Creators, Creativity, and Technology with Bob Iger | a16z Podcast with Sonal Chokshi and Chris Dixon

Key Takeaways

  • Most movie studios are over-committed to a production schedule; they won’t wait until mid-production, even if the movie stinks (lack of commitment to excellence)
  • Management of the creatives
    • Figure out how to insert yourself into the process in a benign way
    • The key is to look over people’s shoulders but not make them paranoid
    • Advising them to consider, but not ordering them to change things
    • Patience and understanding the anxiety of others and not adding to it
  • How to articulate feedback about creativity
    • Authentic feedback trumps fake expertise
    • Only say things that will make a big difference
    • Let the creative diagnose the problem instead of micro-managing everything
    • Don’t use your authority
  • Bob began as the CEO of Disney in 2005
    • At that time, people running traditional media companies were asked to be visionaries and contend with the disruption of Web 1.0
    • Bob’s whole point was that the content side would always win out; high-quality branded content will find its way to the consumer and the consumer will find their way to brilliance no matter what
  • Pixar and Disney had a highly different creative culture
    • Bob wanted to show support and respect for their culture
    • They’ve allowed Pixar to remain independent. Pixar didn’t become Disney
  • For Disney, it was never just about the acquisition, it was about the people
    • Creating a culture that enables the creatives to thrive, and giving them the resources (money, marketing support, distribution help, etc.)
  • The winds of change got more fierce as Web 2.0 came
    • “What we were seeing was not just the disruption of distribution but disruptive distribution disrupting essentially almost every area of the business.” Bob Iger
    • It was mostly Netflix, but it was very clear that what they were doing would be done by others
  • Disney was the first movie company to license movies to Netflix
  • Technology is giving the consumer much more authority than ever before
    • Switching costs between channels, devices
    • Where to watch, when to watch (phone, tv)
  • The innovator’s dilemma; it was essential for Disney to reduce revenue to go into the streaming direction
    • Bob is one of the few cases of non-founder CEO taking the innovator dilemma and succeeding
    • At this time, Disney+ just passed Netflix in the number of subscribers
  • Streaming wins. Plain and simple
    • Linear cable and satellite viewing are done
    • Nobody wants to watch channels anymore, except maybe news or sports
    • Consumers will tolerate ad interruption with lower prices
    • They want multiple streaming services
    • To afford more than one streaming platform, they will take ads to cut the cost 
  • Movie theater going will never return to its high water mark
  • Bob wouldn’t be surprised if Netflix reduced the volume of their content
    • Their sub-base isn’t going to grow significantly and they can’t easily price higher due to inflation and competition
    • Buying rights and perpetuity might be an issue
  • “If you create IP that is consumed and appreciated and valued by a consumer, don’t change it too often, maintain consistency.”Bob Iger

Intro

  • Bob Iger (@robertiger) is the CEO of The Walt Disney Company
    • In this conversation, expect to learn all about the interplay between technology, content, and distribution, how Bob Iger’s strategic vision broadened Disney’s intellectual properties, managing creativity, and much more!
  • Hosts: Sonal Chokshi (@smc90) and Chris Dixon (@cdixon)

What’s Different About Managing Creatives?

  • It’s been 13 years since Disney bought Marvel; why can’t the competitors replicate the success of Marvel?
    • According to Bob, you have to choose the right people
    • He is not talking just about directing; it’s about supervisory management
  • Most movie studios are over-committed to a production schedule; they won’t wait until mid-production, even if the movie stinks
    • They force things into the marketplace before they are fully done
    • For Bob, this means a lack of commitment to excellence. He is a big believer in the relentless pursuit of perfection (kinda like Steve Jobs)
    • “No one is ever going to criticize a movie that’s great for coming out late. They will certainly criticize a movie if it’s bad and comes out on time.”Bob Iger
  • Talent that manages creative talent
    • Bob hired Alan F. Horn in 2012; he was the kind of studio executive that knows how to manage creative talent and the talent that manages creative talent
    • Figure out how to insert yourself into the process in a benign way
    • The key is to look over people’s shoulders but not make them paranoid
    • Advising them to consider, but not ordering them to change things
    • Patience and understanding the anxiety of others and not adding to it
    • Why is this important for tech companies?
    • A lot of tech companies don’t even know they are creative companies; a huge shift happening right now

How to Manage Creatives?

