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Disney War How One Man Toppled the Empire. The Success of Disney After Walt  The 1970’s and early 1980’s were marked by a difficult transition. –Walt.

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Presentation on theme: "Disney War How One Man Toppled the Empire. The Success of Disney After Walt  The 1970’s and early 1980’s were marked by a difficult transition. –Walt."— Presentation transcript:

1 Disney War How One Man Toppled the Empire

2 The Success of Disney After Walt  The 1970’s and early 1980’s were marked by a difficult transition. –Walt dies in 1966 –Roy dies in 1971  Animated Division stumbles –New picture every four years  Winnie the Pooh series  The Aristocats  Live Action Pictures mediocre; 3 per year; minimal marketing –Apple Dumpling Gang –Tron –Escape from Witch Mountain  Production Costs 4x other studios

3 Disney Management after Walt  Roy Disney – largest individual shareholder at 3%  Walt’s family combined had 11%  Ron Miller appointed to head Disney, Roy resigns  By 1984 shares had plunged from $123 to $50  EPCOT costs soared to $1.2 billion  Miller starts Touchstone to break mold

4 Disney meets Eisner  Roy Disney meets Eisner through the Board of Cal Arts  Disney had resigned from the Disney in 1977 over concerns regarding company direction and mistakes (and rehashes)  Roy had always been pushed aside for Walt’s son-in-law, Ron Miller  Roy had a classic Disney temperament –Determination, persistence, and strong, stubborn will

5 Era of Hostile Takeovers  By 1984 after failing to hire Michael Eisner to head up Touchstone and be Disney COO, Saul Steinberg announced he owned 6% of Disney and planned to buy 25%  Board buys off Steinberg, shares plummet  Miller is out, Eisner and Wells are in

6 Coup in the Boardroom  When 1984 Roy Disney (Walt’s nephew) orchestrated a coup to bring on Michael Eisner and Frank Wells –Eisner was former president of Paramount –Wells a former president of Warner Brothers and an attorney  Eisner knew little of Walt or Disney, was a New Yorker, prep school backgrounds, affluent upbringing –Never seen Snow White

7 State of the Union  Employees never left (or were fired!)  Executives rarely worked past noon –Then played cards, had massages  All employees left early on Tuesday to play softball  All producers were in-house  Overhead was 2x other rival studios

8 Learning the Walt Approach  Walt was raised in the Midwest  He idealized rural life, middle America, church socials, sleigh rides –Repeating theme in films and parks  Represented resilience, showmanship and creative ideas

9 Eisner’s Resume  Majors in literature  Head of Programming at ABC –Responsible for Happy Days, Laverne and Shirley, Welcome Back Kotter  Barry Diller then hires him to be President of Paramount –Beverly Hills Cop  Meets Jeffrey Katzenberg who is Diller’s assistant  Katzenberg became a great asset to Eisner and Diller

10 Eisner’s Philosophy  Stingy with praise and compensation  Diller would lavish praise, propose bonuses (i.e., Robert Redford and Ordinary People)  If a film ran over, would not cough up additional funding i.e., Terms of Endearment

11 Eisner at Paramount  Turns down Private Benjamin  Obsessive at keeping costs modest  Generates ideas internally rather than through high priced brokers and agents  Signed Spielberg, Lucas and Ford for Indiana Jones  Philosophy, “we have no obligation to make art, no obligation to make history or to make a significant statement. Our obligation is to make money.”

