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Alex Stroup, Editor

Michael's Legacy

Reflecting on the 21-year tenure of Disney's outgoing chief

Friday, September 30, 2005
by Mark Goldhaber, staff writer

Michael Eisner retires today after 21 years at the helm of the company, the second-longest serving chairman in the history of the Walt Disney Company (after Walt) and the second-longest serving chief executive officer in the company's history (after Roy O. Disney). That must mean that it's time for the obligatory look back at his lengthy tenure. While many Disney fans revile the man for some of the changes that he spearheaded over the last few years, they will usually acknowledge that his first ten years on the job were phenomenally productive for the company. Let's start back at the beginning.

In early 1984, Saul Steinberg and Irwin Jacobs both took shots at buying out Disney. Both wanted to break it up and sell off the pieces to the highest bidders. However, both of them were willing to accept greenmail, or to be bought out. The Bass family (Perry, and his sons Sid, Lee, Robert and Edward) were willing to be “white knights,” and had the money to do so. After some persuasion by Roy Disney, Stanley Gold and Eisner himself, the Basses agreed to champion the appointment of Michael Eisner as Chairman and CEO, and Wells as President and Chief Operating Officer. This displaced Ron Miller, Walt Disney's son-in-law, who then left the company completely and focused on Silverado Vineyards (link), which he and his wife, Diane Disney Miller, had already been running for three years, and began a long-running rift between the “Walt” and “Roy” sides of the family.

But for 10 years, things were rosy for the company. Eisner had a number of successes early in his tenure, including some with projects that had been begun by Miller, such as Touchstone Pictures and the Disney Channel.


Michael Eisner poses with Mickey Mouse and former ally Roy E. Disney at the dedication of the “Time Castle” in honor of Disneyland's 40th birthday in 1995. Photo by Frank Anzalone.

In conjunction with Jeffrey Katzenberg, who followed Eisner from Paramount Pictures to Disney, Eisner decided to begin releasing Disney classics on video. This move was extremely controversial and is still debated in some fan forums, as—while it was a huge benefit—it also had the effect of removing the demand for the longstanding tradition of Disney films returning to the big screen every seven years. Of course, with the DVD market almost overshadowing the theatrical market these days, perhaps the latter argument loses some of its strength. Yet a counter-argument might also be made that the move also helped to create the huge home video market that eventually hurt the theatrical market in the first place.

Eisner and Katzenberg (at Roy Disney's urging) also helped to launch a second golden age of Disney animation. The Little Mermaid, Beauty and the Beast, Aladdin, and The Lion King were all released in that first decade.

Disney's live action films also began an upswing. By hiring stars whose careers had faded despite their talents and putting them in inexpensive yet well-told stories such as Down and Out in Beverly Hills, Ruthless People, and Three Men and a Baby, the company made huge profits. Many debate whether this was the beginning of Disney losing its identity. Walt Disney had lamented the fact that there were certain types of stories that he would not be able to tell because he was “Walt Disney.” By telling these stories under the Touchstone label, the company felt that it could tell the stories without diluting the Disney brand. The big question was whether the public at large would agree, and in the early years, it did.

Disney theme parks were also going strong. Eisner began a hotel construction boom at Walt Disney World with the Grand Floridian, Caribbean Beach, Yacht and Beach Clubs and the Swan and Dolphin Resorts, plus the addition of the Disney-MGM Studios, Typhoon Lagoon and Pleasure Island.


Michael Eisner and Mickey Mouse preside over the opening of Mickey's Toontown at Disneyland in 1993. Photo by Frank Anzalone.

But sometimes, Eisner made missteps, as well. Tokyo Disneyland had opened months before Eisner and Wells arrived. Feeding on the strong opening of that park, Eisner decided that Europe was the next area that was ripe for a Disney park. He began the search for a location, and Euro Disneyland eventually opened in 1992. Of course, overly optimistic projections and lack of consideration as to how Europeans approached their lodgings while on vacation led to a massive overbuilding of resort hotels. While the theme park did well right from the beginning, the resort property as a whole lost money right off the bat.

While this was going on, Michael Eisner was also trying to become versed on Disney lore—he had never seen a Disney film or gone to a Disney theme park until he joined the company. In some ways, this was a good thing, as he could bring in ideas that had not previously been considered. On the other hand, it made it much harder for him to filter out ideas that would dilute Disney's brand identity. Stories tell of how, after Eisner would go on about a new idea that he had, Frank Wells would have to tell him, “We can't do that, Michael—we're Disney.” But the team of Eisner and Wells worked well. Eisner did have many good ideas, and Wells kept him from going too far.


Michael Eisner (left) and Frank Wells (right) as a very successful team for the first 10 years of Eisner's tenure, until Wells' untimely death in a heli-skiing accident. Photo by Frank Anzalone.

Then, Wells died in a tragic helicopter accident, and Eisner lost the only man who could say no to him and make it stand. A few months later, Eisner had a heart attack and required a open heart bypass operation. No succession planning had been done for Wells or for Eisner. Nobody thought that it would be needed.

