Letter #8: Disney (2005)

2005 Shareholder Letter from Bob Iger

Hi there! I go by KG, and I love studying the history of business and investing. I’ll be sharing some notes from one Investor/Shareholder letter per weekday (mostly from my compilations) here.

Today’s notes are on Bob Iger’s 2005 Shareholder Letter, his first as CEO after taking over from Michael Eisner.

You can find this letter in my Bob Iger Compilation, which is under “Creative CEOs.” This particular letter starts on page 1.

If you have any thoughts on what you’d like to see, let me know!


I’m both humbled and grateful to be part of a company that is so meaningful to so many. Above all else, I am thankful for the tremendous creativity, commitment and hard work of the men and women who make up The Walt Disney Company, one of the most loved and respected companies in the world. In fiscal year 2005, the Disney team reinforced its position as an industry leader in quality, creativity and innovation, while generating double-digit earnings growth for our shareholders.

  • Sounds like a silicon valley tech startup — all the buzzwords: meaningful, creativity, commitment, hard work, quality, innovation

  • Boring businesses aren’t always best

  • Iger shows his values and reinforces the company’s — alignment between management, employees, and company is crucial

[Michael Eisner] left us a strong platform on which to build the next generation of Disney success, and I am personally grateful for his wide-ranging contributions. I, along with the rest of the Company, also wish him well on his new adventures, which I am sure will be successful, fulfilling and noteworthy.

  • Always pay respect to your predecessors and acknowledge their achievements

Creativity continues to be the essence of Disney, even as our businesses expand across borders and media platforms. It is the foundation for almost everything we do, the source of our strength and our success, and the fuel that will power us into the future. Fostering and encouraging that creativity — from movies to television, from animation to live-action, from theme parks to consumer products to our online business — is our top priority. As digital technology platforms proliferate, their ability to penetrate markets and attract consumers is reliant upon the kind of branded, in-demand, high quality, creative content for which Disney has always been known.

  • Always wondered why Disney didn’t release Disney+ sooner… they clearly understood the shift toward digital. They clearly understood the value of their library. I suppose it was a let’s own the oil not the gas stations play, but clearly owning the distribution platform in important

  • This letter was written in 2005, 2 years before the infamous 2007 Blockbuster investor day presentation…

Since the Disney Brothers Studio first opened its doors as an animation company 82 years ago, we’ve seen seismic shifts in the technology of entertainment — and we’ve been at the forefront of a few of these shifts ourselves. From silent movies to talking pictures to television to home video, Disney has grown as entertainment options have expanded. Now, innovations such as video-on-demand and high definition television — delivered to the home through broadcast, cable, and satellite — have created more demand for content. And, a new level of convenience is now revolutionizing customer choices — thanks to the next generation of DVD, digital video recorders, online purchases of PCs, and iPods— that is creating equally revolutionary opportunities for our Company.

  • New distribution channels have greatly helped Disney as they focus on what they’re good at — creating content

In order to thrive in this new era and to deliver long-term growth and increased shareholder value, we have established three strategic priorities: creative innovation, global expansion, and application of technology

  • Creative innovation comes from within, global expansion relies on distribution partners, and application of technology depends on tech advancements

Our launch of Hong Kong Disneyland in September was a triumph of creativity — from the feng shui design of the park to the innovative new attractions unveiled there

In November, we introduced our first fully computer-animated film, Chicken Little… And our animation team has an exciting slate of films underway that will continue Disney’s great tradition of storytelling in the computer animated film format

  • I’ve got a whole piece on how technology has changed and will change the way not only Hollywood, but the entire entertainment industry, operates. If you’re interested in reading this, leave a comment (substack or twitter) or shoot me an email/DM. If there’s enough interest, I’ll publish it in a future newsletter.

