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Authors: Kim Masters
The Keys to the Kingdom (63 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.
Â
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)âwhen 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 charismaticâvery charismaticâ¦. Those are his skills. I am definitely more deliberative than Michaelâ¦. 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 allâcertainly Disney and Michael, and Jeffrey to a lesser extentâsustained a lot of pain in that oneâ¦. 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 judgmentâand I think it was a failure on both sidesâthe thing could not have been reasonably resolvedâ¦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.
MICHAEL EISNER DECLINED
to cooperate in the reporting of this book, but the author has interviewed him numerous times since 1986 and discussed with him many of the developments described herein. Those conversations, as well as his many public statements and his autobiography,
Work in Progress,
have helped provide his perspective on events. Many othersânotably Jeffrey Katzenbergâagreed to be interviewed but in no way authorized this book. And some sources who insisted on anonymity are, of course, identified neither in the text nor below.
Otherwise,
The Keys to the Kingdom
is based on hundreds of interviews. Several books were extremely helpful, including Ron Grover's
The Disney Touch,
John Taylor's
Storming the Magic Kingdom,
and Charles Fleming's
High Concept. The Hollywood Reporter Book of Box Office Hits
was the source of annual box-office rankings. AC Nielsen EDI provided many of the box-office grosses. It should be noted that Bert Fields briefly represented the author in 1999. The following list includes principal sources on a chapter-by-chapter basis. AI indicates material from author interviews.
PROLOGUE
AI: Michael Hoover, Bob Daly. Corie Brown, “The Third Man,”
Premiere,
November 1994.
1:
POOR LITTLE RICH BOY
AI: Alfred Hare, Terry Eakin, Susan Baerwald, Patrick Hart, William Brasmer, Barbara Eberhardt, Alan Shevlo, Al Bonney, Fred Silverman.
“Their Silver Wedding,”
Red Bank Register,
January 18, 1911.
“Thousands at Funeral,”
Red Bank Register,
January 14, 1925.
“Sigmund Eisner's Will,”
Red Bank Register,
January 28, 1925.
Helen C. Phillips,
Red Bank on the Navesink
(Caesarea Press, 1977).
2:
ENTER THE DRAGON
AI:Leonard Goldberg, Barry Diller, Terry Melcher, Martin Starger, Dick Zimbert, Brandon Stoddard, Gary Pudney, Roy Huggins, Frank Yablans, Fred Silverman, Martin Davis.
Andrew Tobias, “The Apprenticeship of Frank Yablans,”
New York,
September 23, 1974.
Tony Schwartz, “Hollywood's Hottest Stars,”
New York,
July 30, 1984.
Kevin Sessums, “Barry Diller Interview,”
Playboy,
July 1989.
Huntington Williams,
Beyond ControlâABC and the Fate of the Networks
(Atheneum, 1989).
Leonard Goldenson with Marvin Wolf,
Beating the OddsâThe Untold Story Behind the Rise of ABC: The Stars, Struggles, and Egos That Transformed Network Television
(Charles Scribner's Sons, 1991).
George Mair,
The Barry Diller Story: The Life and Times of America's Greatest Entertainment Mogul
(John Wiley & Sons, 1997).
John Huey, Joe McGowan, and Therese Eiben, “Eisner Explains Everything,”
Fortune,
April 17, 1995.
3:
HAPPY DAYS
AI: Lee Wedemeyer, Martin Starger, Fred Pierce, Tom Miller, Garry Marshall, Leonard Goldberg, Marcy Carsey, David Geffen.
Sterling Quinlan,
Inside ABC: American Broadcasting Company's Rise to Power
(Hastings House, 1979).
Goldenson and Wolf,
Beating the Odds,
op. cit.
Joe Flower,
Prince of the Magic Kingdom
(John Wiley & Sons, 1991).
4:
REVERSAL OF FORTUNE
AI: Barry Diller, Lee Wedemeyer, Leonard Goldberg, Pat McQueeny, Garry Marshall, Richard Sylbert, Allan Carr, John Avildsen, Art Linson, Warren Beatty, Frank Mancuso, Jeff Berg.
Garry Marshall,
Wake Me When It's Funny
(Adams Media Corp., 1995).
Mair,
The Barry Diller Story,
op cit.
John Douglas Eames,
The Paramount Story
(Crown Publishers, 1985). David Blum, “Odd Man In,”
Vanity Fair,
July 1983.
Lee Margulies, “The
Laverne & Shirley
Feud,”
TV Guide,
August 28, 1982.
Charles Champlain, “What to Do for an Encore,”
Los Angeles Times,
July 7, 1978.
5:
SQUIRT
AI: Barry Diller, Jeffrey Katzenberg, Sid Davidoff, Craig Baumgarten, Richard Aurelio, Donny Evans.
6:
THE GOLDEN RETRIEVER
AI: Barry Diller, Jeffrey Katzenberg, Martin Starger, Rich Frank, Leonard Nimoy, Harve Bennett.
