DisneyWar

by James B. Stewart

  Jeff Rochlis met his match in Imagineering, where he was installed in 1987 to rein in costs. His reputation as the Terminator having preceded him, every suggestion was met with surly resistance by the Imagineers. They ridiculed his “Triangle of Success” campaign in which Rochlis demanded that Imagineers wear triangle pins representing “budget, schedule, and quality.” The “Pleasure Island” attraction at Walt Disney World went so far over-budget that it was almost as though the Imagineers were trying to defy Rochlis. Marty Sklar kept a stream of complaints about Rochlis flowing to Eisner. Rochlis was fired soon after, and filed suit against Disney for breach of contract. (A judge ruled in favor of Disney.)

  Five years into his tenure as chief financial officer, Gary Wilson quit to make a successful bid for Northwest Airlines after Wells told him he was having too much fun at Disney to resume mountain climbing or run for public office. Wilson, however, remained on the Disney board.

  Bill Mechanic parlayed his success with home video into the presidency of Twentieth Century Fox (he replaced Joe Roth; Larry Gordon had resigned the post soon after Diller became chairman). As much as Mechanic liked Disney, he knew he’d never run the studio as long as Katzenberg was ahead of him. “They always saw me as the guy pitching videos,” Mechanic recalls.

  Seeing a second-tier Disney executive like Mechanic jump to the top of a rival studio, overnight becoming one of the top executives in the industry, sent a powerful message in Hollywood. Disney was flooded with résumés. Disney was not only making money; it was the “hot” studio sought after by agents, directors, stars, and executives alike.

  In his 1987 letter to shareholders, Eisner had trouble containing his glee. “How does one present an 80 percent increase in net income and pretend such an improvement is nothing special? I’d like to say that the only reason for the delay in writing this letter is my difficulty in communicating how well we have done without sounding too cocky, too confident and certainly too proud!”

  In the first four years with Eisner and Wells at the helm, Disney stock, adjusted for splits, leaped fourfold, which made Eisner’s contract, so hastily negotiated the morning of the board election, extraordinarily lucrative. In 1988 he was paid his salary of $750,000, a bonus of $6.8 million (2 percent of the profits over $100 million), and he earned $32.6 million by exercising some of his stock options. (He had an unrealized profit of $50.5 million on the rest of his options.) His total income of just over $40 million that year made him the highest paid executive in America.

  Four

  Michael Eisner’s outsized compensation was hardly lost on Jeffrey Katzenberg. In stark contrast to his boss’s millions, Katzenberg was stunned to discover that, despite the fact he’d made Disney the number one studio at the box office, his own bonus that same year was—zero.

  Katzenberg fired off an angry memo to Wells, expressing his disappointment and incredulity that notwithstanding the studio’s remarkable string of hits and the success of television series like “Golden Girls,” Disney’s calculation of his 2 percent of profits still came to nothing. Wells adopted a typically conciliatory but firm stance. He wrote back that Katzenberg was “perfectly reasonable” to have expected a bonus and acknowledged the “enormous success” of the studio. Nonetheless, he insisted that, under Disney’s accounting practices, the studio was still running at a deficit, even though that was likely to change as soon as revenues were booked as profit. A confidential memo sent to Frank Wells calculated that the studio’s output under Katzenberg since 1984 had accumulated a deficit of over $48 million after deducting distribution and overhead charges. By this calculation, Down and Out in Beverly Hills, far from the huge success it appeared to be, earned just $2 million on revenues of $18 million, more than offset by a $6.5 million loss on Adventures in Babysitting.

  “Many of these pictures still have substantial revenues forthcoming,” Wells continued, “and of course, will continue ‘forever,’ ” an evident reference to the 2 percent “annuity” that was part of Katzenberg’s original deal. Wells sent a copy of his letter to Eisner, along with the handwritten note, “Probably worth a quick read.”