  • The first thing is to put yourself in their place
    • Their ideas come from within them; it’s their fabric
    • Their ideas are tied to their self-esteem
    • You can’t dismiss that
  • Oftentimes, executives try to exert their authority, show who is the boss
    • It’s not about the title, primarily it should be about establishing a partnership, not ownership
    • They should come in peace, give perspective and not boss around
  • Managing creatives responsibly for the sake of the shareholders is important
    • Executives can’t allow creatives to do unwanted spending or take however much time they want unless they are James Cameron
    • No studio can impose its calender on James Cameron. If you don’t know that, as a studio, then it’s your fault
  • How to articulate feedback about creativity
    • Some executives can be nitpicky just to show that they are looking, watching
    • Authentic feedback trumps fake expertise
    • Don’t be petty with your feedback
    • Only say things that will make a big difference
    • Let the creative diagnose the problem instead of micro-managing everything
    • Don’t use your authority
    • Know when to stop; read their body language
  • Also, try to lead in with something positive
    • The first time he watched Black Panther by Ryan Coogler
    • It was the first big film for Coogler, he barely knew Bob
    • Bob could tell Coogler was nervous and intimidated by his title
    • The first thing Bob said to him after watching the movie was: “You made a great film.”
    • Bob swears he could see the anxiety pouring out of Coogler
    • That gave him the license to say something while he was still euphoric
    • He had some things he wanted to tell him but wanted to put him at ease first 

Bob’s Journey and the State of the Media World in 2005

  • Bob began as the CEO of Disney in 2005
    • At that time, Web 1.0 was starting to impact consumer behavior in a big way
    • The promise of the Internet was vast;
    • The use of new technologies was going crazy, and people were spending a lot of money on new tech
    • Anxiety started to build up in the industry
    • People running traditional media companies were asked to be visionaries and to contend with the disruption of Web 1.0
  • The board of directors at Walt Disney wanted to know what Bob’s plan was
    • He saw a world where technology was going to create an increase in distribution and consumer opportunity to access, consume, and buy media and entertainment
    • Looking ahead at a world with more distribution, he also saw a world with a lot more production/creativity and consumption
    • If the world is going to explode like that, what is a company like Disney to do to thrive in that world?
    • What Bob then realized was that “…great content, high-quality creativity, and branded content would stand the test of time no matter what disruptive forces impacted the business.”Bob Iger
    • People would seek out the best brands, best content, and best experiences no matter how they were getting them
    • He realized they should worry less about the distribution and more about what they were creating
    • Bob’s whole point was that the content side would always win out, good content will find its way to the consumer and the consumer will find their way to brilliance no matter what
  • There was a debate in Disney if they should invest more capital in the direction of distribution, but Bob shut that argument down
    • For him, it was always about high-quality brands and entertainment
    • Walt Disney proved that in a very obvious way; he made Snow White in 1937 and in 2005 it was still being consumed by kids around the world 
    • The technology doesn’t matter, the product will find its way to people

What Is High-Quality Branded Content?