William Shatner with Chris Kreski,
Star Trek Movie Memories
(HarperCollins, 1994).
Leonard Nimoy,
I Am Spock
(Hyperion, 1995).
Dawn Steel,
They Can Kill You but They Can't Eat You
(Pocket Books, 1993).
Aljean Harmetz, “Who Makes Disney Run?,”
New York Times Magazine,
February 7, 1988.
7:
THE KILLER DILLERS
AI: Tom Pollock, Charlie Webber, Barry Diller, Dick Zimbert, Frank Marshall, Lee
Wedemeyer, Jim Zucker, Susan Baerwald, Garry Marshall, Richard Fischoff, Rich
Frank, Dick Sylbert, David Kirkpatrick, Warren Beatty.
Steel,
They Can Kill You,
op. cit.
Aljean Harmetz, “Diller: Taking Risks Is What I Do for a Living,”
Los Angeles Herald Examiner,
June 10, 1982.
Variety,
June 9, 1982.
8:
HIGH CONCEPT
AI: Don Simpson, Dick Zimbert, Leonard Nimoy, Craig Baumgarten, Lee Wedemeyer, Larry Mark, David Kirkpatrick, Walter Hill, Jeff Berg.
Steel,
They Can Kill You,
op. cit.
Charles Fleming,
High Concept
(Doubleday, 1998).
John Gregory Dunne, “Bully Boy,”
New Yorker,
February 5, 1996.
Ellen Farley, “A New Kind of Family Connection,”
Los Angeles Times,
August 19, 1979. Peter Biskind, “Good Night, Dark Prince,”
Premiere,
April 1996.
David Ansen, “Extraordinary People,”
Newsweek,
November 21, 1983.
9:
DEATH OF A MOGUL
AI: Martin Davis, Barry Diller, Jeffrey Katzenberg, Rich Frank, Don Simpson.
Tony Schwartz, “Hollywood's Hottest Stars,”
New York,
July 30, 1984.
Jesse Kornbluth, “Why Hollywood Hates Martin Davis,”
Vanity Fair,
May 1991.
Bryan Burrough, “The Siege of Paramount,”
Vanity Fair,
February 1994.
Judith Miller, “G. & W. and SEC Sign Agreement Settling Suit,”
New York Times,
October 29, 1981.
“G & W's Charges over SEC Investigation of Company Are Thrown Out by Judge,”
Wall Street Journal,
July 24, 1981.
Sandra Salmans, “Barry Diller's Latest Starring Role,”
New York Times,
August 28, 1983.
10:
RISKY BUSINESS
AI: Vince Jones, Terry Semel, James Garner, Tom Pollock, John Calley, Herbert Allen, Roland Betts, Rick Ridgeway.
Dick Bass and Frank Wells with Rick Ridgeway,
Seven Summits
(Warner Books, 1986).
John Taylor,
Storming the Magic Kingdom
(Knopf, 1987).
Allison Moir, “The 67?8 Summits of Frank Wells,”
Forbes FYI,
September 30, 1991.
Marilyn Wellemeyer, “Executives on the Mountaintop,”
Fortune,
May 16, 1983.
John Huey, “Secrets of Great Second Bananas,”
Fortune,
May 6, 1991.
Corie Brown, “The Third Man,”
Premiere,
November 1994.
Connie Bruck,
Master of the Game
(Simon & Schuster, 1994).
11:
THE EIGHTH SUMMIT
Taylor,
Storming the Magic Kingdom,
op. cit.
Flower,
Prince of the Magic Kingdom,
op. cit.
Variety,
April 11â17, 1994.
Myron Magnet, “No More Mickey Mouse at Disney,”
Fortune,
December 10, 1984.
Michael Eisner, interview by Charlie Rose,
Charlie Rose,
September 24, 1997.
“The Hottest Game in Hollywood,”
Los Angeles Times
, September 25, 1984.
12:
A RAVENOUS RAT
?
AI: Dick Cook, Pete Clark, Dave Fink, Pat Scanlon, Rusty Lemorande, Sid Sheinberg. Tom Nicholson with Peter MacAlevey, “Saving the Magic Kingdom,”
Newsweek,
October 8, 1984.
Aljean Harmetz, “Disney Hopes Eisner Can Wake Sleeping Beauty,”
New York Times,
October 17, 1984.
13:
HITS AND MISSES
AI: Dave Fink, Pat Scanlon, Roland Betts, Tom Bernstein, Jane Rosenthal, David Hoberman, Paul Mazursky, David Zucker, Dean Valentine, Paul Junger Witt, Rich Frank, Marty Katz, Harve Bennett.
Laura Jereski, “So You Want to Be in Pictures,”
Forbes,
March 21, 1988.
New York Times Magazine,
February 7, 1988, op. cit.
Julie Salamon, “Jeffrey Katzenberg: Disney's New Mogul,”
Wall Street Journal
, May 12, 1987.
