In last week's column, "Worth What You Pay For It," I advised Walt Disney Company CEO Michael Eisner, for the March 3rd meeting of Walt Disney Company shareholders in Philadelphia, to declare victory and go home. That same day, Roy E. Disney and Stanley Gold asked WDC shareholders to just say "NO" to Eisner and board members George Mitchell, Judith Estrin, and John Bryson at that same meeting. Two days later Pixar Animation Studios CEO, Steve Jobs, ended negotiations to renew the deal between Pixar and Disney.
No Way Out
I have no idea whether Steve Jobs is a regular reader of this column. He could not, however, have done a better job of scuttling my "win-win" exit scenario for Eisner if he'd hired me to sabotage the plan myself. Faced with a shareholders vote of no confidence and the loss of Pixar, Eisner now basically has only two choices: bad and worse.
Part of the reasoning behind advising Mr. Eisner to declare victory and go home was to put an end to the constant waves of negative press, for both himself and the WDC, that are bound to accompany any attempt to fight off calls for his dismissal. The whole idea was for him to end his career on an upbeat, if not a high note. He was to take credit for the current rise in the Disney stock price and the banner year at the Disney studios. Then, pick up his parting check and graciously and gracefully walk out the door before anything disastrous--like the complete loss of Pixar--happened to further call into question his reputation for mismanaging Disney.
Now, Mr. Eisner's only choices are to either a) resign in disgrace as the guy who blew a deal with the most successful animation studio since, well, Disney, or b) stick it out and fight. The latter option virtually guarantees to end as badly for him as the former. As for the WDC, for the remainder of Mr. Eisner's tenure, everything they do, from opening new attractions at the theme parks, programming at ABC and ESPN, and releasing of films (especially the animated ones), will be scrutinized and analyzed for the slightest sign of failure.
Take, for example, the coming opening of "The Twilight Zone Tower of " (TOT) ride at Disney's California Adventure (DCA) theme park in Anaheim. Disney Pubic Relations is gearing up to present this multimillion-dollar attraction to the public in the hopes of restoring DCA's daily average attendance figures to its pre-opening estimates. At the same time, mainstream media has already begun contacting Disney theme park observers and asking them what sort of questions they should be asking about the new TOT.
When TOT opens, you'll see and hear lots of stories about huge crowds and long wait times. You will also hear how people familiar with the Walt Disney World version of this ride feel about the new California version. Even before the ride opens, there's already controversy brewing as to how many of the "Disney Magic" elements in the Florida version of the ride were stripped out by former Theme Parks and Resorts President, and Eisner favorite, Paul Pressler, in order to save money. The complaint being that like so many other rides and attractions in DCA, the "Tower of Terror" will be just another ordinary amusement park ride in a pretty building--complete with overpriced gift shop--and not worthy of the name Disney or a decent value for money spent.
Even if TOT is a big hit with the public, it will be impossible to escape news about DCA's difficult first years of operation. There will be stories about DCA's struggle to be viewed by the public as a destination in its own right rather than just another "land" at
Disneyland, along with stories about closed attractions and failed partnerships within the park.
Join Roy
Now that Steve Jobs has effectively closed the door for Mr. Eisner to slip graciously away through, I'm faced with the fact that Uncle Mike is no longer much of a prospect for my consulting services. Like any good consultant, however, I always see the glass as being half full. And, I now want to offer my services to financial advisors, investment analysts, and Disney shareholders.
Here's my first piece of advice for these folks: Stop getting your information about Disney from Disney.
This past week, I spent a great deal of time reading news stories and opinion pieces about the breakup between Pixar and Disney. I was amazed at the number of analysts from big name brokerage houses, quoted in the various stories, genuinely surprised that things were as bad as they were between the two companies and their respective leaders.
The Los Angeles Times reported that:
"Some analysts speculated that Disney's stock didn't take a bigger bruising because Wall Street had not given up hope that Jobs and Disney Chairman Michael Eisner could eventually come to terms."
Get a clue people. These two guys hate each other's guts, and, yes, they are willing to bet their respective companies' assets on an old-fashioned pissing contest.
Those of us on the Internet who chronicle the activities of Michael Eisner and the WDC have tried, for the past several years, to tell the world just how screwed up this relationship and other things inside the company really are. The Disney PR machine went out of its way to portray us as a bunch of crackpots and malcontents with too much time on our hands. When Roy Disney and Stanley Gold resigned from the board and pretty much confirmed what we have been reporting about the mismanagement of the WDC, they too were characterized by the company as being "disgruntled." Wall Street apparently chose to believe Disney.
