Apple & Disney: A Relationship Too Close for Comfort?

Unmarried, the content and tech giants have accomplished the improbable in the past five years — digital convergence

Apple and Disney are Hollywood’s best friends with benefits — and not everyone is happy about it.

The informal corporate couple currently are coyly hooking up in a cross-promotion of iPad 2 and content over at Apple.com. Of more than 900 multi-formatted DVDs titles to be released this month, “Tangled” — Disney’s take on the tale of hair-heroine Rapunzel — got the nod to appear in the iPad 2 promo video at Apple's website.    

The cameo appears with a teaser (see photo below) for the March 29 DVD/iTunes release of “Tangled,” a potential  boon for Disney if just a fraction of Apple.com’s 70-odd million monthly unique visitors glances at the iPad promo.

Disney, it hasn’t gone unnoticed, is always close by when a pod or pad falls from Apple.

Together, they jump-started video 2.0. in the consumer mainstream by jointly introducing Apple’s paradigm-shifting video iPod with $1.99 Disney-owned TV hits at iTunes.

Disney, which declined comment, has been a cheerleader for Apple’s iPad, Apple TV and under-a-buck-an-episode pricing. Even Disney’s restyled stores — for a sleeker, media-centric interactive experience — are inspired by Apple’s.

In the past five years, in short, they have achieved seamless digital convergence. But what’s remarkable — and almost universally overlooked — is this: The world’s most valuable tech and media brands are pulling off the feat absent a mega-transformative corporate merger to gum up the organic workings, unlike Sony's marriage of gadgets and content.

Indeed, it's mostly based on the well-chronicled syncing between CEO Robert Iger and Disney's largest shareholder, Apple CEO Steve Jobs, who sold Pixar five years ago for $7.4 billion of Disney shares.

Envious, puzzled or laggard rivals of Disney and Apple regularly whisper about the ties, insinuating that the former grants the latter access to its content goodies too readily or cheaply.

“When Apple wants to try something out — a subscription model or $1.99 downloads — Disney is right there first in,” a top exec of a Disney rival says. “The rest of the industry is like, ‘I don’t think so.’ ”

A longtime Jobs confidante disagrees. “The other guys didn’t want to go first” on Apple initiatives, the Silicon Valley venture capitalist told TheWrap. “Steve is universally praised as a positive force on Disney's board. Disney is aggressive about digital distribution of content. Apple dominates digital distribution devices. End of story!”

Shareholders are pleased with the story. Disney shares have shot up some 60 percent to almost $41 each, far more than rivals' or any stock index. Apple shares, meanwhile, quadrupled. 

The Disney-Apple affair began to deepen in 1991, when the Mouse House agreed to distribute features for Jobs' Pixar, which would become the premiere brand of computer-animated storytelling.

But it fully blossomed in September 2005 when Disney CEO Michael Eisner was ousted from the Magic Kingdom and Iger was installed.    

Understated but deceptively skillful, Iger immediately handed Jobs, the prickly perfectionist who’d clashed with Eisner, a peace offering: For Apple’s premiere of iPod video, Disney supplied the first crucial TV hits, including Disney-owned ABC's “Lost” and “Desperate Housewives.”

By late January 2006, the corporate camaraderie had been sealed with Disney’s Pixar acquisition.

And before long, iTunes was adding its first 100 or so movies, courtesy of Disney and Disney-affiliates Miramax and Touchstone. Iger forecasted online movie revenue of $50 million for all of 2006. “We pretty much have the market to ourselves on iTunes,” he later told a Goldman Sachs conference.

Iger has never been shy about his regard for Jobs — “a non-independent outside director,” as Disney describes him in annual regulatory filings. "He has become, very quickly, not only a great sounding board but a great advisor, someone I can turn to readily for advice in a lot of these areas," the Disney boss said eight months after Jobs joined the board in 2006.

Five years later, the affair is still going strong. “Steve has multiple talents, multiple talents,” Iger told the TV interviewer Charlie Rose two weeks ago. “He’s a true perfectionist. He has an ability to focus on making great things and not making a lot of things…He is a genius when it comes to design. He knows how to get the most out of people.”

In September, Disney sweetened the relaunch of Apple TV's streaming-media box with 99-cent digital TV episodes off of ABC, ABC Family and Disney Channel.

Although the first generation of Apple TV in 2006 was hardly a hit, Iger had touted it after playing with a prototype, calling it “compelling.”

Then there's Disney’s rapid expansion into social and mobile games, where its most recent major acquisitions have come.

Playdom, which Disney purchased last summer for up to $573 million, publishes “Mobster,” the biggest mafia game on iPhone. Around the same time, Disney also bought “Tap Tap Revenge” publisher Tapulous, an exclusive Apple supplier.

And, of course, there's the iPad. Heralding the innovative tablet computer even before it arrived at retailers last year, Iger declared it “a game-changer in terms of enabling us to create essentially new forms of content.”

Available at the launch of the iPad, the ABC Player app from Disney’s broadcaster was the first television app for iPad, which drew suspicion that Disney had Apple’s inside help — perhaps even advance access to an iPad.  

Not so, contended two honchos for Disney-ABC Television Group. “He [Steve] didn’t give one to us,” Albert Cheng, an executive vice president, told an interviewer,  smiling.

“When Apple comes in, who wouldn’t want to listen to what it has to say?” a top Disney tech executive asks TheWrap rhetorically. “Anything we’ve done, it’s been because these are great ideas.” When Disney and Apple now cooperate ahead of others, he adds, “people like to connect the dots and say it’s because of Jobs. I think this is far more smoke here than anything.”

Yet, even on Wall Street some wonder. When Iger gathered analysts around a conference call last month, the Apple-Disney affair came up. Given Jobs’ “crucial position” in Disney, “is it fair to say at this point that you're kind of more inclined to go with [Apple’s] iOS operating system?” Tuna Amobi of S&P asked.

Iger replied: “There isn't one company, Apple or any other company for that matter, that's driving our strategy.”

Of course, Disney isn't putting all its eggs in the Apple basket. Disney hasn’t “discovered yet the silver bullet or the business model that's going to prevail,” Iger told analysts last month. So, you can find Disney content on its partly-owned Hulu, Netflix and X-Box, among other places.

At last, Disney also is hopping aboard the Android platform of Apple’s archrival, Google. Last month, for example, the Disney brand went on an Android-based smartphone for sale in Japan. Next month, Disney begins publishing apps for “Jelly Car” and “Tap Tap Revenge,” the biggest games on Apple’s various i-gadgets, for Android now that Google is enabling “in-app purchases” — commerce.