DisneyWar

by James B. Stewart

  Davies nearly panicked after the first run-through. After he’d gone to the mat for Philbin, the host was terrible, forgetting the rules and mispronouncing words and names. But everything came together for the first taping, on a Sunday. The contestants were visibly nervous, and the live audience lent an air of electricity. The first contestant was an accountant from Maryland who was also a member of the high-IQ group Mensa. Philbin rose to the occasion, deftly underscoring the tension with just the right touch of humor. His rendering of “Is that your final answer?” gave every contestant an anguishing moment of doubt and the audience a vicarious thrill. The brainy accountant took home only $1,000.

  Davies, Smith, and the rest of the show’s crew spent most of the night editing. “Who Wants to Be a Millionaire” debuted the following night. Exhausted, Smith slept through the first airing. The show had had little advance publicity because ABC didn’t want to spend to promote it. When Davies got in the next morning, the overnight ratings showed a strong 7.2 rating, 13 share. The second night it was 7.7 and 14. Then, in the third episode, a contestant correctly identified Lake Huron as the second-largest Great Lake, but was erroneously dismissed from the show. Davies and the producers hastily agreed to do the right thing and bring the rejected contestant back for another chance at the million dollars. But the inadvertent mistake brought an avalanche of press coverage. Within two weeks it was the highest-rated program of the summer.

  Davies could hardly believe the show’s immediate success; it was like a dream. After seeing the ratings, Iger sent an email to everyone at ABC: “This is the kind of out-of-the box creative thinking we have to do to succeed.” That same morning Eisner called Davies at the studio to congratulate him. Davies knew his gamble had paid off—not just his belief in “Millionaire,” but his whole crazy decision to devote himself to a career in nontraditional, “reality” television.

  For the first time in years, ABC had a huge hit. And not just any hit, a bona fide, once-in-a-decade cultural phenomenon. “Millionaire” landed on the front Arts page of The New York Times. “The Virgin Mary, Arnold Schwarzenegger, leprechauns—nothing could stop Regis Philbin and his mind-numbing multiple choice show,” wrote Lisa de Moraes in The Washington Post.

  Eisner had said repeatedly that all ABC needed was one big hit to turn it around. Now that he had one, he was determined to put it to good use. ABC promptly ordered another series of “Millionaire” episodes, and scheduled them for the November “sweeps” period, the critical time when A.C. Nielsen measures the nation’s television viewership. In the meantime, Iger asked Jeff Bader, the chief of scheduling, to do an analysis of how ABC should capitalize on the “Millionaire” phenomenon for next year’s regular season.

  Both Michael Davies and Paul Smith had always felt that “stunting”—running the show on consecutive nights at infrequent intervals—was essential to build suspense, maintain viewer curiosity, and keep “Millionaire” an “event.” Andrea Wong, Davies’s successor as head of alternative programming, also worried about overexposure and argued strongly that “Millionaire” should be scheduled during sweeps periods, almost guaranteeing ABC a ratings boost. The show had never been conceived as a weekly staple. But now the ABC executives were told to study the alternatives and their financial implications.

  Bader, Lloyd Braun, Stu Bloomberg, and Patricia Fili-Krushel, the president of the ABC Television Network, met with Iger to present the recommendation that “Millionaire” be retained for sweeps periods and special events, but it fell to Bader to make the case. He argued that “This will be a disaster if ‘Millionaire’ is overexposed,” and launched into the reasons why Smith and Davies thought “Millionaire” had to remain a sweeps event. He’d barely begun when Iger interrupted.

  “I’m sorry, but this is not negotiable,” he said.

  “What do you mean?” Braun asked.

  “Michael and I have already decided. We’re going to run ‘Millionaire’ three nights a week.”

  There was stunned silence. None of the ABC executives had even considered the possibility of so many episodes in a week. Bader looked to his colleagues for support, but no one said anything.

  “I’ll take full responsibility for the decision,” Iger said.

  Afterward, the group filed out. “Thanks, guys,” Bader said. “You might as well go and get the gun because I’m going to be fired.” The other executives apologized for not coming to his defense, but clearly Iger’s mind was made up. They and others suspected that Iger’s strategy was to use the short-term success of “Millionaire” to propel himself into the Disney presidency. It was also yet another example of how seemingly arbitrary decisions were being made from the top, without any real consultation with the people running ABC day-to-day.

  As the ABC executives had speculated, the huge success of “Millionaire” did come just as Eisner was contemplating naming Iger president. Although he’d mentioned the possibility the previous fall, he’d done nothing further about it, and had later backtracked, saying he was worried that Roth and Litvack would leave if Iger became president. Still, he’d encouraged Iger to be patient, and the success of “Millionaire” gave him a strong rationale for Iger’s promotion.

