The Walt Disney Company

A look into Madam Leota's crystal ball for what might be next

Wednesday, March 17, 2004
by Mark Goldhaber, staff writer

There are many questions still to be answered about the current situation at the Walt Disney Company. I'm going to do a bit of speculation in this column, and put forth some scenarios that may—and in some cases, probably—not have any basis in fact. If someone with actual knowledge would give me correct information, I would be grateful.

One thing to bear in mind as we go through this is that while this is a story of the battle over “saving” a decaying American icon, it is also a story of a business. As Roy Disney remarked at the shareholder meeting, “Whatever else it may be, it is always… a business that needs to be run on a sound basis by people who are sensible, as well as sensitive.” And this is a business story on an global scale. The high finance markets are watching this situation closely. Billions of dollars are at stake here.

While Roy is portraying the situation as him and Stan trying to save the family business from the hands of those who would destroy it, remember that he's also a businessman trying to take control of one of his multi-million dollar investments. And, in the interest of full disclosure, I voted my shares of Disney stock with the Save Disney campaign.

Taking the big man down

What will happen next in the fight to remove Michael Eisner? Despite the protestations of those involved, how truly personal is this fight? Will the board negotiate with Roy and Stan, do something stupid just to spite them, or agree to the Comcast buyout just to avoid having to find a new Chairman and CEO? Of course, Comcast is no prize when it comes to governance issues, either.

Diane Disney Miller, Walt's sole surviving daughter, has come out and said that it is time for Michael to go. She also took Roy to task for his “vicious and personal” campaign to remove him. She said that the timing and approach put the company in jeopardy from the Comcast bid. I'm not sure how much animosity remains from Roy's ouster of her husband, Ron Miller, from the CEO position 20 years ago, but I don't believe that there's been much communication between the two sides of the family since then, so at least there are not exceedingly warm feelings there.

However, with the children of both Walt and Roy O. Disney pushing for his removal, don't you think that the board would consider that a big strike against him? Or do they all buy into the “that's the old company, and this is a different company, run in a different way” mentality? If they do, then the company is doomed to lose the magic, for the magic was in the way that things were done before.

Then what?

Which of Roy and Stan's “array of strategies” for continuing the fight to oust Eisner will they employ? Since they haven't revealed any of them, other than the “write the board and tell them to kick Michael out” initiative currently underway at SaveDisney.com, we can't really guess there. (I do find it interesting, though, that the initiative either crashed Michael's e-mail account or caused Disney to close it, due to the volume.) Will they attempt a consent solicitation, to force an interim shareholder vote specifically to propose an alternate slate of candidates? With the long odds against this succeeding, it is doubtful that they will try this one. While many thousands of people were willing to make a protest vote to show displeasure, it is unclear whether a large percentage of them would vote for an immediate removal, and there needs to be a clear majority vote of all outstanding shares (not just of those shares voted) for the consent solicitation to succeed.

Can Roy and Stan take control of the board again without the consent solicitation? Good question. If the board is as loyal to Michael as they make it out to be, it will be a tough row to hoe. They will need to put fear into the hearts of the board members—either that they will lose their seats to a new slate in next year's elections, or that they will be named in a lawsuit for not conscientiously doing their duty as board members, similar to the suit now pending related to the Michael Ovitz matter.

If Roy and Stan can get the board on their side and they exercise control over the direction of the company, what will they do with it? Will Roy put his son Patrick on the board to ensure continued family input, as he attempted to do years ago? What changes might they make to the current business structure? While Stan dismissed as premature my question at the press conference about the possibility of spinning off the networks group and selling them to Comcast to get rid of them while letting Disney concentrate on what they do best, was Roy's little smile in my direction indicative of anything? [Roy, if you're reading this and would like to talk—on or off the record—please contact me.]

Who will be the chosen one?

Whose names are on Roy and Stan's “short list of 5 to 10 candidates"? News Corp's Peter Chernin has rejected speculation that he might succeed Michael Eisner, saying that he's very happy where he is, and that he's optimistic that his current contract renegotiation will be completed soon. So who else? Jeffrey Katzenberg's name has been mentioned in the fan community, but I think that there's enough bad blood on each side that it will never happen. Besides, he appears to be quite happy at DreamWorks, thank you very much.

Two interesting two-man combinations have been mentioned: Apple CEO/Pixar CEO and Chairman Steve Jobs and Pixar Executive Vice President John Lasseter coming over from Pixar, merging the companies at the same time. This is very interesting speculation, but I'm not sure that Jobs could handle running both Disney and Apple at the same time, and I think that Apple is too close to his heart for him to give that up.

The other, more intriguing team is Comcast President Steve Burke and John Lasseter. Burke brings a wealth of Disney operational knowledge, having been successful in several business units of the company, while Lasseter brings a great deal of creativity and new ideas. This one could have a great deal of merit. However, we will have no idea how this turns out for a while, until Eisner is removed.

Whither Comcast?

