Eisner addresses shareholders [complete text - LONG]

[Al Lutz]

Folks,

In case you missed it: [begin quote]

CEO Michael Eisner addresses Disney shareholders
February 25, 1998

KANSAS CITY, Mo. — Walt Disney Co. Chairman and Chief Executive Officer
Michael Eisner issued the following statement Tuesday to shareholders at the
company's Annual Stockholders Meeting:

In introducing the board, I have also managed to cover 38 years of Disney's
past. This leaves only one thing left for me to talk about: the future.

By the "future," I mean the future of leisure time. The future of the
universe, of geo-strategic currents, of economic transformations, of
political bed-hopping; and of El Nino, I will leave to others. That's what
we have ABC News for.

Now, I am well aware of the risks of speculating on the future. As we have
learned from our experience at Disneyland, Tomorrowland can become
Yesterdayland before you know it.

Warren Buffett has a knack for describing such conundrums articulately and
succinctly. "The rearview mirror is always clearer than the windshield," he
once said. Bill Gates is as good at forecasting the future as anyone. But,
in his book, "The Road Ahead," he missed the huge significance of the
Internet. Honest. You can find it in chapter 6, page 125. But, I assure you,
I'm not gloating — once Mr. Gates caught on, he managed to radically change
his company's strategies with lightning speed.

Now, if it turns out that I am wrong in some of my predictions, let me
assure you that we can change directions as quickly as you can say
"Microsoft."

During the last decade or so, future predicting has become something of a
growth industry. In the 1980s, Faith Popcorn — that's really her name —
built her career on forecasting that people would be "cocooning" in their
homes. According to her theaters, restaurants and malls would come to
resemble ghost towns because people would choose to avoid the dangers of the
outside world and have entertainment and services delivered to their door.
The Walt Disney Co. didn't buy into this logic. We went ahead and created
new theme parks and stores and movies. This strategy worked. Like
butterflies spreading their wings, it turned out that people willingly left
their cocoons to join us.

The cocooning forecasters missed the boat because they ignored the essential
relationship between people and entertainment. People crave entertainment,
and they always have. When our ancestors were living in caves, the great
hunter Og would regale his fellow cavepeople around the campfire, telling
them in exciting detail about his kill of a neighboring mastodon. Then,
after acting out his triumph around the communal campfire, Og no doubt went
home to draw pictures of his achievement on the walls of his cave for the
individual viewing pleasure of family and friends.

Fast forward countless millennia to the present. We no longer tell stories
around a fire and we no longer draw on the walls of our dwellings — except
for our 3-year-olds whom we hope won't find the drawer with the permanent
markers. But, though we may have many more and different leisure options
than our hairier predecessors, we still want to be entertained, and we still
want it to happen both in the expansiveness of the outside world and in the
intimacy of our homes.

As much as I enjoy spending a day at home, watching ABC-TV, exploring
Disney.com, or reading a Hyperion book, I always reach a point when I'm
ready to go out to a movie. If I'm at home for two days, I will be willing
to fight rain, sleet, snow and pie throwers to get out of the house to go to
a concert, restaurant, theme park, hockey game — or all of the above.

As you can see, entertainment inside the home and outside the home do not
conflict. Indeed, they actually complement each other. The more we get of
one, the more we want the other. This is how it has always been. And, it is
unlikely to ever change. Virtual reality may expand. But, it will never
replace reality.

There is one other aspect of entertainment that will never change: People
like to be educated. After all, when the hunter Og entertained his neighbors
about his mastodon kill, he was also educating them on how it was done. But,
for this discussion I won't call it "education." At Disney, we chant, "A
spoonful of sugar helps the medicine go down," so I'll call it "curiosity
satisfaction." At our company, we have always recognized the integral
relationship between entertainment and curiosity satisfaction. "Fantasia,"
True Life Adventures, "The Three Caballeros," Davy Crockett, Great Moments
With Mr. Lincoln, EPCOT — all of these classic Disney entertainments score
high on the curiosity-satisfaction scale.

