The Keys to the Kingdom (3 page)

Analysts were becoming increasingly skeptical about the business, but in April 2000, Eisner seemed to show his continued confidence by buying $1 million worth of the company's stock even as the price dropped. In September, Disney unveiled the redesign but the portal's fortunes did not improve. At year's end, the company's Internet group reported a loss of $249.4 million. Finally, Disney threw in the towel.

With the decision to fold Go. com, Disney took $790 million in noncash write offs and said it would incur as much as $50 million in expenses associated with closing the portal. Eisner said the company would focus on Web sites with powerful brands, such as ESPN.com and ABC.com, rather than trying to build a portal. “We were waiting for something at the end of the rainbow that was looking less and less worth waiting for,” he said.

With other companies like AOL Time Warner, Viacom, and Vivendi Universal on the playing field, some industry observers began to question the wisdom of Eisner's long-standing conservatism. To cite just one example, Disney had passed up a chance to buy Yahoo a few years earlier, when it was valued at $8 billion, because Eisner insisted on being given a discount to the market price. By 2001, Yahoo was valued at about $25 billion, while Eisner had pursued a fruitless strategy trying to home-grow an Internet unit.

And there were other areas in which Disney had decided against expansion through acquisitions. “Disney has to recognize that it's becoming a niche player,” analyst Christopher Dixon told the
Los Angeles Times
.

Eisner answered his critics in the company's annual report. “Companies often pay too much for other companies in search of a headline in the
Wall Street Journal
or because they are afraid to let cash burn a hole in their pockets,” he said. “We didn't want to fall into this trap.” Eisner also made it clear that expansion might not be worth pursuing if it were to be achieved the way Time Warner had done it when it had agreed to be acquired by the far smaller America Online for what seemed like rather overvalued stock. And as the new behemoths like AOL Time Warner and Vivendi Universal struggled to merge their cultures, it remained to be seen whether Eisner would stay on the sidelines and if so, whether that would turn out to have been the wiser course.

 

The Door Did Not Stop Revolving at Disney

Joe Roth quickly assembled significant financing for Revolution Studios, one of the few truly powerful independent companies to be founded in a time when money was becoming increasingly hard to find in the entertainment business. Eisner had predicted that he would vanish off the Hollywood radar as soon as he left Disney. It was with no small satisfaction, therefore, that Roth announced in February 2000 that the world's biggest female star, Julia Roberts, was abandoning an expiring deal with Disney to follow him to his new company. “Basically, wherever Joe goes, I go,” Roberts declared. Not only did she sign a multiyear deal with Roth, she asked him to direct her in a film. While Roth stepped behind the camera to direct
America's Sweethearts
, speculation continued that he would eventually become chairman of Sony's film studio. Roth also made a deal with Bruce Willis, who had starred in Disney's megahit
The Sixth Sense
.

Patrick Naughton, the Internet executive who was downloading images of child pornography on his computer and who arranged a rendezvous with an FBI agent masquerading as a thirteen-year-old girl, was convicted in March 2000 of crossing state lines to have sex with a minor. In an extraordinary arrangement with prosecutors, he escaped serving jail time because he developed several computer programs to help the FBI track down other sex offenders prowling the Internet. He was sentenced to nine months of home detention, five years of probation, and a $20,000 fine. He continued to deny that he was a sexual predator, but said, “[The] evidene being what it was, this is where we ended up.”

Judson Green, the chairman of the theme parks and a nineteen-year veteran at the company, resigned in April 2000. Green's division had shown the most consistent success during Disney's difficult years. But he had been eclipsed by rising executive Paul Pressler, who was named president of the theme-park division in 1998. And he was said to have become frustrated with Eisner, whom he considered to be impulsive and manipulative.

Sandy Litvack resigned in October 2000. Litvack had suffered some more high-profile losses in court before he departed. There was the litigation involving GoTo.com, and more. In April, a jury ruled that Disney had no right to deny $2.8 million in benefits to executive Robert Jahn, an executive
then dying of AIDS. Litvack testified in the trial that Jahn had admitted taking payoffs from vendors who made movie trailers and television ads for the studio. But the jury said Litvack should have gotten a signed confession. Jahn had died in May 1994.

And in August, a Florida jury socked Disney for $240 million, finding that the company stole the idea for Disney's Wide World of Sports complex near Orlando from a former baseball umpire and his partner, an architect. The two had shown Disney plans and a model of such an attraction in 1987. Disney had denied the allegation. Louis Meisinger, Disney's executive vice president and general counsel, said the sports complex was “independently created by Walt Disney employees” and that the verdict “was driven by [an] appeal to the jury's prejudices against corporations and business in general.” Disney is appealing the decision.

