Storming the Magic Kingdom

[jfinke]

I just started reading this. I am through chapter 5.

How accurate is this book?

Thanks!

 

[Another Voice]

Very accurate. It's by far the best history of that period inside Disney.

 

[jfinke]

Well, that is interesting. Walt was a real ****. I knew that he was not who he presented to the public, but the whole concept of a merchandising company which just collected royalties was a huge slap in the face to Roy.

It does certainly show business in a different era. When your own board is intimidated by Wall St. Everyone has business degrees these days if not MBAs. Heck, I have an MBA and I am certainly not running a company. Then you have a dropout of USC who got the position through nepotism. Crazy stuff.

 

[Another Voice]

I assume the "merchandise" company you're talking about is RETLAW. It's a lot more complicant than your reaction implies. There's no doubt that the brothers didn't much care for each other, RETLAW was Walt's way of protecting his family and making sure they had an income. Remember, Walt himself had no title at Walt Disney Productions and he was only a small stockholder. That and since Roy had blocked Walt's efforts to create Disneyland, Walt had to get creative about financing. I think we can all agree that Walt's moves (including WED Enterprises) made Disney a much better company.

Hollywood can't have MBAs leading studios. MBAs can't make movies, studios have to be run by people who understand what the public wants beforethe knows itself. MBAs are only good for counting coins after the real works has been accomplished. Does Lassiter have an MBA? Does Spielberg have an MBA? Entertainment is not like making widgets, B-school doesn't work here (witness the fates of Sony, Coca-Cola, and all the other Titans of Business that have bought into this town).

As for neoptism - ya, the Idiot Nephew sure sure found a nice shallow spot in the gene pool.

 

[jfinke]

Well, the book made RETLAW out to be solely for Walt's family and nothing for Roy's family. Still seems like a bad move on a brother.

No disagreement on the MBAs. Just discussing the difference in approaching a business 30 years ago vs. today. I will be the first to say that experience trumps a lot of degrees. But, that is also successful experience. CEOs like professional coaches seem to run in good old boys networks. Once you are in, you are in, no matter how bad you are.

I was referring to Walt's Son in law, Ronald Miller and Diane Disney. On page 18, it states that they both dropped out of USC. I would have thought that Walt's demand for perfection would have been disappointed in not finishing what you started. But, I know jack about hollywood, so....

I do work in the technology industry where the richest and brightest have often dropped out of school. But, that is usually to start their own gig. Not hang around and sees what happens. The book makes it sound like Walt really had to push Miller and after Walt died, Miller was kind of lost.

I am only through chapter 6 now, so I don't know how the idiot nephew turns out. I know he is still making waves. Or was at least in 2005.

 

[Another Voice]

RETLAW was only for Walt's family and the bitterness of that drives a lot of what happens next. In fact, feud between the two halves of the family continues to this day even though RETLAW is long gone. I don't know if I'd fault Walt too much for what he did - the only assests of RETLAW was Walt's image and ownership of the monorails & steam trains at Disneyland (remember, Walt had set-up WED Enterprises from his own money to create Disneyland and it was completelty outside of Walt Disney Productions). Considering that Walt had taken all the financial risk of Disneyland personally, while Roy just kind of sneered at from the sidelines, I can see why Walt thought he ought to get a slice of his own pie.

Ron Miller is an interesting personality. Both he and Roy O. were caght up in the family feuds and both had pressure placed on them that they weren't fully up to. Walt seems to have been looking for an heir, and he wasn't presented with a lot of strong options. Walt's death was very sudden and very unexpected and came just as he had committed to company to its (and the country's) biggest private enterprise - Disney World and E.P.C.O.T. As I think you'll see in the rest of the book, everyone inside Disney was lost, it wasn't just Ron. But of all the characters, he was really the only one that eventually "got it" before the storm hit.

 

[jfinke]

Well, I may be getting ahead of myself in the book, or maybe it doesn't cover it since it looks more like the 80s are covered.

Did Walt Disney Production purchase RETLAW, WED, and the rest of Walt's assets then?

 

[Another Voice]

It's been a while since I read the book, but it really does focus on the early to mid-eighties "green mail" plots against Disney and Roy O.'s takeover.

There's a good chunk missing because right before that was an interesting period where they tried to rebuild the studio with The Black Hole, Something Wicked This Way Comes and of course Tron. Then there was the entire Don Bluth and The Black Calduron mess inside Animation and the huge battles over the building of EPCOT and the expansion of Walt Disney World.