In recent years, this marriage of entertainment and information has become
even more commonplace at Disney: Inside the home, there are Disney
Interactive, ABC News, "20/20," The History Channel, "Bill Nye the Science
Guy," A&E, The American Teacher Awards, Disney Educational Products, the
"Ruby Bridges" Sunday night movie, The Disney Young Musicians Symphony and
Discover Magazine. Outside the home, there are the Disney-MGM Studios, "Dead
Poet's Society," "Mr. Holland's Opus," The Disney Institute, the town of
Celebration and the soon-to-open Disney's Animal Kingdom. All of these
enterprises are about satisfying people's curiosity on subjects that
interest them. Let me give you a quick example. Here is one of 13 "Great
Minds" interstitial segments that we've produced for ABC on Saturday
mornings. (Audience views video of Robin Williams Genie interstitial on John
Muir.)

There, in just 90 seconds, you have seen the power of creative and
informative entertainment. In this instance, it was designed for in-home
viewing. Of course, you just saw it outside your homes. Sometimes these
distinctions can get confusing. But they underpin our strategies as we gear
up to take advantage of two major entertainment trends of the future.

The first trend is globalization. Until recently in the human experience,
people tended to live and die in the same village or town. Entertainment was
a completely local phenomenon. Travel was anything but recreational. It was
exhausting and dangerous. But, during this century, all that has changed,
much to the advantage of our company. Tourists come from around the world to
visit Disneyland and Walt Disney World. Tokyo Disneyland is an enormous
success and Disneyland Paris is the most-visited paid site in Europe. The
Disney Stores are as popular in the rest of the world as they are in the
United States. And, many of our films are actually more successful overseas
than they are here.

But, for our company, these international inroads are just the beginning.
The current Asian economic crisis will pass and the world economy will
continue to grow. Stability and prosperity are taking root in such regions
as Latin America and Eastern Europe. As this happens, people in these areas
will find themselves with more disposable income and — equally important —
more disposable time. Our company will benefit in two ways. Obviously, we
will benefit from the increased demand for our products. But, we will also
be enriched by the cross-fertilization of ideas as we send American
executives abroad and bring foreign nationals here to our corporate
headquarters. I suspect that I will be the last Disney CEO to be fluent in
only one language — or maybe the next to last. Disney will always be a
distinctly American company, but it will be one that consciously serves a
world market. Increasingly, my job will be to move away from the myopia of
American regionalism toward a greater appreciation of international
diversity.

We are already well on our way. For example, we have international Disney
Channels operating in Europe, Asia, Australia and the Middle East and there
will soon be a new Channel in Latin America — bringing the total to eight
channels in all. Each one is tailored to the local culture. Each is
distinct. But each is still Disney.

The second trend to impact the way people spend leisure time is the rise of
technology. Of course, the silicon chip has already had a major impact on
how we spend our time. The average American family may have 1.8 children but
it probably has 4.2 remote controls — none of which is ever the one you
need. But, I maintain that, as cutting edge as our electronic toys seem
today, they will soon look as quaint as a black-and-white console
television.

At Disney, we now employ over 2,300 top technologists working in such areas
as Research & Development, Imagineering, Animation, Disney Interactive,
TeleVentures, ABC and our New Technologies division. They are coming up with
some dazzling approaches to entertainment, both inside and outside the home.

One of our projects amounts to nothing less than a reinvention of television
and our relationship to it. This project merges television with the computer
and the Internet — creating a place you can go for entertainment,
information and communication 24 hours a day.

Our design work in new entertainment technology is revealing a fascinating
new phenomenon, as breakthroughs in outside-the-home efforts result in
applications we can use inside the home — and vice versa.

This is a dramatic new development in the entertainment industry. It used to
be that a person who designed a roller coaster had nothing in common with a
person who produced a television show. Now, the line is blurring and the
interplay is accelerating. I am no mathematician, but I do know the concept
of exponential growth — and this interplay between the outside-the-home and
inside-the-home venues will lead to an explosion in the variety of new ways
we canentertain people.

