earlier this week, three people were let go from the color lab within The Journal's art department.
Forbes announced this week it would be cutting staff, perhaps by as many as 50 positions. And The Times is looking to reduce its newsroom by 100, first by offering voluntary buyouts and then through layoffs.
Smith will continue to provide consulting services to CBS on its various interactive ventures, but is leaving in January to start his own consulting firm. A one-time venture capitalist and investment banker with media firm Allen and Company, Smith had advised Comcast (CMCSA), Google (GOOG) and CBS in his prior life. At CBS, he is CEO of the unit that included CNET sites like CNET.com, Chow.com, and BNET.com as well as the cbs.com and cbsports.com that distribute shows from CBS's existing businesses.
Smith was also a key driver behind CBS's efforts to stream high-end sporting events, including the annual March Madness college basketball tournament games, which had grown greatly in popularity. Under Smith, CBS had kept its distance from Hulu.com, the online site that currently streams shows from NBC, Fox, and ABC. The company was instead building its own TV distribution arm through its TV.com site.
Current interactive president Neil Ash will continue as president of the interactive unit.
In hope of attacking that situation, and maybe of keeping dive-bombing DVD sales from falling even faster, Hollywood is contemplating all kinds of course changes. They include charging more to RedBox and Netflix, selling their DVDs to those companies later than they sell them to retailers like Wal-Mart, and making the companies destroy old DVDs rather than putting them in a cheapie bin somewhere. What’s the common theme? They want the consumer to pay more to rent, or better yet, to buy their discs.
Which is why I loved today’s announcement that Paramount Pictures (VIAB) has found a different way to generate more revenues from its films and the DVD market. Quite simply, they’ve made a fairly inexpensive film called Circle of Eight and are premiering it online with MySpace (NWS). The idea is to create buzz, and then rent or sell it through Blockbuster (BBI) and, I have to assume, other retailers down the road.
]]> Okay, so we’re not talking about a $100 million box office blockbuster here. But there is a precedent for Hollywood making money this way. In late 2007, Paramount spent about $2 million to make the third installment of its Jackass comedy and premiered Jackass 2.5 on Blockbuster’s movie streaming service. The studio then syndicated it to other sites, getting north of 15 million folks to see it, and sold about 1 million DVDs.“It’s about finding an audience who really wants to see this kind of a movie, give them a high-quality Hollywood style movie and build awareness,” says Thomas Lesinski, president of Paramount Digital Entertainment, who dreamed up the concept. “It’s just like a Hollywood premiere at a movie theater.” Of course, it costs less to make, you don’t have to stage an expensive red carpet event, and you don't need to spend a ton on TV commercials.
And you don’t need to worry about theater owners, who complain loudly whenever a studio tries to hurry out a film on DVD too soon after it appears on the big screen. In this deal, MySpace gets the movie for seven weeks, then Lesinski and crew can do whatever they want with it. Better yet, Circle of Eight, which is presented in 10 parts online, is sponsored by Mountain Dew (PEP), Blockbuster, and software maker Adobe (ADBE), which have added games and other online extras. As a result, it may well be profitable even before it hits the DVD stores.
Which is exactly what Hollywood would love to do with more of its flicks. Of course, that ship has sailed. Movie stars cost a ton, so do marketing campaigns to launch movies these days. But maybe there is a place for small films that make money for a studio using the Internet. As microscopic budget flicks like Paramount’s up-from-nowhere Paranormal Activity show, sometimes you can make more than a small pot of money without all the frills.
Circle of Eight may not be ready for the big screen, but I’ve watched it and it looks like a Hollywood production. It stars a couple of actors I’ve seen on the screen before, and was directed by Stephen Cragg, whose resume includes TV episodes of ER and NCIS. Its soundtrack was created by a bunch of high-end composers, and the opening screen features a speeding police car and a guy who jumps to his death. Hey, no one ever said this was Transformers. Still, as Hollywood struggles with how to resurrect a broken business model, at least this time a studio isn’t asking the consumer to pay a higher price or wait weeks before seeing a movie.
]]>"We've been spending time on long-term spectrum policy for the country because there is a spectrum gap that the data suggests that we face," he told a group of BusinessWeek staffers. "The demands that are being created by the iPhone and other mobile broadband technologies threaten to outstrip the amount of spectrum that's available for commercial mobile, and it's important for the country that we get long-term planning right here because it takes time to identify spectrum and put it on the market. We're looking at potential innovations in spectrum policy, like secondary licensing for spectrum, and other more creative ideas for unlicensed spectrum."
Genachowski, who has been on the job for three months, addressed a wide range of issues during his visit. Read the full Q & A.