  So it was all the more devastating when Iger, vacationing in Martha’s Vineyard that August, got a worried phone call from Tom Murphy. Murphy, Stanley Gold, and a few other directors had again raised the issue of succession with Eisner, and Eisner had seized on the question as an opportunity to launch a long catalog of Iger’s weaknesses and faults. He’d said that Iger “can never succeed me,” that he lacked “the stature” to lead Disney. “Bob,” Murphy told him, “I hate to tell you this, but you have to leave.” Iger was devastated by the advice from his old mentor. He didn’t say anything to his wife because he didn’t want to spoil the vacation. But he decided he’d have to leave the company. He was expecting a bonus of about $1 million in January. Then he’d announce his resignation.

  Lloyd Braun thought the success of “Millionaire” might be the last straw for Tarses, and soon afterward he read a gossip item on the Internet reporting that she was about to be fired. It was a difficult time for Tarses; she and Robert Morton broke up; she was spotted at a restaurant making out with “Friends” star Matthew Perry after denying they were having an affair; she had failed to show up for a week of budget meetings in New York and had to send a written apology. Iger met with Tarses, and she emerged from their meeting triumphant. Iger issued a public statement of support, calling the rumors she would be fired “totally untrue.”

  Braun was dismayed. Even before “Millionaire’s” success, Charlie Parsons and Mark Burnett were again pitching the other “reality” show they’d developed for ABC, “Survivor.” Andrea Wong loved the idea and was desperate to get it on the network’s schedule. Braun, too, had always liked it, and was especially eager to get an outdoor, action-oriented show on the schedule that would attract young male viewers. His deputy at Touchstone, Steve McPherson, was also enthusiastic.

  Admittedly, “Survivor” posed some unusual issues. ABC would have to commit to all thirteen episodes. There would be no pilot. Nothing quite like this had been tried on network television. On the other hand, that was part of its appeal. Wasn’t this the “thinking out of the box” that Iger had called for? Davies, Burnett, and Wong recommended “Survivor” again to Tarses and Bloomberg. (Braun stayed away from the meeting so as not to antagonize Tarses.) This time they didn’t reject it out of hand. But they wouldn’t make the commitment either. They told Wong that if she could line up sponsors without a pilot, she could move ahead. She’d heard that Toyota was looking for something unusual, so she started trying to pique the carmaker’s interest.

  Braun was worried that Burnett would shop “Survivor” to another network while ABC tried to line up sponsors. By now he was convinced that Tarses was trying to sabotage every idea he supported, but he decided he’d try again to surmount the problem. He had stopped going to programming meetings to avoid Tarses, but now he retur
ned. Tarses glared at him, then looked away. He decided to ignore this, and ask a question. Everyone in the room froze. Tarses pretended she didn’t hear it. So he asked again. This time she gave a curt answer, while looking the other direction. Braun got up and walked out. Afterward, he told Mark Pedowitz, the lawyer in charge of business affairs for Touchstone Television, that he’d had enough, and he was quitting. “I’m finished. Iger just gave her a vote of confidence. No one cares what’s happening at this place. Fuck this.”

  Word of Braun’s unhappiness filtered up to Iger, and a few days later, he called a meeting. “You are going to behave like adults,” Iger told Braun and Tarses. They met in Stu Bloomberg’s office. “This is ridiculous,” Iger began, and lectured them like grade school students. “You are going to get along, and that’s it.”

  Tarses was twirling her hair around a finger, avoiding looking at Braun.

  “I’ve spoken to Jamie,” Iger continued. “I know she wants to say something.”

  “I realize I’ve made some mistakes,” she began, still not looking at Braun. “Maybe I haven’t behaved in a mature way. But it’s been hard for me. The rules changed. If you would show me more sensitivity, maybe this would work.”

  “Lloyd, do you want to say something?” Iger asked.

  “Yes, I do,” Braun said. “Jamie, I don’t believe one word you just said.”

  Braun had prepared a written list of the problems she’d caused him. He pulled a piece of paper out of his pocket and started reading: the agents she’d told not to work with him, the ABC employees ordered not to speak to him. He continued for five minutes.

  Iger grew increasingly agitated. “Are you saying you quit?” he asked Braun.

  “I’m saying this isn’t going to work. It’s my duty to say this. You decide how to handle it.”

  “This meeting is over,” Iger announced.

  That afternoon, Braun and Bloomberg met with Howard Stern, who was pitching a new show. The meeting went well; it was actually fun. It reminded Braun why he was in the television business. “Stu, this is what it will be like if Jamie is gone. I don’t understand why you defend her. She undermines you.”

  “What do you mean?”

  Braun filled him in on the threats Tarses had made to agents if they dealt with Bloomberg rather than her. “Call the one agent you trust,” Braun urged him. “Call and ask if this is true.”

  Bloomberg called Iger that night. “She’s got to go,” he said.

  Tarses was fired with two years remaining on her contract, and “resigned” on August 27, bringing to a close a tumultuous two years. “I can’t tell you how happy I am,” she told the Los Angeles Times.

  The movie sensation of 1999 looked like it was going to be The Blair Witch Project, an independent horror film that opened that summer. M. Night Shyamalan was dismayed that it would swamp his film, The Sixth Sense, which got pushed forward to August from the fall and had a modest marketing campaign that drew little attention to the fact that a major star like Bruce Willis was in the film.