This is why, in the future, I believe that if an entertainment company isn't
operating in both venues, then it ultimately will find it is operating in
neither. The two will converge and stimulate each other in ways we can now
only attempt to imagine. On the other hand, any company that is
well-positioned in both areas can expect to reap enormous rewards, here in
the United States and around the world.

And I'm here to tell you that your company is very well positioned, indeed.
To demonstrate what I mean, I would like to show you a chart. If you have
been to many of our annual meetings in the past, you've come to expect very
slick and dazzling graphics. I am now going to show you the ugliest chart
we've ever projected — but also the most beautiful. (SLIDE — Chart listing
all of Disney's businesses.)

Here you have a listing of every enterprise of The Walt Disney Co. There are
so many that I realize the chart is difficult to read. On the left are all
of our businesses that provide entertainment inside the home. On the right
are all the businesses that do so outside the home. This one ugly chart
beautifully demonstrates why The Walt Disney Co. is so well positioned for
the future.

But the sheer number of our varied businesses does not tell the whole story.
Consider this (On the displayed slide, many of the names on the chart change
from white to yellow.)

All of these highlighted names in yellow are Disney-branded businesses.
Needless to say, the Disney brand is an asset of our company and our company
alone. Disney is consistently ranked as the number-one entertainment brand
in the world. This is of enormous significance as the number of
entertainment options rapidly grows. When faced with a clutter of choices,
consumers tend to gravitate toward brands they have come to count on.

But Disney isn't the only brand represented on the screen. ESPN, ABC,
Touchstone, A&E and Miramax are among the other brands that comprise our
company and have earned the respect of a growing number of consumers.

There is another overlay we can place on this chart. (On the displayed
slide, the names go back to white and then some change to blue.)

These names highlighted in blue are businesses that have been started in
just the last five years. They include inside-the-home projects, like
Disney.com, ESPN 2, Disney Interactive and Lyric Street Records; and
outside-the-home enterprises like Downtown Disney, Walt Disney Theatrical
Productions, Club Disney and The Mighty Ducks. All of these businesses are
off to strong starts and, simply by virtue of their newness, have enormous
potential for growth.

Finally, here's one more sub-category worth looking at. (On the displayed
slide, the names go back to white and then some of them change to orange.)

Highlighted in orange are businesses that don't yet exist, but will be
inaugurated in the next few years. Each is a major initiative in its own
right. Together, they should offer a base of new growth and expansion for
our entire company. Individually, they will provide an entertainment
experience that people simply can't get anywhere else. Indeed — in the great
Disney tradition — the best of them will create new forms of entertainment.

This year, Disney's Animal Kingdom will open and change the way people view
animals: "Mulan" will enhance the way people view Disney animation,
DisneyQuest will alter the way people view local entertainment, "Armageddon"
will modify the way we look at very large asteroids speeding toward earth,
ESPNZone will affect the way people experience restaurants, the Disney
Cruise Line will launch on July 30 — we really mean it this time — and
impact the way we travel on the high seas, "A Bugs Life" will premiere in
November and make us re-think the way we look at insects. In 2001, Disney's
California Adventure will open in Anaheim and enhance and embellish the way
we imagine the Golden State. Later that year, Tokyo DisneySea will launch
and provide a dramatic new way to look at the oceans that comprise most of
our planet. In addition to these projects, there are many more in active
development that aren't ready yet to be announced.

There you have it. Thanks in large measure to the leadership, guidance and
counsel of board members going back to Card Walker, our company today is
stronger than at any point in its illustrious history. We are now uniquely
poised to build on this bedrock of strength. If a million years of human
history is any guide, people will always want to be amused and moved and
informed — whether in their caves and at their local campfires — or in their
living rooms and at their local multiplexes. And all of us at The Walt
Disney Co. will continue to do our best to provide it for them.

Thank you very much. [end quote]

--
Al Lutz -- alweho...@aol.com -- FDC & TDC Buzz Lightyear
Author of D-I-G (Disneyland Info. Guide) http://members.aol.com/alweho/
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