  Katzenberg wasn’t entirely mollified, especially given the huge disparity between his compensation and Eisner’s, which hardly seemed to conform to the spirit of the “partnership” they’d forged. Katzenberg’s contract didn’t expire for two more years, but he began negotiating a new deal with Wells that would extend his tenure at Disney. The course of the negotiations suggests that it was beginning to dawn on Wells (as well as Eisner, with whom Wells discussed the matter) that the provision in Katzenberg’s contract entitling him to 2 percent of all profits from any project he generated while at Disney might turn out to be far more lucrative than anyone had anticipated. Wells immediately asked Katzenberg to relinquish his right to the 2 percent lump-sum payment in the event he left the company. Katzenberg said he might, but only if Disney would guarantee that he’d make 75 percent of whatever Eisner earned (including bonuses and stock options). Wells rejected that out of hand, insisting the board would never tie one executive’s compensation to another’s. Katzenberg countered by asking that revenue from the re-release of the animated classics be counted toward his bonus and lump-sum payment, his rationale being that he directed the marketing and home video campaigns that had been so effective in enhancing the value of the film library. Wells agreed, but in return, he again tried to get Katzenberg to abandon the 2 percent annuity. Katzenberg refused.

  Negotiations continued throughout the year. Katzenberg wanted assurances that if Wells should leave, he would be his successor, given his extraordinary success with the studio. As Eisner had often said, financial executives like Wilson were fungible; creative executives like Eisner and Katzenberg were irreplaceable. In one draft of the new contract, Katzenberg’s lawyer wrote, “If Frank leaves, you replace him.”

  Though Eisner kept his distance from the negotiations, Wells kept him informed, and the issue of Katzenberg’s succession annoyed him. “I won’t make that deal,” he exclaimed at one point. Eisner blamed Katzenberg’s demands in large part on David Geffen, who had become a billionaire by selling Geffen Records to MCA Corp. Since their first meeting, he and Katzenberg had gradually become best friends. They spoke on the phone every day and were sharing a vacation house in Acapulco when the issue arose. Eisner complained to Katzenberg’s lawyer, Arthur Emil, that Geffen was wielding undue influence on Katzenberg, and Eisner seemed to resent their close relationship.

  Though Wells assured Katzenberg that he was his successor, and said he’d even discussed the eventuality with Roy, Stanley Gold, and Sid Bass, Eisner made sure that such language never made it into the final contract. So instead of extending the contract for another six years from the expiration of his current deal, to 1996, Katzenberg said he wanted an option to leave two years sooner, in 1994, in the event Wells stepped down and someone other than he took his place.

  Still, there was plenty to reassure Katzenberg in his new deal. Besides an enhanced salary of $750,000, a grant of 500,000 stock options, Disney agreed to pay $4 million toward the new beach house Katzenberg was building in Malibu, and retained the lump-sum payout provision—still a “tremendous concept,” Wells wrote, that “should increase by a big amount.”

  In a handwritten letter to Eisner dated June 26, Katzenberg expressed his appreciation. “The last few months were very difficult for all of us. But they are behind us and I just want you to know that I feel great about where we ended up. Most importantly to me…way beyond the dollars and cents of it all, is [the] fact that in the end you came thru [sic] and delivered for me…. We’ve been together a very long time, in fact, in terms of Hollywood time-keeping about 3 lifetimes so far. I not only hope but I’m counting on us staying together forever. You’ve been great. You’ve handled my crap with extraordinary patience and care and understanding. I’m deeply appreciative and do love you for it. Jeffrey.”

  After the surprising success of Oliver & Company, Katzenberg and Schneide
r were on the prowl for another Broadway-style musical, and Schneider turned to Howard Ashman, whom he knew from Little Shop of Horrors, where Schneider had worked as the show’s stage manager. A native of Baltimore with a master’s degree from Indiana University, Ashman had begun writing plays while working as an editor at Grosset & Dunlap publishers, and later became artistic director of the WPA, an off-Broadway theater that produced Little Shop. Ashman, however, was worried about how he’d be treated working for Disney. He told Schneider he was gay, and asked how “progressive” Disney would be. “We’re open, tolerant, and very supportive of diversity,” Schneider assured him. Ashman didn’t seem entirely convinced. “It is the Walt Disney Company,” he said, though he thought Eisner’s decision to permit same-sex dancing at Disney World was a step in the right direction.