When Litvack resigned, it was not perceived to be as a result of any loss of confidence relating to these court cases. Rather, Litvack was said to have been restless for some time, while Eisner was believed to have prevailed on Litvack to stay until the company started showing some better results (as it did by October)—when the departure of yet another high-level executive might not alarm investors. Given Iger's ascent, there was no hope that Litvack might ever rise to second in command. And a Disney executive said Litvack had grown tired of the game. “Bob is the future; he's not,” that executive said. “Why fight it? It's a tough business and a tough company and you've got to be on your game every minute.”

In an interview at the time, Litvack reflected on his relationship with Eisner. “Michael can sit and create and react to creative thoughts in a nanosecond,” he said. “He's also charismatic—very charismatic…. Those are his skills. I am definitely more deliberative than Michael…. I brought a deliberate approach and I would restrain, at times, his impulses.”

Litvack also indulged in some musings over the Katzenberg trial. “I wish [that] had come out differently,” he said. “We all—certainly Disney and Michael, and Jeffrey to a lesser extent—sustained a lot of pain in that one…. I wish that damn thing had been handled by both sides quicker and easier and without the cost to everybody.”

But Litvack still didn't think Disney could have done anything different. “In my judgment—and I think it was a failure on both sides—the thing could not have been reasonably resolved…until we were able to make some headway in the trial,” he said. (In the second phase of a two-part trial,
Disney was able to chip away at some of Katzenberg's projections about the company's future profits. Those estimates were key to the amount of money that the former studio chief was owed.)

Pressed on the company's decision to go through a public and sometimes embarrassing trial despite an earlier agreement to pay Katzenberg a minimum of $117 million, Litvack said the decision was justified by circumstances that he declined to discuss in depth. “You can either believe that we are total fools, that the collective IQ is forty, or you can believe that there's something more that you're not seeing,” he insisted.

He declined to elaborate.

I
T MUST HAVE
been difficult, even frightening, for a poor little rich boy whose parents wanted so much for him and demanded so much from him. But a boy who had a lively imagination yet a very short attention span did not necessarily possess the qualities that ensure a brilliant academic career. And in fact, Michael Dammann Eisner had to get used to trying hard without always succeeding. The son of a wealthy New York family, he had grown up on Park Avenue, spending weekends in wealthy Bedford Hills at his maternal grandparents' estate.

The Eisners were wealthy but not extravagant, and Michael was inculcated with a sense of thrift bordering on cheapness. His mother constantly admonished him to turn out lights when he left a room. If the family went to dinner and Michael wanted a shrimp cocktail that wasn't included in the prix fixe menu, his father complained that this indulgence was “ridiculous and unnecessary.” Early on, Eisner was taught to believe that money was to be taken very seriously. The message that his father drilled into his head was that “you do not spend capital.”

For the first three years of Michael's life, his father, Lester, was away flying transport planes in the Second World War. Being the only boy (he had one older sister), Eisner was his mother's young prince and he learned that by being “clever and playful and likable” he could almost always have his way. To the young boy, Lester's return seemed a change for the worse. It wasn't a happy dynamic. A longtime Eisner associate says that his father was weak and vacillating with his wife, but self-righteous and overbearing with others, including his children. Relentlessly dissatisfied with them, Lester insisted that they call him by his first name. In his mother, Maggie, Michael had a powerful ally. Complain as Lester might, Maggie saw to it that her boy got to savor his a` la carte shrimp cocktail.

Eisner says his father was popular, charming, and funny—but also recalls
that his best friend, John Angelo, was “terrified of him.” An avid sportsman, Lester was highly competitive and demanded much of his children. When he took them galloping on cross-country rides every weekend, he hardly noticed that they were scared to death. Both children learned to hate and fear riding.

Michael's sister, Margot, liked to figure-skate. Lester pushed her hard and she became a capable little technician, laboring at her performances with such grim determination that she failed to win over the judges in competitions. Her brother knew better how to have his way. “Smile,” he told her. “Play the game.” It was a natural gift for Michael, but for Margot, it was not.

Michael attended the exclusive Allen-Stevenson School on East Seventy-eighth Street, a school known for its children's orchestra. (Eisner played glockenspiel.) He set out each morning dressed in a blue uniform with a blue cap. He was relatively happy there, not because of a love of learning, but because he was one of the best athletes in the relatively small school and got to be quarterback of the football team from the fourth through eighth grades. He found that he liked calling the plays. Academically, he never really distinguished himself—much to the unconcealed disappointment of his father. “I wanted to please him, and it was nearly impossible,” Eisner said later. The anxious and protective Maggie did her best for her son, even forging his homework for him when he fell behind.

