Last Days

Is Eisner's number up?

Thursday, March 11, 2004

There have been plenty of important numbers in Disney history. 3 (little pigs). 7 (dwarfs). 101 (Dalmatians). And now 43.

Few figures will prove as significant in company lore as the 43 percent of Disney shares that last week were voted against Michael Eisner's reelection to the board. (A confirmed final count will be announced later this week, although a Disney spokeswoman expected the preliminary numbers to be “extremely close.”)

The board's only official reaction was to “accept” Eisner's “resignation” as chairman, while he continued as Chief Executive Officer. Although the separation of duties will appease several large institutional investors, it won't be enough to pacify his most vocal critics. The board may have bought itself a little time, but clearly it looks like Eisner's days are numbered.

Let me count the ways…

24 (The percentage of shares withheld against new chairman George Mitchell.)

Despite faring markedly better than Eisner, Mitchell still received his own eye-opening stamp of disapproval. For that, he earned a promotion. Not so coincidentally, Mitchell is one of Eisner's closest allies and biggest boosters on the board.

There's only one way Mitchell can now be seen as attentive to the shareholders. That's if he put friendship aside and kept Eisner on as CEO temporarily, to maintain stability in the face of the Comcast bid, and took on the chairmanship so the board would be free to spend the next few months recruiting a permanent successor.

No matter. From here on, Mitchell has to be careful not looking too much like Eisner's cheerleader.

51 (The percentage of shares actually voted that went against Eisner.)

When the preliminary vote was announced, I expected Eisner to spin the results by emphasizing how many more shares supported him than went against him. But as it turned out, the only way Eisner could claim a majority of support was if he counted the roughly one-seventh of shares that were not cast as votes of confidence. As far as those who actually cared enough to vote, a majority want Eisner gone.

24.08 (The per-share price of Disney stock the day before Comcast's bid inflated it by nearly $4 a share.)

Assuming Disney continues to ignore Comcast's overtures, Eisner must find a way to keep the stock above this level. The more Disney's stock price slips, the better Comcast's offer appears, and the greater the pressure becomes that Eisner be canned or the company be sold (after which Eisner will be canned).

4 (The standing of ABC among television networks.)

From the day the company acquired it, Eisner's albatross has been a drag on earnings. Each year, its few modest hits are overshadowed by a pack of dogs, and the ratings miraculously find a way to sink even further.

Yet this fall, Disney may have an opportunity unlike any it has had since acquiring Capital Cities/ABC in 1995. With competing networks losing some of their long-running, top-rated series, such as Friends, Frasier and possibly Everybody Loves Raymond, viewers may be more willing to give a new show a peek. ABC must fill the gap. It's now or never.

Judging from ABC's track record under Disney, it's never. My advice: unload the networks on Comcast, whose bid was partially motivated to control costs of airing ESPN.

50 (The anniversary of Disneyland, to be celebrated in 2005.)

Disneyland's Golden Anniversary should be arguably the biggest, most marketing-friendly milestone in the history of the theme park industry. Ideally, the promotion should begin this fall, last into 2006, and showcase the original Kingdom at its brightest and shiniest, playing up both the new and the nostalgic. During the rest of his contract, Eisner has no greater opportunity to generate favorable press, fistfuls of cash, and smiling, forgiving fans.

Unfortunately, decayed infrastructure and delayed decision-making may leave us all dismayed. Eisner's become conditioned to viciously control costs, but if Disneyland's budgets and creativity are cut too short, the CEO will pay the price.

30 (The percentage growth in earnings promised by Eisner for 2004.)

Over the last few years, Eisner has made some daring projections that have failed to materialize. But this is one promise no one will forget and will certainly be a topic of conversation at next year's shareholders meeting.

12 (Months until the next annual shareholders meeting.)

The only way Eisner survives past next year's annual shareholders lynching is by delivering three things noticeably absent for years:

• Concrete proof that 2004 was an unparalleled financial and creative success;
• Believable promises that the following year will be even better, based on current trends and exciting projects in the pipeline,
• And an appearance that generates cheers not jeers. Now that he's been stripped of some of his power, Eisner can no longer survive as the Hated Tyrant.

Take a deep breath, the Third Act has begun.

Thoughts, questions, or comments? Contact David here.

David Koenig is the senior editor of the 80-year-old business journal, The Merchant Magazine.

After receiving his degree in journalism from California State University, Fullerton (aka Cal State Disneyland), he began years of research for his first book, Mouse Tales: A Behind-the-Ears Look at Disneyland (1994), which he followed with Mouse Under Glass: Secrets of Disney Animation & Theme Parks (1997, revised 2001) and More Mouse Tales: A Closer Peek Backstage at Disneyland (1999); all titles published by Bonaventure Press.

He lives in Aliso Viejo, California, with his lovely wife, Laura, their wonderful son, Zachary, and their adorable daughter, Rebecca.

You can contact David here.

Click here to go to David's main page for a list of archived articles.

Visit MouseShoppe to purchase copies of David's books. (Clicking on the link opens a new window.)

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