  After the modest success of Mouse Detective, animator Ron Clements revived his idea for the Hans Christian Andersen fairy tale “Little Mermaid.” This time the animators produced a longer treatment of the story, which introduced a villain—Ursula, a giant sea witch—and a happy ending, in which the mermaid becomes human and is united with Eric, her prince charming. Eisner and Katzenberg read the new version the same night they received it, and Katzenberg immediately recognized the new elements as Walt’s prescription for the animated classics: good versus evil, overcoming odds to realize a dream, and a happy ending. “We’ve got to do this,” Katzenberg enthused to Eisner the next morning.

  Splash was now safely in the distant past, and Katzenberg and Eisner gave some thought to developing “Mermaid” as a live-action project. Writer Michael Cristofer, who’d won a Pulitzer Prize for his play The Shadow Box, briefly worked on a script, but Clements persuaded Katzenberg to give him and John Musker a shot at the script. Geffen, meanwhile, kept insisting to Katzenberg that Ashman was a “genius,” and that Disney should find more work for him. So in 1986, Katzenberg and Schneider met with Ashman and showed him some of the animated projects in development, including Little Mermaid, which was the script that captured Ashman’s interest.

  Ashman and his composing partner, Alan Menken, commuted weekly from New York to California, and claimed an office next door to Clements and Musker at the animation warehouse in Glendale. Less extroverted and acerbic than Ashman, Menken had grown up in suburban New Rochelle, New York, and composed and sang commercial jingles while writing more ambitious musical scores. His first collaboration with Ashman was for a 1979 WPA production of God Bless You, Mr. Rosewater, which led to Little Shop. They and the animators darted in and out of one another’s offices, trying new ideas.

  Ashman had the idea to structure the opening sequence as an underwater montage, for which he and Menken wrote the song “Fathoms Below.” He proposed staging “Under the Sea” as a jubilant calypso number. Ashman transformed Ursula into a raspy-voiced, overweight octopus who sashays through the film in a sleeveless black gown, a character modeled on Divine, the transvestite star of Hairspray, Female Trouble, and other cult movie hits far removed from the Disney canon. Ashman wanted the crab Sebastian to be a wisecracking Trinidadian. The character of Sebastian let the writers bring comedy into the script and allowed Menken to write songs that were clever pastiches of calypso and reggae tunes, just as Little Shop had recycled 1950s pop styles.

  Katzenberg was dazzled by Ashman’s knowledge of theater and music, and especially his familiarity with the Disney canon. It seemed that everything Katzenberg had struggled to learn in his long hours in the Disney archives Ashman already knew. Ashman naturally dominated the process; animators often saw him hovering over Menken at the piano, showing him how to adapt the melodies to his lyrics. The animators thought of Ashman as the John Lennon to Menken’s Paul McCartney.

  After the songwriting team had finished five numbers, Schneider summoned Eisner, Katzenberg, and Roy Disney for a run-through. As soon as he heard “Under the Sea,” Eisner was convinced Ashman and Menken had created a song that would be a hit on its own, whatever the fate of the movie. Roy was captivated by the undersea theme, and retrieved some undersea footage of a giant octopus from one of the nature documentaries he’d worked on when he first came to the studio (though the real-life octopus bore scant resemblance to the campy Ursula). Katzenberg, too, felt mounting enthusiasm about the quality of the film. Oliver had been a first step, but no one had ever approached an animated film as though it were a Broadway musical. Schneider had been right that a musical needed a unifying score and lyrics. Mermaid felt fresh, original, and exciting. Still, Katzenberg cautioned that the commercial potential of a film about a mermaid was probably limited by its appeal to young girls.

  Early screenings were not as promising as the songs. Katzenberg, in particular, had problems with the third act’s resolution of the threat from Ursula. It simply didn’t make any sense that the gentle mermaid Ariel would be so easily able to overcome the all-powerful sea witch Ursula. “This just doesn’t work,” Katzenberg said on several occasions before leaving screenings. This had become Katzenberg’s style: something either “worked” or it “didn’t work.” The animators found it disconcerting, but they had to concede that Katzenberg’s broad instincts were almost always right, as opposed to his more specific suggestions, most of which they ignored. It was best for Katzenberg to identify the problems, then let the animators figure out a solution.