12 Era of Wells and Eisner  Hires include Jeffrey Katzenberg –Katzenberg wants stock options, instead get 2% of any product put into production by him (including theme park rides, merchandise, live action and animation) and if retired or left would get a lump sum for future earnings  Roy given the animation division  Wells is approached by Stan Kinsey with a new computer technology developed at Industrial Light and Magic, Pixar Advanced Computer Graphics –Could cut animation costs by 30% and recreate same quality

13 Eisner and Wells  Within 30 days of tenure, stocks surge  Theme parks only area making money in 1984  Began to envision hotels as entertainment as well as lodging  Business philosophy begins to overtake creativity –Raise ticket prices to raise revenues  Over 1,000 people lose their jobs  Release Down and Out in Beverly Hills

14 Animation Post Walt  Split into two segments –The older animators replacing Walt’s 9 old men –Newer hires from CalArts such as Tim Burton and John Lasseter  First post Eisner release was the Black Cauldron –Ten years in the making and a train wreck

15 Animation  Gong Shows –5 new ideas are presented from each animator –One immediately gonged catches Roy’s interest... The Little Mermaid –A hold over from Ron Miller … Who Censored Roger Rabbit? Also interesting

16 The First Signs of Trouble  Euro Disney  Frank Wells killed in a helicopter accident  Katzenberg vetoes purchasing Lucas’s stake in Pixar (originally available for $12 million) –Steve Jobs sees the potential and purchases the stake

17 EuroDisney – How does so much go so wrong?  Original budget $1.6 billion climbs to $4 billion  Used WDW attendance and profits to project  Miscalculated French – willingness to attend in cold weather, interest in “American” fairy tales, cooperation as employees  Misjudged European vacation patterns and expenditures

18 EuroDisney  Attendance on opening day a mere 6,000 (projected at 10,000)  Occupancy at hotels – 60% far short of 85% projections (no one wanted to stay so far from Paris)  Opens April 22, 1992 with farmers blocking roads in to park and hurled onions and tomatoes at executives and guests.  French President declares it “not his cup of tea”

19 Critical Response  “The Old World s presented with all the confident big ticket flimflam of painstaking fakery that this bizarre campaign of reverse-engineered cultural imperialism represents. I like to think that by the turn of the century, Euro Disney will have become a deserted city, similar to Angkor Wat …”

20 EuroDisney  Eisner was unwilling to listen to concerns and planned a second park on site (Disney MGM)  Europeans have far more vacation time than Americans and spend far less per day –Stay affordably, do not buy many souvenirs, used travel agents (costing millions in commissions)  Loses several hundred million/yearly initially  Initially forced to restructure debt

21 Management Strife  Eisner fails to name Katzenberg President (as promised) when Wells dies  Eisner names himself President and CEO  Eisner suffer heart attack and by pass  Drives Katzenberg from Disney and refuses to honor bonus of 2% of profits from all projects he develops –Beauty and the Beast, Aladdin, Little Mermaid, Lion King

22 Management Strife  Loses Katzenberg who heads to Dreamworks to start studio and head new animation division  Hires Michael Ovitz as President (Head of CAA – agent) (Aug 1995) –Immediately deep sixes all proposed projects  Pushes for acquisition of a network –Considers all three and settles on ABC –ABC stock at $105 (i.e., $20 billion) $65 cash; $55 stock  Implemented an executive “counterprogramming” –Named head of European stores/merchandise to head of television –Moved CFO to head of Disney Stores –Places Joe Roth in Katzenberg’s position

23 Mistakes Mount  Purchase of ABC nearly doubles size of Disney –Adds ABC, ESPN, E!, A&E and Lifetime  Robert Iger in charge of ABC at the time  Ovitz assigned to save primary animators from leaving to Dreamworks  Ovitz negotiates settlement with Katzenberg for $90M – Eisner refuses

24 When it Rains it Pours  Katzenberg files suit arguing he could be owed as much as $12B  Jamie Tarses hired to head ABC programming. PR disaster  Programming leaves ABC in third place  Eisner forces Ovitz out at tremendous cost to Disney

25 Good Results during Tough Times  Reworked Toy Story (by Katzenberg) opens strong and earns $200M (domestic) on $30M production cost –$358M worldwide  Disney extends deal with Pixar to 7 pictures: 50/50 split of revenues, Disney controls rights to sequels and merchandise

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