The Disney/Pixar relationship has been in trouble for years. The first public sign of trouble came when Disney, at Eisner's behest, stood firm behind a clause in their agreement that allowed the Mouse House to exempt "Toy Story 2" from the five-picture deal it had with Pixar. At the time, it was widely reported by entertainment media sources that Pixar CEO Jobs was furious at Eisner for his intractability in this matter, especially in light of the fact that TS2 was the highest grossing animated release of 1999, bringing in $245 million in domestic box office alone.
Things just continued to go down hill from there. Jobs, ever the consummate visionary, has never been known to suffer fools gladly, least of all fools that share in the profit of his vision. In early 2002, while testifying before congress about the need to protect vulnerable entertainment companies, like Disney, from copyright infringement, Eisner accused "some" computer companies of "profiting from piracy."
"Rip. Mix. Burn." Eisner said was telling people "that they can create a theft if they buy this computer."
"Rip, Mix, Burn," was the catch phrase from Apple Computer's 2001, iPod ad campaign. Steve Jobs is, and was at that time, also the CEO of Apple Computer, Inc., and Mr. Eisner had just accused his counterpart at Pixar of being a pirate.
In an interview last fall in Rolling Stone magazine, Jobs said of Eisner's comments:
"The person who assailed us over it (Rip, Mix, Burn) was Michael Eisner. Because he didn't have any teenage kids living at home, and he didn't have any teenage kids working at Disney that he talked to, so he thought "rip" meant "rip off." And when somebody actually clued him in to what it meant, he did apologize."
Financial analysts appear to have taken this comment by Jobs as a way of saying he bore Eisner no ill will. Disney analysts chose to see this as Jobs way of saying Eisner was out of touch with the very youth market they both sell to.
If actions really do speak louder than words, some of Eisner's should have caused more than just a few Wall Street types to scratch their heads. A little over two years ago, Pixar Animation Studios Executive Vice President, Creative--and the man widely regarded as the imaginative genius behind Pixar's remarkable successes--John Lasseter was visiting Disneyland with his young son. The two Lasseters were given the red-carpet treatment and a fully guided tour of Walt Disney's original Magic Kingdom by none other than Michael Eisner himself. Six months later, Steve Jobs was seen wandering around Disneyland surrounded by a phalanx of Disneyland security guards and few Team Disney Anaheim managers.
Eisner's actions caused more than a few Disney observers to wonder out loud if the big cheese might not be courting Lasseter in an attempt to keep the cream without first having to buy the cow. In any event, the real slight to Jobs and Pixar came about a year later.
From the beginning of their relationship, Disney chose to release virtually all of its co-productions with Pixar in the fall during the holiday season. Due in part to the switch from a fall release schedule to a summer schedule, Pixar faced an extended period of time with no new product in the market. "Monsters, Inc." was released in the fall of 2001, and "Finding Nemo" wouldn't hit theatres until late spring 2003. During that extended absence from multiplexes, some interesting Pixar-related rumors began to circulate.
In a story dated October 24, 2002, "Is Disney trying to torpedo 'Nemo?'( PLEASE LINK TO THAT ARTICLE)," our own Jim Hill reported about the strange origins of a rumor from deep within Team Disney Burbank that was attempting to use the Internet to disparage the quality of the as yet unfinished "Finding Nemo." What was really interesting was how uniformly this rumor was made available to anyone with a website even slightly dedicated to movies or entertainment. Of course, the Internet also made it possible for anyone and everyone at Pixar to learn what was going on inside of and coming out of TDB.
More than Just Jobs
For weeks now, Roy Disney has been trying to educate the investment community about the value of nurturing and holding on to creative talent at a company whose greatest asset is the look of wonder and joy in a child's eyes. He knows that child and his or her family will continue to embrace all that the Disney company has to offer for years to come, as long as what the Disney company offers them is a truly an imaginative, magical experience.
Michael Eisner says that he too, like Roy Disney, believes in Disney Magic, Disney Quality, and Disney Imagination. For most of his career at the WDC, Wall Street seems to have believed him. The problem is that while Eisner can talk the talk, he cannot, or will not, walk the walk.
For all his willingness to stand up and fight when challenged, Michael Eisner is, ironically, a very risk-averse chief executive. Some of his greatest achievements have more to do with stifling competition than they do with imagination or creativity.
For example, Walt Disney wanted to use the vast expanse of Walt Disney World in Florida, to build EPCOT. No, not the combined Future World and World Showcase theme parks now known as EPCOT but, rather, an Experimental Prototype Community of Tomorrow. In other words, he continued to dream about new things and new challenges.
Michael Eisner looked at WDW and decided what it needed wasn't new ways of living but new ways to keep guests from leaving the grounds. To stem the flow of WDW visitors to Universal Studios Florida, he built Disney MGM Studios. With little initially invested in new attractions and an emphasis on shopping and dining, the new park failed to live up to expectations. Almost immediately it required an infusion of capital for new rides and attractions to increase its appeal to guests.