Disney creativity not only delights our audiences, it also allows us to establish franchises that generate ongoing returns by transcending any one business

  • Disney = Creativity + Franchises

  • If you’re going to tell me I’m wrong because Disney has just been acquisitive and rebooting old content, I won’t argue with you. But they’ve been smart in their acquisitions and creative in their reboots — so many previous reboots had failed regardless of format (film, TV, books, etc)

we are committed to create characters and stories with staying power that last beyond a single movie or a TV show. These franchises provide the kind of dependable, long-term success that is invaluable in the often unpredictable entertainment industry

  • Disney hypes up the innovation and creativity of Silicon Valley yet understands the importance of sustainable cash flows — talk about a dream come true

while India, China and other markets around the world promise great opportunity, there are near-term challenges and limits on initial returns in these markets. However, to achieve our goals in the long term, we are making important inroads and strategic investments today, to create growth opportunities for tomorrow

  • Old Chinese Proverb — “The best time to plant a tree is 20 years ago. The second best time is today”

Technology — and our ability to leverage it effectively — is the third critically important part of our long-term growth strategy. Video games, personal video players, broadband-based devices and other mobile content providers are having an increasing impact on our businesses. As technology rapidly evolves, a new generation of consumers is quickly embracing all it has to offer, and Disney will be there to provide original and compelling content to meet this growing demand

  • Leverage — not create. This echoes the importance of acquisitions for Disney. Pixar was a huge innovator in technology — Ed Catmull and Pat Hanrahan of Pixar were awarded the Turing Award (Nobel Prize equivalent for Computer Science) for their work on Modern Computer Graphics

  • “Skate to where the puck is going, not where it has been” — Disney identifies the technologies of the future, and creates content for them so that when they go mainstream, they are ready

we recognize that the development of new technology provides us with the opportunity — and the challenge — to make it possible for more for more people to enjoy our content in more ways, at more times and in more places than ever before.

  • More, more, more

  • This idea of more content that is more easily consumed is what has given rise to the internet powerhouses of China — any idle time you have, you play minigames in WeChat, shop in Pinduoduo, or read the news on Toutiao.

  • However — you need good content. This idea of more more more was the thesis behind Quibi, which, well, you know how that’s going.

  • This is why I’m so bullish on Roadtrip — they’ve created a platform that leverages great existing content (music) and created content (conversations)

We have to be willing to break with some traditional business models, in order to give consumers what they wantgreat entertainment at a fair price delivered in ways that are convenient and easy to access

  • Accessibility matters — across distribution and price point

  • Jeff Bezos: Focus on the things that won’t change — For Disney customers — that’s great entertainment at a fair price delivered in ways that are convenient and easy to access. No one will want worse entertainment, higher prices, or less convenient access

  • Don’t be tied down to tradition — even though Disney was printing money (which they still do), they’re willing to break old systems and make new ones

As we navigate an increasingly complex environment, in which the first-mover advantage will be of more importance than ever, the Apple deal has served as a catalyst to help our team think increasingly outside the prevailing business models by taking intelligent risks to the benefit of our consumers as well as our shareholders

  • Hm, not sure I agree with Iger’s assertion here that first-mover advantage will be of more importance than ever… especially in an increasingly complex environment. If anything, in an increasingly complex environment, shouldn’t late movers have the advantage of sitting back and watching the first-movers mistakes?

  • I 100% agree that it’s important to think outside prevailing business models and take intelligent risks though — and think about the benefits to your customers and your shareholders

We’re moving forward to embrace technology across all of our business units, including the recent launch of the Mobile ESPN phone and Disney Mobile

  • Focus is on Sports and Gaming — Smart

  • In a way, gaming has now become a sport. Humans are competitive creatures — anything that can be competed upon, will be competed upon

in the interactive video gaming arena, switching from a licensing model to creating and marketing games ourselves… We believe this new strategy can significantly increase our returns in this growing industry

  • The Netflix model… except for gaming instead of Film&TV

As technology expands the array of entertainment and consumption options, the value of familiar and trusted brands increases dramatically

  • The power of brands… is it a moat though?

  • If you’ve got a strong brand and you’re entering a white space… by association most people will believe in you, or at least give you a shot, regardless of how your actual product/service is

We must continue to cultivate a culture of creativity, to move boldly and to take the intelligent risks necessary for innovation, growth and success in the future. A future that, as always, will be propelled by the power of Disney’s creative spirit


  • Be bold; take (intelligent) risks


If you’ve got any thoughts, questions, or feedback, please drop me a line - I would love to chat! You can find me on twitter at @kgao1412 or my email at kevin@12mv2.com.

All compilations here.