The name rights and the Disneyland holdings were sold in 1982, I don't remember if that's part of the book. The Disney family held on to the company's other assest (including about a dozen television stations and some oil property - the management of RETLAW was pretty damn good), but that was sold off in the mid-1990's to an outside company. There are still some bits of RETLAW left that are controlled by Diane Disney Miller.

I think that WED Enterprises was sold by Walt Disney to Walt Disney Productions shortly after the 1964 World's Fair had run its course. Somehow I think WED was also tied up in the 'Project X' deals that were being set-up for what became WDW. I don't have any documentation with me, but I'm pretty sure WED became part of Disney before Walt's death.

 

[jfinke]

That makes sense. After DL became a big hit to consolidate the branding and people.

Is there a breakdown of WD's income sheet? I had heard rumors, probably on this board, that WDW was basically supporting the empire. Any way to track that down? Google's income statement does not have that type of details. It would be ironic that the theme parks are supporting the rest of Disney.

Well, I loved Tron, as campy as it is. But, I am a computer guy. They actually took risks with that one. As much as I like Chronicles of Prydain, The Black Cauldron is a love hate movie for me.

 

[Another Voice]

I think the sale of RETLAW and WED happened because it took a decade for Walt to build up enough trust in Roy that he wasn't going to screw things up.

Disney only breaks their financials down by major business units. The closest to WDW you can get is the 'Theme Parks and Resorts' segment. Then all those numbers are blended in with Disneyland, royalites from Tokyo and the whole mess from Paris.

All of Disney's business units are very unique and it's difficult, just by looking at the numbers provided by Disney, to do a lot of real analysis. The one key fact to remember is that Disney's park operations are essentially 100% cash - people buy their tickets and pay for their hotel rooms all with pure, cool, smooth coin.

Compare that with capital intensive businesses film & television where I need to drop $300 million today to make Pirates Part 3374 and wait through two years of production and post before I can start to make a dime back. And factor in all the flicks like Underdog - rule of thumb in Hollywood is that only 1 in ten movies make back their costs. And even then throw in the cost for Hanna's stint in rehab and other "Hollywood expenses" and it's pretty easy to see which division is the ATM. Then, of course, there are the five billion dollars paid up front to the NBA but that gets amortized and other accounting goodies.

For the most part, the parks have always provided a more stable cash flow than the movie has. Flicks are hit or miss, but theme attendance is a lot steadier given the level of quality has. Disney of old would use profits from hit movies to expand the parks so that the higher cash flows from the parks could fund future movies. 20,000 Leagues and Davy Crocket paid for a lot of Disneyland, which then financed Mary Poppins who profits went into 'Pirates of the Caribbean', 'The Haunted Mansion' and Tomorrowland 1967 that caused a surge in attendance allowing the studio to make The Jungle Book and The Love Bug that generated the cash to start Walt Disney World, etc.


It's funny that Disney has been straining to come up with a "franchise". Yet mention Tron to anyone in town and their eyes light up. That flop of a movie has acheived a cult status - but since it was made by "the Dead Guy's people" no one dare bring it up to Eisner. There is some movment now with Tr2n but there's still no script and just hope. Personally, a great kick-rear sequel to Tron would be an huge event movie on the scale of Batman...if Disney makes a good movie.

 

[jfinke]

Thanks for the insight. It is all pretty interesting as I have zero experience with Hollywood.

I thought that Tr2n was further along than that. Oh well. I would certainly go see that over PoC4. Of course, now I look, it seems that WarGames2 went direct to DVD, so who knows what will happen.

So, where does all of the money come from in HW? If only 1 out of 10 movies actually turn a profit, that means that that one movie has to support the production and distribution of the other nine + profit, correct?

 

[doconeill]

So, where does all of the money come from in HW? If only 1 out of 10 movies actually turn a profit, that means that that one movie has to support the production and distribution of the other nine + profit, correct?

I don't even think the ratio is that high.

You see, Hollywood studios (not Hollywood Studios ) have an accounting system that has resulted in a number of lawsuits, although I don't believe any of them have been fully resolved without being settled.

Ask anyone in Hollywood who has "interest on net profits" on any production, and they will tell you that they never expect to ever see a dime on that clause - because it will never make a profit. Even if it grosses $500 million on a $100 million budget, it won't make a profit.

