Bob Iger rocks Disney

    Seismic shift

    A lot of what's new comes from two big and related strategic changes Iger has made at Disney, and the way he has managed the business. One was his subtle but seismic decision to refocus the company and most of its more than 150,000 employees around its roster of "franchises," like the Jonas Brothers - Iger defines a franchise as "something that creates value across multiple businesses and across multiple territories over a long period of time."

    The second change was unsubtle: Just days into Iger's new job, Disney acquired Pixar Films, bringing Apple's (AAPL, Fortune 500) Steve Jobs onto the company's board in the process. In recent weeks these moves have contributed to a string of hits at the box office, including "High School Musical," "Beverly Hills Chihuahua," and the animated "Bolt."

    The Disney Channel, which has emerged as a centerpiece of the company's strategy, is expected to finish 2008 as the second-most-watched cable channel in primetime. For the third straight year it was first or second and the leader among small kids and tweens.

    Meanwhile, Disney has been touting Pixar's - sorry, Disney Pixar's - "Wall-E" as a Best Picture contender for the Academy Awards. Should "Wall-E" prevail, it would be the first time Hollywood's top honor went to an animated film, not to mention to a picture released under the Disney name.

    In home video, the company released "Tinkerbell" in October, the first of five DVD films that are part of its new "Fairies" franchise, which, following the success of its "Princesses," has elaborate publishing, online, and consumer products offshoots. (Check out Disney Clickables Fairy Charms, a new line of bracelet toys. When one wearer's charm is held up to another's, both people become fairy friends in Pixie Hollow, a virtual world for the more than 7.5 million fans who had created their own fairy avatars before Tinkerbell or Clickables even hit the streets.)

    There is more to Disney, of course, than Disney. It counts ABC and part-ownership of cable channels Lifetime and A&E among its assets. Sports juggernaut ESPN - 80% owned by Disney - is estimated by Doug Mitchelson of Deutsche Bank to have generated around one-third of the company's $8.4 billion in 2008 operating income.

    But what Iger has done, as Andy Mooney, head of Disney's consumer products business, puts it, is "widen the aperture" of one of the world's most valuable brands. A decade ago the Mickey Mouse and Winnie-the-Pooh franchises accounted for 80% of the company's consumer products business; today it's closer to 50%. You can still buy a $1 Disney T-shirt at Wal-Mart (WMT, Fortune 500), but a Mickey Mouse T-shirt from Dolce & Gabbana sells for $1,400. There's even a posh Four Seasons hotel under construction at Disney World.

    And when it comes to overseas growth - the perennial holy grail for U.S. media firms - Iger has put creative executives on the ground in Russia, China, India, and elsewhere with the aim of producing, for the first time, original, local-language movies under the Disney name.

    So far it's working. Over the past three years Disney, which ranked 67th on the Fortune 500 last year, cruised to the head of the media pack in terms of both its stock performance and its return on invested capital. Even after losing 30% of its value in the past six months amid the financial blowout, Disney has held up better than the S&P 500 and rivals like Time Warner (TWX, Fortune 500) and News Corp (NWS, Fortune 500). Under Iger, who turns 58 in February, Disney has become the world's largest media conglomerate by market value, worth around $40 billion.

    There is so much of what Iger calls the "Disney difference" in the company's stock price that some wonder if its premium is sustainable. Analyst Michael Nathanson at Sanford Bernstein noted that by late December, Disney's trading multiple, based on forecast 2009 earnings, had "ballooned" to 9% above the S&P's and more than 70% above those of its media-conglomerate peers, "the widest margin in recent history." He thinks either Disney needs to start trading down or the rest need to start trading up.

    And even at these levels, Disney stock is now slightly below where it was when Iger took over (he has two million options likely to expire worthless in February). As he put it to his European management team in a strategy meeting hours before joining the Jonas Brothers: "Unfortunately, all this success creates the ever-greater demand for more success."

    Between the impact of the economic crisis on tourism and the digital upheaval in the media business, the headwinds now are no less intimidating than those young Walt Disney faced when his first Mickey Mouse cartoon, "Steamboat Willie," debuted in 1928. Even so, Iger says, "We felt like we were the last to feel the pain, and we think we could be the first to heal."