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The Iger Counter

Amid ABC's Tough Spell, President Faces Tough Sell

June 03, 1997|SALLIE HOFMEISTER

When Michael Ovitz stepped down as president of Walt Disney Co. early this year, one name that immediately surfaced as a possible replacement was Robert Iger, president of ABC Inc.

But with the network he presides over sagging badly, Iger is beginning to look like just another Disney executive in a precarious position. The network's plunging ratings, weakening fortunes and management turmoil over the last year have cast doubts on Iger's leadership.

Both he and Disney Chairman Michael Eisner will face the fire beginning today, as affiliates meet at Disney World in Orlando, Fla., to preview the new fall prime-time schedule. In his first presentation to affiliates shortly after Disney purchased New York-based ABC last year, Eisner pledged improvements by way of apologizing for the network's ratings slide from first to second place. ABC then slipped to third in the number of households it reaches. (In key demographics watched by advertisers, it came in second, beating Fox by only a nose.)

Iger, who says a network turnaround is his top priority, could look like a hero if ratings reverse. The network business is cyclical as hits fade and lagging networks rise.

But television executives are not optimistic about a quick reversal at ABC. While Iger calls his new schedule opportunistic, many in Hollywood and on Madison Avenue see it as desperate, with more new shows to promote than its rivals and few hits to replace aging favorites such as "Home Improvement" and the just-retired "Roseanne" and "Coach."

What's more, ABC has given critics a reason for doubt by allowing rumors of impending management changes to linger. Since she became president of ABC Entertainment a year ago, under a cloud of controversy and corporate intrigue, Jamie Tarses has been hamstrung by speculation that she wouldn't last.

The pressure on Iger to help Disney justify its $19-billion purchase of ABC could mount next year as special acquisition accounting that is propping up ABC's financial performance begins to phase out. While other media stocks have stagnated under the weight of heavy debt, Disney remains a darling on Wall Street, soaring more than 50% since last summer on the strength of its theme parks and ABC's ESPN sports cable powerhouse. Shares closed Monday at $80.875, down $1 on the New York Stock Exchange.

Disney has taken full advantage of accounting rules that allow acquiring companies to write down the value of assets in a purchase. ABC, which in addition to the broadcast network includes 10 TV and 20 radio stations, ESPN and the Disney Channel, accounted for about a quarter of Disney's roughly $3 billion in operating profit last year. But more than half the $400 million in earnings from the ABC network derived from the special accounting. "I don't know how Disney stock has reached the level it has, considering that purchase price accounting is going to run out over the next year," said one Wall Street analyst.

People close to Iger, 46, say he also is still adjusting to the meddlesome culture of his new employer. A skilled political survivor who, as one former associate said, "manages upward better than anyone in the business," Iger blossomed in a much different environment.

Former Capital Cities Chairman Thomas "Murphy set a climate that was absolutely straightforward and decentralized, where managers had a strong sense of proprietorship," said one executive close to ABC. "He set out financial and operational goals, let managers carry them out, then fired or hugged them depending on how they did."

Disney's culture is quite different. "Eisner is a creative genius and micro-manager," said the executive.

Executives at Disney and ABC say Eisner is moving his own executives into positions around Iger. "Michael trusts Bob, but it is the Disney style to create a competition between executives," said one Disney executive.

Some analysts believe Eisner is grooming Steve Burke, the former head of Euro Disney and now president of the ABC broadcast group, for a top management slot, perhaps as Iger's successor. Burke is the son of retired Capital Cities/ABC chief Daniel Burke.

Sources say Eisner recruited Preston Padden last month to become president of ABC Television Network, with responsibilities for affiliates, sales and research, but not entertainment, which reports directly to Iger.

Iger says both he and Eisner recruited the executives to ABC. "I created a job for Steve and he quickly became a great support to me," said Iger. "Padden was a very obvious candidate to fill the network position, and Michael and I recruited him together.

Charming, ambitious and as handsome as any anchor on ABC, Iger found that his polished presentation, control under fire and thoughtful and quick command of details propelled him quickly through the ranks at ABC. He was the handpicked successor of Murphy (one of the most admired men in American business) and was due to step into his shoes as chairman until his boss sold the company to Disney.

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