To paraphrase something J. Michael Straczynski (the writer of the upcoming "The Changeling") said in the past, if a movie set in some third world country burned down for some completely unrelated production, the net income from another production can be written off to cover the costs.

 

[jfinke]

Yeah, I didn't even want to touch on hollywood accounting practices on how every movie breaks even.

But, at some point, they have to be making money or they would all be out of business. Maybe we could get reality movies at that point?

 

[YoHo]

Let's put it this way. At World's End made over $1 BILLION in revenue. Disney has not seen a dime of profit from that.
Production+advertising+Johnny's "personal snacks" are rumored to have cost on the order of $500,000 though of course that's not what is reported.

The theaters get a cut, Depp gets a cut, Bruckheimer gets a cut, Verbinski gets a cut and on and on and on.

Hollywood is all about making people rich, not companies.

As for how they can operate?
Well, Disney owns a Themepark, NBC/Universal makes lightbulbs, Ultrasound machines and Locomotives (GE), Time Warner has Cable. Sony....is Sony.

At another time, in another place, I heard AV describe Hollywood as a billion dollar small business and that's about right. If Disney's theme park numbers take a big enough hit, they are screwed. Warner is precarious too. GE, much like Toyota embraced green technology. They'll be making locomotives and windmills forever and can bankroll stuff.

Sony better hope Blu-Ray adoption and PS3 sales pick up or the former Columbia/Tristar will be in trouble.

 

[Another Voice]

If only 1 out of 10 movies actually turn a profit, that means that that one movie has to support the production and distribution of the other nine + profit, correct?

The old saying around town is that once you begin to see how Hollywood works, you no longer how ask how the studios can turn out so many bad money losing movies. Instead the question becomes how do any good movies get made at all.

Yes, that's still about right. Thanks to home video the "one in ten" hit makes a lot more money than "hits" in the past used to, but the overall increase in costs have offset all those new found revenue streams. Occansionally you see where someone has written that "new media" has made it so that no movie every looses money. That's pretty much a lie, designed to increase shareprices and sell studio junk bonds. No one disprove it thanks to Hollywood accounting, so no one fears being caught. Besides, so many people along the way do make money that, on the surface, it seems plausable.


Hollywood accounting is...is anyone familiar with the works of H.P. Lovecraft? The characters in his horror stories, the more they learn of ancient lore the more they are driven insane for sheer evil of what they know.


Movies are a unique business in that they rely exclusively on the talents of individuals to create a sellable product. People go to see "a Tom Cruise movie"; no one goes out to buy a "tire engineered by Herman Nurcle, occupant of cube 118836 in some glass tower in Detroit". A corporation makes and sells the products and, for the most part, the people of the corporation are the most replaceable parts of the operation. The corporation has all the power.

But Hollywood knows that stars - actors, directors, producers - drive the entire industry. You can't 'engineer' a profitable movie like you can engineer a refrigerator or other consumer product. Movie making is an art form that requires the work of artists to create (or at least to make a semi-okay movie). People in town know that. And they sell their talent for the highest price possible.

The entire money chain is designed to funnel money to people instead of to corporations. The guilds have a large part in this as well. So the studios developed elaborate schemes to hide the money. These schemes have been found out so that more money would flow to individuals, creating new and more complex schemes...it's an arms race.

Worse, the corporations themselves are in on the act. Remember Jeffrey Katzenberg's clause that let him, personally, collect money from all the movies he oversaw while he was working for Disney. All that money came out of the corporate ledgers and into his private bank account.

On a movie like Pirates of the Caribbean, deals are written so that individuals involved take a percentage cut of everything the movie brings in. Jerry Bruckheimer gets a Big %, Johnny Depp gets another Big %, the director gets a % and so on and so on down the line that the studios can be left with a fraction of the box office take. Studios take those small cuts because 20% of The Dark Knight's cut is still a lot of money.

It's an insane business - one of the reasons why the town has always been awash in scams and trickery. It's not a stable enough business to base a large corporation on and there are lots of shareholders who are going to discover that very shortly.

 

[jfinke]

Not to get too entirely off point, but I appreciate your information...

It seems it is also a pretty conservative / resistant to change industry as well.

Looking back at all of the lawsuits regarding video taping, etc. it seems pretty ironic that they were fighting something that would bring in so much more money.

Going back to Tron, I read somewhere that they were not nominated for special effects awards because they "cheated" by using computers. When in fact, they were ground breaking a new technique.

