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Michael Eisner Discusses Future of Content at Stanford Business School

April 14, 2001

STANFORD GRADUATE SCHOOL OF BUSINESS—In an impassioned tribute to artists and storytellers, Walt Disney chief Michael Eisner warned against overstating the importance of technology in the media business.

"It's not about the ever-changing tools, but the timeless stories that the tools can tell," he told a student-sponsored conference audience.

Eisner also stressed the need to protect content creators against technology-enabled piracy. One solution was to deliver reasonably-priced, legitimate content to internet users, he said. To this end, he described how Disney would soon announce a plan together with other studios to sell encrypted films over the Internet.

The chairman and CEO of Disney—the largest and most profitable entertainment company on the latest Fortune 500 list—was the keynote speaker at the Stanford Business School's second annual Future of Content conference on April 14. The event, surveying the state of media convergence, was attended by some 350 students, industry professionals, and journalists.

Eisner noted that although technological innovations "add colors on an artist's palette", they quickly become obsolete. In contrast, the basic appeal of content is the constant, he said. "It's all about story-telling."

However, there is no obvious formula for creating compelling content. "The ingredients for successful entertainment are discernable but not quantifiable."

Eisner cited an example from his years as a senior executive at the ABC television network: the 1977 epic mini-series, Roots. The drama was telecast at prime-time over five consecutive nights. But, dispelling the myth that this unprecedented move was a case of scheduling genius, Eisner said it was actually a response to ABC's research department, which had predicted that the series about black slavery would be a "complete disaster."

The network chiefs believed in the show and refused to shelve it, but decided to air it within a single week to concentrate the losses that they had been told to expect. Roots went on to break ratings records and help ABC secure its number one position. Media executives need to have a gut feel for quality content and nurture an environment supportive of creative talent, he said. "Fostering great content may not be a science, but neither is it about luck."

Turning to the need to protect content creators, Eisner said Disney advocated an aggressive public education campaign to make people aware that theft should not be tolerated, whether in the real world or on the Internet. He also called for an economic response. "History has shown that one of the best insurances against pirated products is providing legitimate products at appropriate prices."

"We're about to announce a strategy in conjunction with other content players to make available our movies over the Internet," he added. He did not give details, but promised that the films would be reasonably priced.

Asked about new video technologies that may encourage viewers to zap through commercials, Eisner acknowledged that this was a "big risk" and an uncertainty that made him "a little nervous."

On the trend of reality programming, such as CBS' Survivor, he said, "Story-driven comedy and drama has been the strength and temple of radio and TV. I would like Survivor on ABC, but I wouldn't like it on my tombstone."

Also receiving a backhanded compliment from Eisner was AOL Time Warner, whose merger Disney had challenged as anti-competitive. Asked about the future of interactive television, Eisner raised the specter of monopoly control over the "pipes and tollgates" into the home. The "return path" between viewer and content-provider relied on cable networks, he noted, adding: "We're going to get killed by AOL Time Warner."

AOL Time Warner also featured prominently during a panel discussion on media mega-mergers. Jim Bankoff, president of AOL's Netscape arm, argued that it was not in the merged entity's own self-interest to restrict consumer choice. "How could we deny our consumers the content they want? We'd go out of business if we did that," he said.

McKinsey media and entertainment consultant Derek Alderton said that while any merger was hard to pull off successfully, media mergers were especially difficult because of the uncertainty about the future shape of the business. "Nobody knows what the industry will look like tomorrow, let alone how to integrate it," he said.

by Cherian George