]]>Adler informed his staff of his plans in a memo Tuesday night. He declined to comment beyond what he wrote in the memo (see full memo below). On Oct. 13, BusinessWeek's parent McGraw-Hill Cos. announced it was selling the magazine to Bloomberg after a months-long sales process.
Adler’s resignation eliminates any question as to whether he would continue on under Bloomberg’s ownership and gives Bloomberg’s chief content officer, Norman Pearlstine, the opportunity to hand pick his own candidate for BusinessWeek’s top editorial job. Adler and Pearlstine, who will become chairman of BusinessWeek, were once colleagues at The Wall Street Journal. It is rare that the top editor of a magazine that is acquired stays on in that role.
“It was hugely important to me to help find the right owner for BusinessWeek and to work closely with our business-side colleagues to ensure that staffers would be provided appropriate benefits under any circumstances,” Adler wrote in his staff memo. “Now that these goals have been accomplished, I’m considering other opportunities, and I believe it makes sense for a new owner to move forward with a new editor.”
Pearlstine, who has recruited his old friend, Jim Kelly, the former managing editor of Time Inc. to help with the transition, says: "Steve Adler is a great journalist, editor and friend. We respect his decision to pursue other opportunities. He will remain on board until the acquisition is completed, and we are actively recruiting a new editor to ensure that BusinessWeek delivers the powerful, authoritative content that senior managers, government officials and thought leaders rely upon." Kelly could not be reached for comment.
While Adler's time at BusinessWeek coincided with a challenging advertising climate, BusinessWeek’s weekly readership remained steady at nearly 5 million.
"It has been a true privilege to work with Steve. He is a great leader who has built an incredible team and legacy, and has been a friend to me and to BusinessWeek," says BusinessWeek President Keith Fox who has worked alongside Adler for the past two and half years. "I wish him nothing but the best as he embarks on the next chapter in his life."
Among Adler’s other accomplishments were to create an investigative reporting unit, put in place an editor whose sole responsibility would be overseeing the magazine’s web operations, integrate the print and online operations and make key high profile hires. Among those were Ellen Pollock, a former deputy page one editor at The Journal, and John Byrne, a BusinessWeek alumnus who was editor-in-chief of Fast Company magazine. Pollock and Byrne serve as BusinessWeek’s executive editors.
Adler's Memo
October 20, 2009
Colleagues:
I want you to be the first to know that I will be leaving BusinessWeek when Bloomberg becomes its new owner in December.
It was hugely important to me to help find the right home for BusinessWeek and to work closely with our business-side colleagues to ensure that staffers would be provided appropriate benefits under any circumstance. Now that these goals have been accomplished, I’m considering other opportunities, and I believe it makes sense for a new owner to move forward with a new editor.
I’m excited about the sale to Bloomberg and about BusinessWeek’s opportunity to prosper under its leadership. I’m confident the Bloomberg team shares our journalistic standards and will bring new passion, new ideas, and new resources to the endeavor. I look forward to working with you and with the Bloomberg team to make the smoothest-possible transition.
I’m very proud of the work the BusinessWeek team has done in the past five years. You’ve broken an extraordinary series of stories and won a record number of awards, including the most prestigious in our business. You’ve provided the indispensable journalism for which our magazine has long been famous—and on which our readers depend. As a result, BusinessWeek has succeeded in maintaining all of its print readership of nearly five million during a period of great economic challenge, while building a new audience of ten million monthly users online.
I am especially grateful to Terry McGraw and all my McGraw-Hill colleagues for their support. Terry has always protected our editorial independence, cheered our accomplishments, and held us to the highest standards of journalistic integrity and excellence. At I&M, Glenn Goldberg has helped us enormously with resource needs and always provided thoughtful counsel and encouragement.
I want to offer deepest thanks to BW’s two executive editors -- and my good friends -- Ellen Pollock and John Byrne, for guiding our editorial team with such extraordinary skill and good humor. They helped build and maintain the close community we share (think jazz and chocolate!) During the past 30 months, BusinessWeek President Keith Fox has been the ideal collaborator and an amazingly creative and disciplined leader of our business in the toughest of times. I am grateful for all his tireless work on behalf of our team. And I must express my great affection and gratitude to Aida Rosario, whom you all know as our secret weapon in navigating the bureaucracy and whom we are all so fortunate to have managing the office.
It has been an honor and a daily joy to work with all of you. And for the next six weeks, it will remain so.