With all of the sequels and redos, etc. It seem like the name of the game is to find something that works and then ride it till it dies.

I compare two shows on NBC right now Chuck and Knight Rider. Chuck is a fresh, funny, campy show that does not take itself too seriously. Knight Rider on the other hand, is horribly written, has bad acting, and is not very good. The only way I can think of it being green lighted is the Knight Rider name.

Or all of the NCIS shows we have on tv. It is the same formula over and over.

 

[Another Voice]

Business Hollywood is so resistant to change for a simple reason – a lot of people are making a lot of money from how things work right now. No one wants to risk that. Look at how the most “progressive” bands were the ones that fought the hardest against downloadable music. Hollywood is also so hard to change because the active talent pool is so small. There’s really no effective “outside” to drive innovation – at least at the moment.

The real change in “new media” isn’t coming from big studio distribution (putting episodes of ‘Knight Rider’ on the Internet, Xbox and iPhones). The real change is coming in production. It is so easy and so inexpensive make professional quality product that the studios stranglehold on filmmaking is starting to crumble. We’re quickly approaching the era of garage-based studios; anyone with a $1,000 camera and $5,000 in PCs and software can make a flick that rivals giant Hollywood productions. The missing piece, however, is small time distribution – a way for an audience to pay to see the final product. Once that falls into place, Hollywood is going to shaken to its foundations.


Disney movies don’t do well at the Oscars, and movies that set the technology trend don’t do well either. The largest branch in the Academy is the actors and they, in a herd, don’t like to see anything that isn’t their face up on the screen. The Lord of the Rings was similarly punished even though those films will have the greatest impact on how movies are made than any movie for the last twenty-five years.

The average cost to make, market and distribute a typical summer Hollywood movie is now just about a third of a billion[/i] dollars. Some movies, like Superman Returns and PotC: At World’s End soar to half a billion dollars. With that amount of money on the line, all the studios have to minimize whatever risks they can. Having a “pre-sold” property that’s already been proven a success helps the suits sleep better at night. If ‘Knight Rider’ worked twenty years ago, it’s going to be popular now…won’t it?

This thinking has also infected Disney as well. The Studio is desperate to find “franchises” of “proven” properties that they can continue to make sequel after sequel after sequel. They don’t care if it’s Underdog or The Greatest American Hero or The Lone Ranger – being able to put up past earnings on a Power Point presentation is more important than saying “this is a great new idea that the public will love!”

 

[jfinke]

That is what I kind of figured.

The real change in “new media” isn’t coming from big studio distribution (putting episodes of ‘Knight Rider’ on the Internet, Xbox and iPhones). The real change is coming in production. It is so easy and so inexpensive make professional quality product that the studios stranglehold on filmmaking is starting to crumble. We’re quickly approaching the era of garage-based studios; anyone with a $1,000 camera and $5,000 in PCs and software can make a flick that rivals giant Hollywood productions. The missing piece, however, is small time distribution – a way for an audience to pay to see the final product. Once that falls into place, Hollywood is going to shaken to its foundations.

This is key here, I think. Already, a bunch of shows such as those on SciFi are getting moved to Canada for lower production purposes. And even then, they have canceled their most popular ones due to cost. Now they just picked up a show called Sanctuary which was originally shot for the web. Plus, it is all green screen, so there are no on site locations from what I understand.

 

[deej696]

I have really enjoyed this thread. AV you and I may not always agree here on the boards, but I always enjoy your posts, because I know of few other people that put the amount of detail as you do.

As far as Storming the Magic Kingdom, I am going to have to read this again I think. I read it back in the 90's sometime, but I was a teenager at the time and dont remember a whole lot. I do remember, mainly because it was in Disney War as well, that the RETLAW/WED thing was settled before Walt's death. I seem to remember the company paid around $50 million for the rights, but I could be wrong.

On the business of Hollywood. Earlier AV mentioned that Hollywood doesnt like change because this is how its always been done and they make a boatload of money at it. How does the current reality tv craze fit into that? It would seem to me that changing focus from sitcoms and dramas to The Real World Meets A Deserted Island is a pretty big change. Or is TV a different animal than movies?

So are you saying that I need to go buy Google stock, because when YouTube figures out how to make money distributing movies thats where the money's at?

 

[jfinke]

Google has just started showing full episodes of older shows such as Star Trek, 90210, and MacGyver.