  • For Bob, high-quality branded content means telling great stories
  • Everyone sets out to do that, but they don’t create processes that result in that
    • They rush things into the marketplace
    • They don’t take the time
    • They get impatient
    • They don’t manage the creative community well
      • No risk in new ideas that sound odd but could be great
      • They don’t know how to process failure in creativity
  • One of the things that Bob sees today is that there is so much anxiety about transformation and disruption that companies managing creative processes transfer that to the creative community

Fixing Disney Animation (The Story of Pixar Acquisition)

  • When Disney animation was great, the company was great
    • Disney animation has such a massive effect on company perception, brand perception, on commerce
    • If you have great IP, it’s leverageable in consumer products, theme parks, music, etc.
  • How does one do that? Find great people
    • Where were the great people? They were all working for Pixar at the time
  • The relationship with Pixar was ending
    • What if Disney buys Pixar? It was not for sale
    • Bob called Steve Jobs with the crazy idea of buying Pixar
    • Steve was the majority shareholder of Pixar. He bought it from George Lucas
    • Ultimately, Disney bought Pixar for $7.4 billion in 2006
    • Steve Jobs became a member of Disney’s board and the largest shareholder of the company (with 7%)
  • Pixar and Disney had a highly different creative culture
    • Bob wanted to show support and respect for their culture
    • They’ve allowed Pixar to remain independent. Pixar didn’t become Disney
    • They ended up adopting a lot of Pixar’s creative processes
    • At Pixar, every movement they ever made was driven by the idea of the director
    • The director pitches the idea, Pixar likes the idea, and they go and make the movie
    • The passion of the director is evident in every single step of production and creativity of that film
    • In Disney’s case, they assigned the ideas to the directors. The connection and passion didn’t exist
    • At Pixar, every movie had a conference room; the movie lived in that room full time
    • The director and the team put pictures up on the walls, the movie soundtrack was playing, and all the meetings about the movie were in that room
    • The movie started taking a tangible quality of actually existing in a place
    • At Disney, they had one room for all the movies
  • It was obvious to Bob, the movies at Pixar had a home
    • They showed him cutting-edge animation technology he never saw before
    • He was blown away by all of it

Buying Marvel

  • He walked into the Marvel office alone in June 2009 and pitched the idea of buying them
    • Told Marvel about the Pixar acquisition story
    • Got Steve Jobs on the phone to tell them how great the relationship has been
    • He offered Disney stock, the value of which he already proved to Steve Jobs
    • At that time they only put our Iron Man
  • Ironically, Bob was never a comic book fan but he was aware of the passion people had for comics
    • Like Pixar, they had a core creative team that was impressive and led by Kevin Feige
  • For Disney, it wasn’t just about the acquisition, it was about the people
    • Creating a culture that enables the creatives to thrive, and giving them the resources (money, marketing support, distribution help, etc.)
  • Eventually, Marvel pitched a crazy five-year plan (Avengers)
  • Was the acquisition of Marvel too “edgy” for Disney? It doesn’t have to be Disney’s Marvell
    • There was purposely no co-branding
    • In Bob’s mind, these weren’t just superhero movies, they were Marvel movies
    • Let the consumer think it’s Marvel, not Disney’s Marvel

Buying Star Wars

  • George Lucas didn’t want to sell but made it clear if he ever did that he would sell to Disney
    • Bob let it go and waited
    • Eventually, George called him later and the deal was announced in 2012
    • Disney ended up with Pixar, Marvel, and LucasFilm; they had more known brands known for their quality of story-telling than any other media entertainment company in the world
  • The ones that got away?
    • James Bond
    • Harry Potter (already gone to Warner Brothers)

Next Big Strategic Priority After Lucasfilm and Netflix

  • 2012-2016 Bob spent developing Shanghai Disneyland, his pet project
    • Planting a flag on mainland Chinese soil
  • The winds of change got more fierce as Web 2.0 came
    • App-based entertainment, and new forms of distribution, and that started Bob’s thinking about the streaming
    • The disruptive forces that he talked about in 2005 got more profound and started to impact the entire business
    • “What we were seeing was not just the disruption of distribution but disruptive distribution disrupting essentially almost every area of the business.”Bob Iger
    • It was mostly Netflix, but it was very clear that what they were doing would be done by others
    • They were showing the way, particularly for the big tech companies
  • Also, the average consumer was starting to exert more and more authority
    • Technology is giving the consumer much more authority than ever before
    • Switching costs between channels, devices
    • Where to watch, when to watch (phone, tv)
  • Big impact on linear television watching
    • Consumers want a program, not a channel
    • Disney was heavily invested in linear channels
  • The danger of ad-based entertainment was looming over them; they had to do something
    • Disney was the first movie company to license movies to Netflix
    • Netflix paid more money for their movies than anybody was willing to pay at the time

