• 10 Sep 2007 at 10:18 AM
  • Disney

The Mouse’s Eyes (clap clap), Are Watching You

In response to the toy recall frenzy, Disney will be conducting random tests of licensed products. The tests are designed to make sure the 65,000 different Disney products sold by 2,000 vendors aren’t covered in lead or have small parts that fall off (there goes the Little Mermaid with the removable coconut bra, also lead coated for extra lift and support). One of the Mattel recalls involved a “Sarge” car toy based on the character from “Cars.”
Disney’s tests are not designed to replace manufacturer safety protocols, but to scare toymakers into
not selling small poison death traps, or accepting them from China. So we have a large private company acting as a self-appointed regulatory body. Is this even legal? Will Disney start suing toymakers if they find “unsafe” toys, and will the parameters of “safety” be defined by the Mouse?
Since China is still going to be… well… China, the cost of all this “safety” and “avoiding child death” is unfortunately going to be passed on to the American consumer. The toy-selling landscape is already changing. For the first time, toys are trying the marketing tactics of U.S. automakers, urging the public to “buy American.” You can save the life of your child and battle the Commies in one tickle-me-purchase.
Disney Plans to Test Quality Of Toys Using Its Characters [Wall Street Journal]

  • 02 Aug 2007 at 10:35 AM
  • Companies

Disney Loses Its Mind

penguin-chick.jpg Disney has officially lost its mind. The Immodest Mouse bought Club Penguin, a social networking site for the tween and pre-tween demo. As the name suggests, Club Penguin allows you to make your own penguin avatar and enter a virtual world where you can endure the brutal, constantly near-death existence of a penguin to the High School Musical soundtrack. Nothing eases the pain of standing on the outer edge of a pack during a blizzard on the verge of starvation and metabolic shutdown than “We’re All in This Together.”
Capitalizing on the popularity of penguins, who have displaced the morbidly obese in Hollywood as the de facto generators of lazy comedy (we all know, from Eddie Murphy movies to Big Momma’s House to Tyler Perry that everything fat people do is hilarious, but we are just beginning to discover that everything penguins do is hilarious, like surfing, dancing, or getting eaten), Club Penguin was founded by three Canadian dads in 2005. The site is ad-free, which makes it all the more un-monetizablelicious.
Disney paid $350 million for Club Penguin. The site must be huge to generate a price that’s almost 70% of what MySpace went for, right? Here’s the kicker – the site has 700,000 users. That means that Disney paid $500 per user (on what we’re sure is a pretty sad revenue number). Disney, deciding this wasn’t ridiculous enough, has promised another $350 million by 2009 if the site meets its growth targets.
The Wall Street Journal reports that the Club Penguin founders “decided to sell now because the company had got to a point where it needed a partner to grow.” That and they realized they hit the jackpot by coming across a drunkenly irrational mouse.
When Zuckerberg heard this, he instantly upped the required facebook bid in his head to $35 billion.
Disney Buys Kids’ Social-Network Site [Wall Street Journal]

  • 02 Jul 2007 at 11:08 AM
  • Companies

Does Disney Still Have A Friend In Pixar?

pixar.jpg Is an incremental $300mm in revenue and under $200mm in net income a year worth $7.4bn, and is this performance even sustainable? That’s the question many analysts are asking about Disney and Pixar after Ratatouille raked in (a mere?) $47mm on opening weekend.
The movie debuted #1 in domestic box office and faced competition from Bruce Willis’ titanium-enhanced musculoskeletal system (if you catch Live Free or Die Hard you’ll know what I’m talking about) and Steve Carell’s giant career mistake, but still turned out to be Pixar’s worst opening weekend in 9 years. Also, at a projected domestic gross of under $200mm, Ratatouille will be the 3rd straight Pixar movie to fall short of its predecessor.
Analysts like Merrill’s Jessica Rief Cohen were bullish on Disney’s post-Pixar prospects at the time of the acquisition in January 2006, even though many thought the move wouldn’t be accretive until 2008. In retrospect, almost everyone agrees that the Pixar deal was pricey, and that Jobs cashed out at Pixar’s peak valuation, but there are lingering disagreements as to whether Pixar amounts to a net positive as a Disney brand.
Seeking Alpha concedes that the Pixar deal was expensive, but that the unit focuses the mouse’s media division more on content and less on distribution. The argument here is that it’s much tougher for a giant like Disney to remain on the forefront of ever changing distribution methods, but valuable content is indispensable regardless of how it’s delivered to the masses. The intellectual property/content business also takes maximum advantage of Disney’s scale.
Personally, we think that if movies like Ratatouille save us from Shrek 4: Attack of the Surfing Penguins, or at least inspire other studios to match Pixar’s quality, Disney did the right thing by not upsetting its winning combination with Pixar. Disney also gets to reaffirm its status as the industry benchmark for animation, and a content provider’s image is a huge asset, however intangible.
On Disney’s Pixar Acquisition: Pricey, But Worth It [Seeking Alpha]
Disney’s (DIS) Pixar Purchase: Never Give A Sucker An Even Break [24/7 Wall St]