Eisner portrays himself as an insatiably curious child whose father begged for relief from his incessant questions. He also saw himself as having had a fairly adventuresome youth. “‘Give me a subway station and I will go,' was my motto as I traveled to Yankee Stadium, to the Polo Grounds, to Madison Square Garden, and to the World's Fair,” he later remembered. Certainly, a genuine and enthusiastic curiosity was one of Eisner's most engaging traits. Even so, the disciplined attention needed to shine in school eluded him.

Lester was also perennially dissatisfied with Michael's standards of conduct. Lester held himself out as a rigidly moral man, but even as a child, Michael had learned to “play the angles,” as a boarding-school housemaster put it in a letter to his parents. Michael may not have been an academic star, but surely he learned some interesting lessons—maneuvering between a constantly discontented, stiff-necked father and an iron-willed mother who helped him cheat at his schoolwork. At some point, clearly, he concluded that his father's standards could not be met—and he didn't intend to try.
Later, Michael would see something of his father, with his strong professions of morality, in Frank Wells. If he saw hypocrisy in either man, Eisner never said so. But the similarity was such that Michael would acknowledge that Wells served as “a governor” to him when he was “tempted to push the boundaries just a little too far.”

 

AT DINNER IN
the family home, young Michael was expected to wear a tie and jacket. Similarly attired, he was dispatched to classes at the Viola Wolff dancing school with white-gloved little girls. His parents took him to concerts and Broadway shows starting at a tender age. A Picasso,
The Bullfight,
lent by an art-collector friend, hung on his bedroom wall. Television was restricted to an hour a day—and that only after two hours of reading. Michael broke the rule when his parents went out and gradually absorbed a dream of a humbler, happier life, informed by sitcoms of the fifties—
The Adventures of Ozzie and Harriet
and
Father Knows Best
. When his father returned home and found the television still warm, Michael faced his fury for trying to pull off the deception.

Of course, Eisner was a rich boy in Manhattan (and a Jew—if a highly assimilated one who enjoyed his share of unkosher shrimp). His life had little in common with the middle-class, middle Americans portrayed on television. But the Eisners were hardly living as extravagantly as the family's circumstances would have allowed. “Michael had a privileged but not indulged upper-middle-class urban upbringing,” says childhood friend Susan Baerwald. “It was not a lot of rich kids running around with expensive toys. Nobody had fancy cars or trappings of wealth.”

Summer vacations were spent near Lake Dunmore, Vermont, at Camp Keewaydin, the country's second oldest boys' camp but not an especially fashionable (or especially Jewish) establishment. “We lived in tents and had very poor facilities,” remembers one alumnus who had Eisner as a camp counselor in the early sixties. “There were bad fields and a pockmarked tennis court.” The camp was a place of simple, old-fashioned virtues.
HELP THE OTHER FELLOW
, read a banner hanging in the dining hall. The emphasis was on canoe trips and hiking; campers were required to earn certificates of achievement in various areas to ensure that they had a well-rounded experience. Despite its lackluster appointments, Terry Eakin—a Keewaydin camper roughly of Eisner's vintage—remembers the place as “idyllic” and unchanging, as if in a time warp.

“Keewaydin is not one of those Jewish camps,” says Baerwald, who later sent her own children to Keewaydin along with the Eisner children. “It's not in Maine, it doesn't have speedboating, there's nothing modern. There's no electricity in the tents. It's woodsy. It's a funky old camp with wooden canoes.”

Camp Keewaydin, which has been around since 1910, had a couple of other well-known alumni: author John McPhee and Senator Jay Rockefeller of West Virginia. Lester Eisner also had camped and worked there as a counselor. Alfred Hare, the beloved camp leader for decades, went by the nickname “Waboos,” a leftover from his own childhood summers at Keewaydin. He remembers a very young Michael showing up with his father for a weekend visit. Before the child was even registered, Hare says, his father had signed him on for a Saturday-night boxing match.

The camp was packed with traditions. Campers were organized according to age in “wigwams.” There was “the Great Auk”—a night when the counselors short-sheeted beds and played other pranks. Eisner seems to have been a truly happy camper. Hare remembers him as “mild-mannered and congenial,” hardly someone who seemed destined to become the “s.o.b.” businessman Hare would later hear about. Eisner was a pretty good athlete who was probably a better tennis player than his childhood friend John Angelo, but who consistently choked in matches. He also was an enthusiastic and inventive participant in the regular Friday Night Frolics, where the different wigwams presented skits.

Even at that youthful age, Eisner remembers that Angelo noticed a quality in him that would define him forever. “You have a way of taking charge that makes people want to follow even though they aren't always sure why,” Angelo told his friend. It was true. Eisner had learned early at his mother's knee to be “clever and likable and playful” and he knew how to use those qualities to draw people to him.