14: “
A WHIFF OF THE MOUSE
”
AI: Pete Clark, Roland Betts, Tom Bernstein, Don Simpson, Pat Scanlon, Dave Fink, Rick Ridgeway, Michael Rosenfeld, Jack Rapke, Jeffrey Katzenberg, Marty Katz, Jane Rosenthal.
15:
WINNING UGLY
AI: Robert Cort, Jane Rosenthal, Mark Johnson, Marty Kaplan, Marty Katz, Ron Clements.
Aljean Harmetz, “Who Makes Disney Run?”
New York Times Magazine,
February 7, 1988.
Salamon, “Jeffrey Katzenberg: Disney's New Mogul.”
Barry Singer, “Just Two Animated Characters Indeed,”
New York Times,
October 4, 1998.
16:
TOONTOWN
AI: Robert Zemeckis.
Kim Masters, “Bunny Hop,”
Premiere,
July 1988.
17:
STAR WARS
AI: Bernie Brillstein, Marty Kaplan, Laura Ziskin, Dick Sylbert.
Ron Grover,
The Disney Touch
(Irwin Professional Publishing, 1997).
18:
ONE FALSE MOVE
AI: Laura Ziskin, Jeffrey Katzenberg, Roland Betts, Dick Sylbert.
Peter Boyer, “Katzenberg's Seven-Year Itch,”
Vanity Fair,
November 1991.
John H. Richardson, “Star-Crossed by Love,”
Premiere,
February 1991.
John H. Richardson, “California Suite,”
Premiere,
August 1991.
Kim Masters, “The Mermaid and the Mandrill,”
Premiere,
November 1991.
19:
MOUSCHWITZ
AI: Jeffrey Katzenberg, Randall Kleiser, David Hoberman, Marty Katz.
Judy Brennan, “My Two Sons,”
Premiere,
April 1994.
Boyer, “Katzenberg's Seven-Year Itch.”
Victor Zonana, “Disney Apologizes, Receives Limited Rights to Muppets,”
Wall Street Journal,
May 1, 1991.
Charles Fleming and Jennifer Pendleton, “Henson Charges Disney with Muppet-Mugging,”
Variety,
April 22, 1991.
Rita Koselka, “Mickey's Midlife Crisis,”
Forbes,
May 13, 1991.
Alan Citron and Nina Easton, “Disney Adjusts to Fallibility,”
Los Angeles Times,
May 24, 1991.
Alan Citron and Nina Easton, “Magic Kingdom Battens Down the Budget Amid Recession,”
Los Angeles Times,
May 28, 1991.
Joe Nocera, “For Every Bruce Willis, There Is Always Another Bruce Willis,”
GQ,
October 1991.
20:
BEAUTY AND THE DEBACLE
AI: Ron Clements, Jeffrey Katzenberg, Dave Fink.
Peter H. King, “Michael Spells It M-o-n-e-y,”
Los Angeles Times,
December 9, 1992.
James Flanigan, “Who Cheers Eisner's Payout? Disney Shareholders,”
Los Angeles Times,
December 8, 1992.
Allan Sloan, “Eisner Joins Select Group with $197-Million Option,”
Los Angeles Times,
December 6, 1992.
New Republic,
December 28, 1992.
21:
THE CRASH
AI: David Vogel, Jeffrey Katzenberg, Dave Fink, Pat Scanlon, Roland Betts, Michael Hoover.
Jolie Solomon, “Mickey's Trip to Trouble,”
Newsweek,
February 14, 1994.
Kurt Eichenwald, “Euro Disney Faces More Bad News,”
New York Times,
November 16, 1992.
Bill Echikson, “Disney's Rough Ride in France,”
Fortune,
March 23, 1992.
Peter Gumbel and Richard Turner, “Fans Like Euro Disney but Its Parent's Goofs Weigh the Park Down,”
Wall Street Journal,
March 10, 1994.
James Bates, “No Magic Fix for Huge Losses at Euro Disney,”
Los Angeles Times,
July 9, 1993.
Alan Citron, “Mighty Disney Learns to Duck,”
Los Angeles Times,
August 24, 1993.
22:
CHEST PAINS
AI: Jeffrey Katzenberg, Rich Turner.
Michael Eisner, interview by Charlie Rose, op. cit.
James Bates, “Eisner Earns $203 Million but No Bonus,”
Los Angeles Times,
January 4, 1994.
Ken Auletta, “The Human Factor,”
New Yorker,
September 26, 1994.
Elise O'Shaughnessy, “The New Establishment,”
Vanity Fair,
October 1994. Claudia Eller and Alan Citron, “Angst at Disney's World,”
Los Angeles Times,
July 24, 1994.
Richard Turner, “Disney's âVolume' Strategy Takes Toll as Mestres Leaves Hollywood Pictures,”
Wall Street Journal,
May 16, 1994.
Richard Turner, “Disney, Using Cash and Claw, Stays King of Animated Movies,”
Wall Street Journal,
May 16, 1994.
“Looking for Mr. Right,”
Newsweek,
August 1, 1994.