Jeffrey Katzenberg, at the time the head of Disney's studios operation, thought that he was next in line for Wells' job, and that he should be the designated successor for Eisner, based on his success at the studios. Eisner, however did not trust his loyal lieutenant, and eventually told him that he would not be part of the succession plan, leading Katzenberg to leave the company on unhappy terms.

Eisner's personality would not let him be perceived as anything except the winner—the most talented, the most intelligent, the most successful individual, and that competitiveness and lack of ability to compromise would drive away many valuable players over the years. The list almost reads like a who's who of Hollywood: Steven Spielberg (after Roger Rabbit), George Lucas (after the Indiana Jones attractions), Steve Jobs (during the term of the Pixar contract), and many others. And let's not forget all of those from inside Disney: Katzenberg, Joe Roth, Richard Frank, Paul Pressler (say what you will about his theme park talents, but the man was excellent at running Disney's retail operation), Meg Whitman, and more.


Michael Eisner completes a ride through at the launch of of the Indiana Jones Adventure at Disneyland (link) with George Lucas, one of the former business partners that Eisner caused massive friction with over the years. Photo by Frank Anzalone.

In the end, this was one of the areas that led to Eisner's downfall. His failure to come to terms with Jobs and Pixar on a new agreement was one of the points harped upon by many both inside and outside the company during Roy Disney's Save Disney campaign.

During the 11 years after Frank Wells' death, Eisner oversaw many changes to the company. Looking to control a distribution channel for the television programs produced by their studio, Disney purchased Capital Cities/ABC in 1995. [It was from this transaction that incoming CEO Robert Iger joined the company.] Disney continued to build hotels and theme parks. Disney launched a third movie brand, Hollywood Pictures, then merged it back into Touchstone. They also bought Miramax Films from Bob and Harvey Weinstein, two others who earlier this year finally left Disney after conflicts with Eisner.

In 2001, in another move that helped lead to Eisner's departure, Disney bought Fox Family Channel, with its library of films and TV shows, as well as its contract with Major League Baseball. That was just one of many decisions to backfire on Eisner that year. That January, Disney was forced to shut down its Go.com portal operation and write off a huge loss. In May, Disney's California Adventure theme park opened to tepid reviews and small crowds.

While it's an easy argument that Eisner has diluted the Disney brand and that the company no longer is true to its roots, it's also true that the entertainment industry has changed tremendously over the last 20 years, and there's a reasonable possibility that the company would not have survived the changes intact if it were not for Eisner.


Michael Eisner speaks at Disneyland's 50th birthday celebration on July 17, 2005. Photo by Frank Anzalone.

Let's look at some of the raw numbers of Eisner's tenure at the company: Market capitalization has increased from $2 billion to $58 billion. Revenues have increased from $1.5 billion to $30.8 billion, net income from $98 million to $2.3 billion. $100 in Disney stock purchased when Eisner took over would now be worth about $1,900 today.

The company bought (or created) two top-tier professional sports franchises, and later sold them. Disney now owns over a dozen book imprints and over a dozen magazines. The company launched a hugely successful retail operation, then ran it into the ground and eventually sold it off. Disney now owns five record labels and an interactive software division. They run over a dozen major Web sites.

The four theme parks have grown to 11, plus the two ships of the Disney Cruise Line. Company-owned hotel rooms have grown from 2,500 to 32,000. Disney now fully or partially owns dozens of broadcast and cable networks around the globe. The company has launched an extremely successful theatrical division. The film library has grown from 156 titles to over 900 titles. The animation studio expanded and produced new masterpieces, including the first-ever animated film nominated for an Academy Award Best Picture. Of course, the animation studio has since been severely cut back and retooled to work entirely with computer-generated animation.

But in his push to make the numbers look good for investors and financial advisors, Eisner may have done a great deal to the company's long-term outlook. There are many complaints that the studio's output, while more fiscally conservative, is also bringing in a lot fewer bucks at the box office. Walt Disney Imagineering, the division responsible for coming up with new ideas for the theme parks and for designing continuity and detail into them, has been decimated by layoffs to a perhaps unprecedented extent. The studio has turned its back on traditional animation, the area that it once dominated, after a few poorly performing films that were substantially altered from their original vision by marketing staff with no moviemaking experience.


Outgoing CEO Michael Eisner and incoming CEO Robert Iger pose with Mickey Mouse and Disneyland's new star at the Hollywood Walk of Fame at the July 15, 2005 dedication ceremony. Photo by Frank Anzalone.

Was Michael Eisner good or bad for the Walt Disney Company? The answer is yes, because he was both. He presided over tremendous expansion of Disney assets, but he also was a major contributor to the sacrifice of quality to profits and the dilution of the company's valuable brand. Whether the negative impact of these changes was a product of poor decision making on his part or of the change in how businesses are run in 21st Century America is an interesting subject for debate, as is the impact of Eisner's reign on the long-term outlook of the Walt Disney Company. Time will tell.


Thoughts, questions, or comments? Contact Mark here.


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