  At one early screening, kids squirmed during the musical sequence “Kiss the Girl,” a gentle lullaby that was still in black-and-white sketches. “We’re cutting that song,” Katzenberg said as soon as the screening was over.

  “You can’t cut that song!” Ashman practically yelled.

  “Okay. We’ll cut it in half,” Katzenberg replied. Ashman looked wounded. Everyone tried to change Katzenberg’s mind, and finally the lead artist, Glen Keane, got him to leave the song alone for one more screening. Ashman and the others held their breath as the sequence, now in full color, played. No one in the audience budged, and the song stayed. But “Fathoms Below” was cut; unlike a Broadway show, Katzenberg didn’t think audiences would sit through a lengthy opening musical number.

  In another early screening, Eisner was perplexed by Sebastian’s sudden transformation from Ariel’s foe to friend. Animators were still relying largely on the old storyboard approach, despite his insistence on scripts. “Why can’t these problems be solved at the script stage?” he asked. At his behest, new scenes were created—a beach encounter between Ariel and Sebastian, and, at the climax, a scene where Eric destroys Ursula by crashing his boat into her.

  Little Mermaid was the first animated film to use CAPS, the new computer system that Kinsey and Roy had championed, which made it much easier to create and insert new sequences. Even so, Mermaid was going over its already high budget of $40 million, and because of costs, the full artistic potential of the new system couldn’t be tapped. The colors used for Ariel, for example, were scaled back from eleven to seven, saving nearly $750,000. And in the end, only the scene where Ariel and the Prince head off into a rainbow as the undersea characters wave was computer-generated.

  As the film neared completion, Schneider was overseeing the final dubbing and the scoring of the music. Menken showed up for the sessions, but Ashman stayed in New York. “Where’s Howard?” Schneider asked. Menken said Ashman didn’t want to travel. Both Schneider and Katzenberg thought it was odd, given Ashman’s pivotal role in making the film, but didn’t give it much thought. Toward the end of the process, Disney scheduled an unusual preview screening at night. The mostly adult audience seemed enchanted, and broke into applause at the end. Katzenberg was elated, and immediately changed the marketing plan. Initially worried that the film would appeal mostly to young girls, the campaign was broadened to target parents as well.

  Little Mermaid opened in November 1989. “The heroine of Hans Christian Andersen’s story ‘The Mermaid’ failed in her bid to become human, and became a disembodied spirit relegated to spending centuries in limbo,” wrote Janet Maslin in The New York Times. “ ‘The Little Merm
aid,’a glorious Walt Disney version of this tale and the best animated Disney film in at least 30 years, is due for immortality of a happier kind. ‘The Little Mermaid’ is a marvel of skillful animation, witty songwriting and smart planning. It is designed to delight filmgoers of every conceivable stripe.” Little Mermaid grossed an astounding $110 million at the box office in the United States, $222 million worldwide.

  As box-office revenues from Mermaid poured in, Katzenberg pressed to boost production of animated films. Eisner and Wells, who had initially considered abandoning animation altogether, and had then banished it to Glendale, took little persuading. Disney animators had traditionally worked on a civilized, if not leisurely, schedule that generated a new film every four years. With Katzenberg’s encouragement, Eisner insisted he now wanted one every twelve to eighteen months. At meetings with the animators, Katzenberg mixed praise with exhortations for more. “Bigger, better, faster, cheaper” became his mantra, often mockingly parodied by animators who resented the increasing demands and long hours.

  Many of them took their complaints to Roy, who had emerged as the champion of the division’s traditional methods and values. Schneider and some of the other animators used code names to discuss the top Disney executives; Roy was “the Godfather” or “the shepherd,” Eisner was “Dad,” and Katzenberg was “Mom.” Despite his position as head of the division and vice chairman of the company, Roy continued to defer to Katzenberg, and his attendance at the weekly meetings where Katzenberg made most of the important decisions became sporadic. When he did attend, he said little, as was his wont, especially with someone as decisive and opinionated as Katzenberg. Still, he played an active if quiet role in the division. Roy conveyed most of his suggestions through Schneider, and talked directly with many of the animators. He saw rough cuts of all the animated films, and made detailed notes. Roy worried that radically stepping up production would inevitably erode the quality of the animated films.