And what is going on with the Comcast bid? Comcast has repeatedly said that it believes that its original offer for Disney was a fair one, and that it will not overpay for Disney. It has said that it is willing to walk away if the price is not right. In fact, many analysts are predicting just that. However, it has not pulled the offer off of the table, and is remaining very quiet lately.

So what's really going on here? Here's some long-ball speculation, guaranteed to have no basis in fact. Imagine this scenario: Michael Eisner, fearing removal from his position by angry shareholders, thinks, “What could possibly make people more scared to remove me than to keep me? How about if the company were under attack? Yeah, that could do it!” Michael calls Comcast CEO Brian Roberts on the phone. “Brian, I'd like to offer you a deal. You want a cheaper price on ESPN, and I need a favor. If you make a buyout offer for Disney, not good enough that shareholders will jump at the chance, but enough that it will make people afraid that an empty CEO chair will cause the Walt Disney Company to lose its independence, that will be enough to keep me in my job. Once the heat is off, we sign a new sweetheart deal for you to get ESPN at rock-bottom prices. What do you think?”

Disney has already made lower-than-expected renewal deals for ESPN with Cox and Charter Communications cable systems, so an argument could be made that an even lower deal with Comcast, ostensibly to get them to cancel the buyout deal, wouldn't be as much of a shock. I have no inside information, but this scenario occurred to me in the weeks leading up to the shareholder meeting, and it has been increasingly bouncing around in my brain. We'll have to wait and see, though I would think that the SEC would be interested if there's actually some truth to this wild guess.

Subject-matter expert Internet media become legitimate

Round-trip miles to Philadelphia: 561
Hours away from home: 40
Pages filled in my reporter's notebook: 21
News articles written: 2
Reporting on the events in Philadelphia for MousePlanet as part of the official press: Priceless

Another story also emerged in Philadelphia. It's amazing the role that the online media is playing in this whole process, from Roy and Stan using the Internet and posting links to online media stories on their Web site (including a couple of my stories, I must note—yay me) to many of those in the online media getting interviewed for TV—me with the BBC; Jim Hill with Reuters, CNN, CNBC, and seemingly everybody else in creation; and Benji Breitbart from LaughingPlace getting interviewed (I didn't notice who with); it was like the media circus was feeding on its own. Everybody wanted to get good information, they realized that some of the best inside information on the company were from the people who dedicate their time to covering the company, and they just happen to be use the Internet as the primary communication medium.

And yet at the same time, the whole experience was a bit overwhelming. I mean, here I am, little old me, reporting for MousePlanet, and here's a phone call from the BBC wanting to interview me on air and wanting to track me through the various events in Philadelphia. And they do shots of me walking down the street to get through the long lines, and they film me going up the escalator to the convention center into the annual shareholder meeting, and they interview me on various topics over two days for TV and radio. I mean, this is the BBC! And I'm just little schlubby old me!

Thanks to all of you

Another thing that was exceptionally cool was meeting all of the MousePlanet readers at the events surrounding the Save Disney rally and the shareholder meeting. It was really great to meet all of the folks from Georgia, Michigan, Pennsylvania, New Jersey, and the rest of the country who came to Philadelphia. I got a chance to say hello to people that I don't know who actually read things that I write. This Internet thing is really, really cool.

I've really got to thank all of the people at MousePlanet who agreed to let me join their merry band, and for doing such a wonderful job here on the site in keeping this such a professional operation. It's really a pleasure to be able to work with all of these people and have so much fun while doing it. OK, so we're not getting rich with this gig yet, but—heck—sometimes I wonder, between getting press credentials for the Save Disney events and the Disney annual meeting, and helping George McGinnis to bring his Imagineering stories to the Internet, I don't even need to get a 401K for this. Not that I'd mind rolling in dough with this job, but this is just so darned much fun. And getting feedback from people who actually read the stuff that I write helps to make those long hours doing research that much less tedious. This is some cool stuff, folks. So thank you to all of you MousePlanet readers, especially to those of you who write back and let us know how we're doing. It's a pleasure doing this for you.

Oh, and I'll be at Walt Disney World celebrating a milestone birthday with some friends from April 30 through May 3, so if you see a short, fat, bearded guy with glasses wearing a MousePlanet golf shirt, be sure to say “hi”—I'll be giving out MousePlanet buttons to readers (while supplies last).

Thoughts, questions, or comments? Contact Mark here.

This column represents the personal opinions of Mark Goldhaber, and does not necessarily represent any positions taken by MousePlanet, Inc.

Mark is a veteran of many trips to Walt Disney World starting in 1972, with a few Disneyland trips also under his belt. He is also a Disney stockholder and a Disney Vacation Club member who collects Disney sericels, books, clothing, and just about any other thing with The Mouse on it that he can lay his hands on.

Between visiting WDW, planning trips for himself and others, fantasizing about trips to WDW, and reading everything he can about Walt Disney and his legacy, there's not much time left for anything other than family time, but he's perfectly happy with that.

Mark is a computer geek working for the State of New York. He lives in the suburbs outside Albany, New York, with his wife and son.

Click here to contact Mark.

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