The Iger Sanction - Broadcasting & Cable

The Iger Sanction

Disney's next CEO faces major challenges
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Now that Iger is CEO-to-be of Disney Co., he will need to mature businesses across the Magic Kingdom, once he takes over from outgoing chief Michael Eisner next year.

At the top of his to-do list: Negotiate a new deal with animation star Pixar Studios. Disney and Pixar's co-production pact expires after Cars is released this summer. Iger must also manage the impending split with Miramax founders Harvey and Bob Weinstein, who are leaving their film division. Growth is stalled at theme parks, too.

“He needs to restore the company's creative engine,” says Fulcrum Global Partners analyst Rich Greenfield.

One area Iger can mine for growth is the TV holdings. Iger knows that business intimately. Former chairman of ABC Group, he started his career as a studio supervisor for ABC in 1974; 20 years later, he was running the network.

Last spring, he overhauled ABC's management ranks, elevating cable maven Anne Sweeney to head both ABC and Disney's cable network and former Touchstone TV President Steve McPherson to head ABC Entertainment. In the process, he dismissed former entertainment chief Susan Lyne and Lloyd Braun, ex-chairman of ABC Entertainment TV Group.

Looking ahead, here are five challenges Iger faces in the TV arena:

NFL Negotiations

ABC's Monday Night Football deal expires after the 2005-06 season, as does ESPN's Sunday Night Football package. CBS and Fox have already renewed, but Disney is holding out. ABC gets a big ratings boost from MNF but has trouble capitalizing on football's big male audience. Plus, MNF's expected multibillion-dollar price tag is steep. Complicating matters, NBC Universal is interested again.

ESPN cannot afford to lose the NFL, its marquee property and cable's highest-rated show. One possible scenario: ABC and ESPN could swap football packages.

Keep ABC Growing

Desperate Housewives and Lost made ABC cool again. Iger, a reputed micromanager, will have to trust Sweeney and McPherson to develop more hit shows and to cleverly market and schedule them.

But ABC's performance—up 14.7% in 18-49s through February compared with last season—isn't all positive. Its sitcoms are struggling, and the network doesn't have a winner on lucrative Thursday night.

Satisfy stations

The trouble with ABC's freshman phenoms is they are not 10 p.m. ET shows. Local stations rely on the last hour of prime time to deliver big audiences into late news, a local broadcaster's top money maker. When NBC was hot, 10 p.m. stars Law & Order and ER boosted local news. ABC stations are starved for a similar assist.

ESPN's Affiliate Tab

The sports network is cable and satellite operators' biggest channel expense, wrestling about $2 a sub for the main channel. ESPN's rates climbed 20% in recent years but will slow to 7% beginning this year. ESPN needs revenue generators to make up the loss and help foot the billions the network is paying in sports-rights fees.

Cable Aces

Disney Channel, a cable starlet two years ago, is struggling to replace its tween sensation Lizzie McGuire and score new animated hits. A star character can provide a big opportunity for the theme parks, merchandising arm and even the recording division, the way That's So Raven has done.

And Disney still needs to make good on its inflated $5.2 billion purchase of ABC Family in 2001. Historically, the network has been ratings/programming challenged. But adding Gilmore Girls and 7th Heaven reruns is helping, as is a new exec team.

Photo: Jason Merritt/FilmMagic.com, Iger

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