Making Hard Decisions About Disney’s Streaming

  • Bob had big concerns about technology and streaming
    • Reed Hastings, co-founder of Netflix tried to convince Bob that Disney is not going to make it
  • They didn’t have the platform; no way to manage busted credit cards, issues with geo-targeting, etc.
    • Disney had no tech to execute streaming, no technology solution
  • The first problem in going into the streaming business for Disney was finding a technology solution
  • The second problem is that they were making all this money from other forms of distribution (licensing movies to Netflix, cable, and satellite subscription fees)
  • To make this change happen, they had to convince Wall Street that it was essential for Disney to disrupt themselves
  • The innovator’s dilemma; it was essential for Disney to reduce revenue to go into the streaming direction
  • For tech solutions, they invested in a platform called BAMTech, and by investing they had a path to ultimately buy and control (Disney Streaming)
  • Decentralizing your own decision-making
    • Decentralization is not anarchy
    • Bob felt that at Disney too many decisions were being made centrally
    • Some people who knew more than the central organization were being deprived of the opportunity to apply their knowledge
    • He felt that managing the brand and its qualities had to be done centrally and consistently
  • Bob is one of the few cases of non-founder CEO taking the innovator dilemma and succeeding
    • At this time, Disney+ just passed Netflix in the number of subscribers
    • He was fortunate to have the board’s support, they even exhorted him to do it
    • They wanted to give him the chance; speed is the essence, they said
  • Advice he got from Will Danoff (The Fidelity Contrafund); go all in
    • Not many companies can go all in; it takes money, disruption, and kill earnings (by 2 billion for the first year)
    • The license fees from Netflix stopped
    • The cost went up, they spent more money on production to get ready for the new platform
    • Revenue went down
    • It was really important that they were serious and went all-in
  • Nail biting moment
    • Disney+ was launched on November 12, 2019
    • Their plan was for 4 to 5 million subscribers in the first year
    • They signed 10 million in the first 24 hours
    • That 24 hours were one of the best moments for Bob

The Future of Streaming

  • Streaming wins. Plain and simple
  • Linear cable and satellite viewing are done
  • Nobody wants to watch channels anymore, except maybe news or sports
    • With the generational shift, it goes over the edge
  • Consumers will tolerate ad interruption with lower prices
    • They want multiple streaming services
    • To afford more than one streaming platform, they will take ads to cut the cost 
  • All the services will have multiple tiers (like Hulu does)
    • Netflix already announced it
  • Advertisers win
    • Streamers win
    • Consumers win
    • Creators win
      • It’s a great time for creators now, more access to create

Movie Theaters

  • Movie theater going will never return to its high water mark
  • It will still be a thing, but more like a niche activity
  • Great competition from movie-quality television that can be watched from home
  • Everything about it is pro-consumer; mobility, time, customization, personalization, etc.

What’s Working/Not Working for Streaming

  • It’s not just about volume and filling your home screen with as many products
    • More editorial judgment is needed
  • Disney+ vs Netflix
    • Netflix has a lot of mixed content, Disney+ is more premium
  • Bob wouldn’t be surprised if Netflix reduced the volume
    • Their sub-base isn’t going to grow significantly and they can’t easily price higher due to inflation and competition
    • Buying rights and perpetuity might be an issue
  • Licensing and buying things for short-term usage and reverting back to the creator
    • The creator will then have an opportunity to sell to others
    • It would be a good thing for creators

Lessons for Intellectual Property (IP) Game

  • “If you create IP that is consumed and appreciated and valued by a consumer, don’t change it too often, maintain consistency.”Bob Iger
  • Respect vs reverence
    • When you innovate with IP, do so in a user-friendly way
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