With my thanks and warm regards, Steve
Azoff, who initially derided the press reports as “either wishful thinking or idle speculation,” went to great lengths during his 30-minute question answer presentation to present Ticketmaster’s case that scalping should be declared illegal so that his company and “rights holders” (i.e. sports teams and rock stars) could control the flow of tickets and prices that consumers pay to get them. “It’s up to those rights owners to decide what they want to do with those tickets.”
Azoff says he has been meeting in Washington with various congressional members to press federal legislation to put curbs on scalping. (The majority of states have laws that allow scalping, and several have removed anti-scaling provisions in recent years,) “I tell them that they wouldn’t allow someone on the street to scalp a gallon of gasoline when there’s an oil crisis” says Azoff. “Why would they allow someone to stand on a street corner and scalp a ticket when it’s in high demand, too?”
During his talk, Azoff did not address reports that his company and Live Nation may be pondering making concessions, including selling off some ticketing sites, in order to curry favor with regulators who worry that the combined company would control too many venues and drive out competitors. “We would never have undertaken this merger if we thought it wasn’t legal,” he said.
Instead, Azoff said he rarely reads newspaper accounts of the deal, although he had seen some recently and dismissed the leaked accounts. “I know that the Justice Dept hasn’t been the source of any of these leaks,” he said, hinting that interested parties were trying to squash the merger. “Despite what (rival concert promoter) AEG might think, this is not a popularity contest,” Azoff added.
Azoff did offer one potentially pro-consumer initiative. Early next year, said Azoff, it plans to introduce “dynamic pricing” of tickets it sells. Under dynamic pricing, a virtual open market would be established for tickets, with the most popular tickets commanding the highest prices based on the numbers of folks wanting them. Alternatively, less attractive tickets would command lower prices. According to Azoff, about 40% of concert ticket seats go unsold these days because they often are too high priced. With dynamic pricing, “we’d have lower priced tickets, more tickets sold and more opportunities for venues to sell popcorn and beer,” the Ticketmaster CEO says.
Trust Bob Iger to tell it like it is, while the rest of Hollywood sugar-coats the obvious. The Walt Disney Co. (DIS) CEO, who first broke ranks with fellow media moguls to say that falling DVD sales was due to more than just the recession, now is sounding warning signals that DVD’s next generation Blu-ray discs also may fall short of the mark.
Speaking before a gathering of lawyers at a symposium at USC today, Iger all but predicted that Hollywood’s hopes for a boost in DVD sales from the new high-definition discs could never offset the continued fall of traditional DVD sales. His reasoning: folks who love to collect DVDs already have 80 or so in their libraries, the new Blu-ray machines are “backward compatible” (meaning that they can play the standard DVDs) and folks simply aren’t going to go out and replenish those libraries as they did when the DVDs first replaced VHS tapes. “We have seen some but not as much as we would like,” he told the gathering.
Try to get other executives in Hollywood to say the same thing. But then again, Iger seems to have a far more realistic outlook for the film business anyway. The business of making films and other entertainment, he says, has fallen prey to the many more choices that folks have to entertain themselves these days. As proof, he trots out the experience of his 11 and seven year old sons, who he says “are the best laboratory I know.” His kids, he says, would be just as happy to “play free casual games all day long.” Other folks have even more things to divert their attention, he says.
That puts the entertainment business in the unenviable position of facing up to the fact that “the opportunities to monetize its content are not what they once were.” Yup, Bob, you said it. DVD sales this year are likely to be off more than 9%, continuing a slide that began two years back. If Iger’s right, those sales won’t likely fully return. And no one thinks that online sales of movies will make that up anytime soon.
That’s a big problem. Sales of those shiny discs, which carry humongous profit margins, have always been the great equalizer for studios whose executives have become addicted to spending big to produce and market films. A few years back, if a film flopped at the box office, it might still make back a chunk of its expenses on DVD sales.
No more, Iger seems to be saying. That why, he says, he began a major overhaul of Disney’s studio. It produces fewer films, is looking to keep costs down, and has focused of brand name producers who cut through the clutter of other filmmakers and might even bring gamers like his sons to the movie theaters. Since taking over as CEO four years back, Iger bought Pixar, has a deal pending to buy Marvel(MVL), and has struck a deal to help finance films made by superstar director Steven Spielberg’s newly reconstituted DreamWorks studio.
Those outlets produce the kind of “brand name” films that folks go the movie theater to see, Iger told the USC gathering. “I don’t think people go to see a film that’s made by Warner Brothers (TWX),” he says, “but they’ll go to a film that’s been made by Disney, or Pixar or Marvel.” That’s likely true. And, if Iger’s right (and I’m betting he is), folks might just also buy some of those shiny new Blu-ray discs.
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