  • 09 Feb 2007 at 1:57 PM
  • Apple

Steve Jobs: Typhoid Mary of Backdating?

stevejobs2.jpgAnd speaking of Steve Jobs…wait for it…backdating is back! As we mentioned this morning in the Opening Bell, the Wall Street Journal reported this morning that back in his Pixar days Steve Jobs had a role in negotiating a contract with film director John Lasseter that included stock options dated months before the contract negotiations even began. The news here is not the backdated stock options grant—those were acknowledged by Pixar-owner Disney months ago—but Steve Jobs role in the contracts. First Apple, now Pixar. This guy is starting too look like more than just a “typical backdating miscreant.” He’s practically the Typhoid Mary of backdating.
And look at how both Apple and Disney are trying to manage today’s news. Apple refers all inquiries to Disney on the grounds that Disney now owns Pixar. Disney refers all inquiries to Apple on the grounds that that’s where Jobs works these days. This kind of circular buck-passing can’t go on forever. Soon someone will have to announce that it’s all okay because Steve Jobs might have known about the options grants and the backdating but he didn’t know about the legal or accounting implications and so that makes it all okay. And that’s an idea that sounds pretty reasonable but vanishes in the presence of thought.
Did Jobs think that all this backdating going on around him was just because those dates were the birthdays of the accountants or something? What did he think was going on when the agreements he was negotiating for himself and Lasseter kept including options grant dates fixed at some point in the past?
We have no idea but we can take a guess. The advantage of fixing the date and therefore the price of the stock options was not that it let Jobs and other executives secretly steal money from the company or its investors. It’s that it let them negotiate other things, like price points, without worrying about getting screwed by day-to-day movements in the stock-prices.
Let’s go through this one more time. If we agree you should get $10 million in options today, and write that down at today’s numbers of 10,000 shares, but the price jumps 10% by the time we finalize the agreement, you either better be on the ball and make sure you are getting 11,000 shares or you’ll end up with less value than you negotiated for. If you’re a busy executive, or say a film-director, you probably are doing more important things than watching the day to day fluctuations of the stock price. So odds are you are going to get screwed.
But if we fix the options grant at a certain date in the past, everyone knows exactly how many options equals how many dollars. We can all move on to thinking about more important things. As it happens, many companies were under the impression that accounting rules allowed them to account for these as “at the money” if they pegged these to earlier dates with historically low share prices, even though they were in fact granted on dates when they were “in the money.” This turns out to have been wrong but it depends on an obscure, poorly understood and widely misunderstood, somewhat arbitrary accounting rule.
So here’s what the Apple-Pixar-Disney people should really say: This isn’t a bid deal. Not because Jobs was too ignorant to understand it, but because it just isn’t a big deal. We’ll fix the financial statements. But nothing criminal or fraudulent happened here. Time to move on. Have we mentioned we’re coming out with the iPhone?
Larry Ribstein wonders if this latest revelation will test the strength of the “Apple Rule”—which holds that scandalous misdeeds by popular CEOs are neither scandalous nor misdeeds. He concludes with the most pertinent question:

Now we have both Jobs and Lasseter, and possibly Michael Dell. So are we going to lock up America’s most popular entrepreneurs, make untenable distinctions in who gets prosecuted, or finally understand that the criminal justice system is a wildly inappropriate way to deal with agency costs like those involved in backdating?