Camp Keewaydin appears to have commanded more of Eisner's loyalty than any other institution in his life. He sent his own sons there, far from home in Los Angeles, and as recently as 1998, he was chairman of a campaign to raise funds to expand the property. He and his friends John Angelo and Susan Baerwald would enjoy parents' weekend, when they would sneak pizza into their rooms at the Middlebury Inn, take their kids to the A&W root beer stand, and go canoeing.

As a young teen, Eisner also spent time at the Jersey shore, where John Angelo's family had a home in a community called Elberon. A well-to-do
set of regulars belonged to the same beach club. Susan Baerwald, who lived in the ocean community all year long, remembers Eisner as preppie and somewhat shy. Michael's mother, Maggie, made a more indelible impression on Baerwald. “Maggie was a very strong woman, very self-assured,” she remembers. “She was Jewish, but not
very
Jewish. German-Jewish—very American and successful. She was a presence…. I liked Maggie but you were a little bit afraid of her.” Her fierce watchfulness, her adoration of and anxiety for her son, made itself felt even to Eisner's young friends.

 

EISNER'S GREAT-GRANDFATHER
, Sigmund, arrived in New Jersey from Bohemia in the 1880s with an immigrant's empty pockets. In the next several years he built a uniform business from a two-sewing-machine operation into the largest manufacturer of military uniforms in the country. Winning a contract with the federal government, Sigmund outfitted the Rough Riders, including Colonel Theodore Roosevelt. He was also exclusive supplier to the Boy Scouts of America, starting when the organization was founded in 1910.

He married Bertha Weiss, whose family had helped settle the town of Red Bank, New Jersey. In 1906, Sigmund paid $6,000 for a three-story, sixteen-room nineteenth-century stucco house with a sunroom overlooking the North Shrewsbury River. Even at the time the price was reported by a local paper to be “ridiculously cheap.” Sigmund became a much-loved philanthropist, extensively involved in civic and Jewish activities. Among his many contributions, he donated $50,000 toward the Zionist cause.

The Eisners appear to have been a happy couple. On their silver anniversary in 1911, they threw a party for two hundred, some of whom arrived in special Pullman coaches from New York. The guests strolled through a house bedecked with roses and dined on beef, squab, duckling, and turkey. The Eisners renewed their vows before a rabbi, with Sigmund wearing the same gloves he had worn twenty-five years earlier.

The marriage produced four boys, all of whom went to work at some time for the family business. Sigmund was not destined to live a long life. In 1925, at sixty-six, he succumbed to what a local paper described as “an affection of the heart” and a stroke. The entire town of Red Bank shuttered its shops for an hour on the Thursday of his funeral. Flags were flown at half-mast. As his body lay in his home, thousands stood on the lawn outside. Rabbi Stephen Wise, who presided at the services, praised Sigmund's pride
in his Judaism and his lifelong commitment to his faith. Five cars loaded with flowers followed his casket to the cemetery.

His estate was estimated at $12 million. In his will, he remembered not just local synagogues but Christian churches of every denomination, including those attended by members of the African-American community. He also left money to every police officer and fireman in the town. Eventually, his sons donated the family house to the town of Red Bank for use as a library. Sigmund's sons kept up their father's philanthropic tradition in the town, and after they all died, the Eisner family continued to donate money to Red Bank until 1997, when the family foundation was dissolved with one final gift of $500,000.

 

ALL THE EISNER
boys had been offered first-rate educations. Three attended Harvard, including Michael's grandfather. J. Lester Eisner spent time in the National Guard following the First World War and called himself “Colonel Eisner.” Like his father, Sigmund, he was active in civic and government activities, including a number of state and local commissions created to deal with the Great Depression. During the Second World War, he became head of the American Red Cross in England. He was a member of the Harvard Club, the Army and Navy Club in Washington, the American Club in London, and several yacht clubs.

The Colonel's eldest son, Lester Jr., was only ten years old when his mother, Marguerite, died; he and his two younger brothers were brought up mostly by servants while their father spent evenings dining at ‘21' in Manhattan. The doubly abandoned Lester Jr. kept up the family's standards by attending Princeton and Harvard Law School. But perhaps his greatest achievement was marrying a formidable wife, Margaret Dammann.

Maggie also came from an extraordinary family. Her father, Milton Dammann, had worked his way from shoeshine boy to president of the American Safety Razor Company. He was also a lawyer with a practice in Manhattan. Like many such successful men, he never lost his anxiety about money—even after he had an apartment at 300 Park Avenue and a seventy-four-acre estate in Bedford Hills, north of Manhattan, with a domestic staff of fifteen. Milton's wife, Reta Weil, came from a rich Southern family but shared her husband's concern about money. When she was in town, she refused into her old age to take a taxi when the bus would do.