To stem the flow of WDW visitors to Sea World Orlando and Busch Gardens Tampa, he built Disney's Animal Kingdom. With little initially invested in new attractions and an emphasis on shopping and dining, the new park failed to live up to expectations. Almost immediately it required an infusion of capital for new rides and attractions to increase its appeal to guests.
In an attempt to increase the number of days guests stayed at the Disneyland Resorts in Paris and Southern California, he built Walt Disney Studios Park Paris and Disney's California Adventure. With little initially invested in new attractions and an emphasis on shopping and dining the new parks ... Well, you get the picture.
In some parts of the company, Eisner has been very lucky and his lack of vision has managed to pay off. In 2000, he appointed Nina Jacobson as President of Buena Vista Motion Pictures Group, in charge of picking all the live-action films produced by the WDC. To date, she has a very impressive record, including last year's second highest grossing film, "Pirates of The Caribbean: The Curse of the Black Pearl." The highest grossing film of the year was Pixar and Disney's "Finding Nemo."
In a recent interview with the Los Angeles Times, Ms. Jacobson said Eisner inspired her during a luncheon meeting when he told her:
"I would rather you go with your own gut... and you pass on something that someone else makes into a success than to have you trying to put a slate together by guessing what other people want."
That advice may have served Ms. Jacobson well; however, it has cost Disney not only several successful films but denied them something Eisner has lusted after for years, a long-term feature film franchise.
Through its wholly owned subsidiary, Miramax, Disney had the opportunity to produce Peter Jackson's "The Lord of The Rings." True, hindsight is 20-20, and at the time Jackson was pitching the idea to bring J.R.R. Tolkien's epic work to the screen, his was not the most recognized name in Hollywood directorial circles. Nevertheless, his presentation convinced one of the most successful names in independent film production, Harvey Weinstein, co-chairman of Miramax, that the time and technology had arrived to bring "Rings" to the big screen.
Weinstein understood that to bring Tolkien's trilogy to the screen it would require an equal number of films. And, that even by shooting all three films as one in Jackson's native New Zealand, "Rings" would still cost more than Miramax could commit under Disney's operating rules. He tried but was unable to get Disney to either make the film or authorize Miramax to fund the project. "Rings" was eventually made by New Line Cinema, a division of then AOL Time Warner.
In the late 90s, "The Lord of The Rings" may still have been a high risk proposition for any studio to undertake; however, bringing author J. K. Rowling's "Harry Potter And The Sorcerer's Stone" to the screen was a different matter altogether. The tale of Rowling's young wizard and his adventures at Hogwarts School of Witchcraft and Wizardry had broken all sales records for children's books, and had even become a best seller among adults. There was a huge worldwide audience built in for the first film. Even so, Eisner passed saying that the price sought by Rowling's representatives was just too high. And, once again, Time Warner through its Warner Brothers film studio brought Harry Potter to the screen.
The point here is that both of these film franchises, "The Lord of The Rings" and "Harry Potter," required taking a risk. Executives at New Line Cinema and Warner Brothers took a chance on the creative vision of others, and the return on those investments is now in the billions of dollars. And while Time Warner was risking millions to reap billions on these films, what epic drama did Michael Eisner greenlight? "Pearl Harbor."
To understand how the WDC has gotten to the point where it will go with its gut, pass on creativity and imagination, and produce a "Pearl Harbor" instead of "The Lord of The Rings" or "Harry Potter and The Sorcerer's Stone," you need to go back to Steve Jobs story about Michael Eisner's "Rip, Mix, Burn" remarks. Jobs said because Eisner, "didn't have any teenage kids living at home, and he didn't have any teenage kids working at Disney that he talked to... he thought "rip" meant "rip off."
Eisner came from a world where the events of December 7, 1941 were, and still are, very real to the people he associates with. Hobbits, wizards, warriors, mythical beasts, and muggles have no meaning whatsoever to him. He has no frame of reference for the type of fantasy that ignites young minds, and trusts only that which he knows.
This is what Disney watchers and critics have been trying to make the investment community understand for years. You've got a guy with little to no imagination running what is supposed to be the greatest dream factory in the world.
As I said to Mike in my last week's column, this is just an overview of why I think you should advise your clients to join Roy Disney in his call to vote NO on returning Eisner, Mitchell, Estrin and Bryson to the WDC board of directors. I am available for further consultation, and my rates are very reasonable. Call me. We'll talk.
C'ya real soon!
C.W. (Chuck) Oberleitner is the owner of dbit Consulting, a business development and IT consulting firm in Los Angeles, California -- http://dbitconsult.com/. At least that's what it says on his business cards. When not advising clients or taping out his occasional series of columns for JimHillMedia.com, he can be found doing his impersonation of Jimmy Olson at media events around Southern California.
