The Epic Disney Blow-Up of 1994: Eisner, Katzenberg and Ovitz 20 Years Later
10:00 AM PDT 4/9/2014 by Kim Masters
Twenty years ago, Frank Wells, Disney's No. 2, died in a helicopter crash, and war broke out in the industry. It was Eisner vs. Katzenberg, the dominoes started to fall, and Kim Masters was in the middle of it.
On Easter Sunday 1994, Frank Wells, the patrician No. 2 man at the Walt Disney Co., and his close friend Clint Eastwood flew by helicopter with a small group to the remote slopes of Nevada's Thorpe Creek Canyon. They wanted to spend the day skiing on untouched powder. When the party was ready to return to the lodge, Eastwood went ahead in one helicopter while Wells and two friends decided to ski more and take a second chopper. It was a short trip in the air, less than five minutes, but the second helicopter, carrying Wells and four others, did not make it. The engine failed, and the chopper crashed into a hillside. There was one gravely injured survivor. Wells and everybody else were dead.
Wells' death stunned the industry and instantly created a vacuum in the Hollywood hierarchy. Ambitions were inflamed and dominoes began to fall. By August, just weeks after The Lion King had opened as the latest and greatest in a string of hits from a revitalized animation unit, Disney's chairman and chief executive, Michael Eisner, then 52, would fire his studio chief, Jeffrey Katzenberg, then 43. At Disney, of course, animation was the mighty engine that drove merchandise and theme park attendance. Katzenberg had been recently described by an analyst as "probably 80 percent responsible" for the run-up in Disney's stock.
Katzenberg would ally with David Geffen and Steven Spielberg to create DreamWorks -- a bold but ultimately frustrating attempt to launch Hollywood's first new studio in decades and a saga that still is playing out 20 years later. Under pressure to name a second-in-command, Eisner would turn to chilly uber-agent Michael Ovitz, then the so-called most powerful man in Hollywood. Thus began an unhappy 14-month partnership that ended with Ovitz's epic fall from power. And Katzenberg's lawsuit to enforce his rich contract -- devised years earlier by Wells -- gave the industry a riveting trial that revealed mortifying comments that Eisner had made privately about his erstwhile studio chief, including the infamous line, "I think I hate the little midget."
Katzenberg's lawsuit, which could have been settled for $90 million, wound up costing Disney nearly $270 million -- not counting tens of millions in legal fees. And Eisner became increasingly imperious and isolated, sowing the seeds for his own ouster following a dramatic shareholder revolt a few years later.
Many of the industry's elder statesmen believe to this day that the rupture between Eisner and Katzenberg might have been avoided if Wells had remained as a steadying influence, but his absence opened the door to recriminations and embarrassing litigation that reshaped the industry's power structure. These are the episodes that fascinate me most as a journalist: when executives who are supposed to be all about managerial discipline and the bottom line engage in self-destructive, emotion-driven public battles. The spectacle that unfolded following Wells' death 20 years ago laid bare the reality that may not be taught in business school -- how irrational personality conflicts and jealousies can transform an entire industry.
