Disney ‘Enforcer’ Stripped of Power

The man known among executives of Walt Disney Co. as “The Enforcer” took a hit Friday.

Chief Strategic Officer Peter E. Murphy, the rough-edged point man for Disney boss Michael Eisner, was removed from his powerful post and placed in an advisory job with diminished responsibilities.

Murphy’s 30-person strategic planning unit will be dramatically downsized, giving more autonomy to Disney’s division chiefs, some of whom have complained of being marginalized and disrespected by Murphy. Critics of his operation, which reviews all major Disney initiatives, have dubbed it “the business prevention department.”

The overhaul was largely orchestrated by Disney’s newly named chief executive, Robert Iger, who does not officially take the helm until Oct. 1 but already has begun putting his stamp on the company, with Eisner’s blessing.

Numerous Disney executives, as well as Wall Street analysts who track the company, had seen the internal unrest surrounding Murphy as an opportunity for Iger to score points with his troops while distancing himself from his predecessor’s regime. He apparently succeeded.

“This is a welcome change and long needed,” said USC business professor Warren Bennis. “Too many decisions are made by Eisner and the strategic planning department, and it’s why to a great extent Disney has lost a lot of talent over the years.”

In an interview, Murphy defended his tenure and style, saying spirited debate with other executives was a necessary part of the process.

“I did the job I was asked to do by Michael, Bob [Iger] and the board,” he said. “It was not a popularity contest.”

Murphy said he was consulted about the changes and added, “I feel great about it. It’s the right decision for Disney and for me personally.”

A source familiar with the new arrangement said Murphy, who’ll report to Iger, was given a two-year deal with an option to leave sooner -- the most likely scenario. The source said Murphy had expressed interest in working for a private equity firm specializing in media and technology.

For his part, Iger said in a statement that the new corporate structure “will create efficiency with accountability and empower our business unit leaders in their ongoing efforts to create new, differentiated and compelling entertainment experi- ences.”

He said Murphy’s “foresight and talent have played a major role in making Disney what it is today.”

Murphy joined Disney in 1988 as a senior planning analyst after earning an MBA from the Wharton School.

He rose quickly through the ranks, earning a reputation as a bright and ambitious strategist. He helped expand Disney Channel worldwide and crafted a business plan for the acquisition of independent film company Miramax Film Corp., whose founders are splitting from Disney. Murphy was promoted to chief strategic officer in 1998 after overseeing the $19-billion acquisition of Capital Cities/ABC Inc.

“He’s a very dedicated, hardworking and smart strategist,” said Steve Bornstein, a former president of ABC Broadcast Group.

Added Steve Wadsworth, president of Walt Disney Internet Group, “He and his team have been an incredibly valuable resource to my group.”

But that view is not universally held.

Although Murphy, 42, played an important role in acquisitions that have built Disney into a global entertainment powerhouse, his style rankled some senior executives, who said projects too often got bogged down while Murphy’s underlings reviewed them.

“You want to energize bold, thoughtful risk taking in a creative business,” said Jeffrey Sonnenfeld, associate dean of the Yale School of Management. “You just can’t do that when you’re caught up in complex chains of command.”

But the structural problems were compounded by Murphy’s reputation as Eisner’s guided missile, said several current and former Disney executives, who asked not to be named.

Eisner relied heavily on Murphy and his group to keep tabs on the decisions of his top managers in the company’s four divisions -- film, theme parks, consumer products and television -- giving him authority to veto investments his boss didn’t like or pursue projects he did.

When Eisner was determined to buy Fox Family cable channel from News Corp., he dispatched Murphy to plot the strategy, and he became one of the principal architects of the deal. Disney paid $5.3 billion for Fox Family channel (now known as ABC Family channel) and other assets -- billions more than it was worth.

Murphy also has locked horns with executives in other parts of the company.

Last year Eisner and Iger made it clear to Murphy that they wanted to sell the Disney Stores, whose sales had chronically lagged. Some executives contended that the deal Murphy was structuring did not reflect the full value of the outlets. Under the final agreement, Children’s Place Retail Stores Inc. agreed to spend up to $100 million to remodel and run the stores and to pay Disney royalties, beginning in two years.

Another project that Eisner supported and Murphy championed was MovieBeam, a video-on-demand service launched in 2003 in three cities. Some studio executives contended that the service could cut into the company’s lucrative home video sales, although it’s too soon to gauge the effect.

Doubts also were raised outside the company by analysts who believed Disney was venturing into an area already swelling with big-time competition.

“They’re getting themselves involved in a space here that’s dominated by the Comcasts, Motorolas, Intels and Apples of the world,” said Josh Bernoff, principal entertainment analyst with Forrester Research Inc. in Cambridge, Mass. “Their ability to succeed here is definitely in question.”

Murphy, in an interview Friday, defended his role in all those transactions, saying he got the best deal he could for the stores, that he had high hopes for MovieBeam and that ABC Family, whose ratings have improved, would “prove to be a great asset for this company.”

Reflecting on his 17 years at Disney, Murphy said, “I believe in the job I did and expect the company will continue to benefit from it.”