Pixar Pay Package to Lasseter Included Well-Timed Options
[Wall Street Journal]

The Apple rule gets a workout

  • 07 Dec 2006 at 9:36 AM
  • Disney


bonuswatch.jpgBonus numbers for the upper reaches of Wall Street executives are coming in. Or at least the best guesses about those numbers. Yesterday Charlie Gasparino reported that his sources say 50 individuals at Goldman were looking at bonuses in excess of $25 million, and that twelve indivuals at each of Morgan Stanley and Merrill Lynch would get that much. This morning the New York Post reports on the most exclusive bonus club of them all: the chief exectuvies. Bonuses are expected to put them over the $40 million mark.

As news spreads of Lehman Brothers boss Dick Fuld’s $186 million, 10-year payout, Wall Street’s top five chieftains are on track to rake in a combined $200 million in 2006, awash in cash from record trading profits.
Profits at Wall Street’s leading firms are up an average 15 percent across the board from last year’s record levels. So are their stock prices, with even Morgan Stanley – the scene of a bitter, multi-month executive rebellion in 2005 – up more than 28 percent year-to-date.
Executive recruiters and veteran Wall Street pros told The Post that there was little doubt that for the chiefs of Goldman Sachs, Merrill Lynch, Lehman Brothers, a $40 million payday is a distinct possibility.
“I think it is safe to say that this year, most of the leading [Wall Street] CEOs will see their pay in the $40 million or above range,” said a veteran Wall Street executive recruiter.

Of course, the most underreported story right now are the bonuses of Wall Streeters farther down in the ranks. Don’t forget to send bonus rumors to tips@dealbreaker.com. Thanks.
Fat Cat Parade [New York Post]

  • 16 Oct 2006 at 4:31 PM
  • Disney

Bloomberg: We’re a Little Sassy Today, So Sue Us for Living

Disney’s Iger Pushes Nutrition While Parks Sell 1,093-Calorie Turkey Leg [Bloomberg]

  • 30 Mar 2006 at 6:10 PM
  • Disney

Cramer on Eisner

cramereisner.jpgWe’re not sure who at CNBC decided that Michael Eisner needed a talk show, but we suspect that it may be the same person who decided Tina Brown and Dennis Miller needed a talk show. We were passively watching it late Wednesday night when our cable provider decided to invoke the Emergency Broadcasting System siren, and the screeching buzzer was almost better TV.
We’ll admit that it was fun to watch Eisner interview Sir Howard Stringer and ask him questions about Michael Ovitz while trying not to flinch, and the preview for the next show–Regis Philbin grilling Eisner about why he pulled ‘Millionaire’–was entertaining if only because we don’t think Philbin could even get a meeting with Eisner when Eisner was still “working,” but…
Eisner is a charisma black hole. Where even the most loathesome people have a smidgen of charisma they can pull out in case of emergency/multi-million-dollar syndication deal/divorce court hearing, Eisner has a big empty void, a charisma abyss. On a scale of one to charismatic, Eisner is a negative 10 Clintons. It’s painful. And we’re apparently not the only ones who think so.
During the call-in portion of Jim Cramer’s show just now, a caller complained that he turned on CNBC at 9PM Wednesday, expecting to find Mad Money, but it wasn’t there. Cramer: “That’s Cramer being a team player!” [Cramer pushes a button, gratuitous sound effect.]
Caller: “Yeah, but how’s that guy gonna make me any money?”
Cramer: “That’s Cramer defaulting to teeeeam player!”
Somewhere at CNBC, a call screener is getting a slap to the back of the head.

  • 20 Mar 2006 at 9:06 AM
  • Disney

If CNBC Asked You to Jump Off a Bridge…

meisner.jpgMichael Eisner, explaining why he’s doing a talk show in a CNBC spot advertising said show:
“Well, the biggest reason was.. because they asked me to.”
Which begs the question: who asked him to? And was this the same person who asked Tina Brown and Dennis Miller to?