  The Sixth Sense opened on August 6, to generally strong reviews (though The New York Times critic hated it). Most critics were careful not to give away any of the surprise twists Shyamalan had been so careful to work into the screenplay. It was the number one film its opening weekend, attracting the usual crowd of eighteen- to thirty-four-year-old fans of the horror genre. But then old-fashioned word-of-mouth took over, a phenomenon so rare that it was practically forgotten in Hollywood. As New York Post critic Rod Dreher pointed out, “I can’t remember the last time so many people stopped me cold to tell me how knocked out they had been by a movie. Grown men relate stories of having trouble sleeping…. Audiences can’t get enough of this movie, and they’re telling their friends and family all about it.”

  The Sixth Sense was ultimately nominated for six Academy Awards. Completed at a cost of $35 million, it earned just under $300 million in the United States alone, the most successful live-action film in Disney’s history.

  David Vogel had been right when he told Eisner that he’d left Disney with one of its biggest pictures. Vogel hadn’t found another job and had pretty much stopped looking. He had decided he no longer wanted to rely on the Machiavellian instincts he found necessary to continue as a movie executive. A few studio people called to congratulate him on the film’s enormous success, but he heard nothing from any of the top Disney executives, including Eisner, Roth, and Schneider. Of course, Vogel was one of the few people who knew that Disney had sold off the profits to Spyglass, and would earn only a 12.5 percent distribution fee. He wondered what Eisner thought now.

  In September 1999, Eisner summoned Steve Bornstein to an urgent meeting, saying he needed Bornstein to step in and run Disney’s floundering Internet ventures. Bornstein had been at ABC barely six months, and now Eisner wanted him to move to California. The only experience he had with the Internet was setting up the successful ESPN site, which was run by a Seattle company called Starwave, in partnership with Microsoft’s MSN network.

  From the early days of the Internet, the new medium had posed a challenge to the “old media” companies like Disney. The Internet was a hybrid of distribution and content. Would consumers pay for content, as they did for cable television? Or was the Internet more like a broadcast network, where revenues came from advertising? Was it both? No one “owned” the Internet, but companies like America Online and Yahoo! were “portals,” selling access to the Internet’s vast possibilities. Amazon and eBay were content sites, drawing users to the shopping services they provided. How could traditional media companies protect their markets? Simply as a defensive measure, every media company was forced into creating Internet sites that corresponded to their newspapers, magazines, and networks, profitable or not—and most were not, given that they generated little revenue from either users or advertisers.

  At Disney, these issues were constantly on the agenda for strategic planning, first under Larry Murphy and then, after his departure, under Peter Murphy. Like many executives of their generation, both Eisner and Frank Wells had been initially technophobic, slow to embrace new advances and impatient when they failed to work as promised. But with the rise of the personal computer and Internet access, Eisner had become a voracious user of email. Its speed and convenience perfectly fit his impulsive personality, especially when he was suffering from insomnia. Soon everyone at Disney carried BlackBerries, constantly scanning them for urgent messages from Eisner, who used a variety of email pen names—Michael Rust, Michael Breckenridge. Eisner also relied on Bran Ferren, an eccentric Imagineer who at least gave Eisner the illusion that he was abreast of the latest high-tech developments. Others thought Ferren lacked depth and scientific rigor, while conceding that he was adept at spinning fanciful visions of the future that seemed to appeal to Eisner.

  As usual, Eisner’s strong inclination was to build an Internet business from within. He’d summarily rejected Ovitz’s proposal to buy a minority interest in Yahoo!. Then Larry Murphy, working with Tom Staggs and a new chief technology strategist, Kevin Mayer, examined various options, and in August 1997 recommended a partnership with Yahoo!. Staggs had negotiated a potential deal with Yahoo! in which Disney would acquire a 10 to 15 percent stake in Yahoo! for $180 million in return for Yahoo! giving prominent access to all of its sites. The logic seemed compelling to Murphy.

  At a meeting to sell Eisner on the deal, Murphy argued that while the portals were likely to emerge as the dominant forces on the Internet business, Disney had arrived too late to establish its own branded portal without a massive and risky investment. The alternative was to leverage Disney’s existing sites and strong brand name to create a partnership with one of the leading portals. Murphy considered $180 million a modest sum to gain a stake in the leading portal. Murphy and his team had chosen Yahoo! over AOL, with whom they’d also had brief negotiations. AOL had suggested that Disney buy AOL outright, or even that AOL might buy Disney. Eisner personally called AOL chairman Steve Case to comp
lain about the suggestion and reject any such possibility. But the notion that AOL might try to buy Disney, far-fetched on its face, seemed less preposterous as the value of AOL stock climbed into the stratosphere.

  Murphy was well aware of Eisner’s preference for developing businesses within Disney, which had been a constant refrain ever since he’d rejected Marriott and decided that Disney could build its own hotels. But Eisner had made a major concession by buying ABC. So Murphy was both disappointed and surprised that Eisner not only rejected the Yahoo! proposal but also seemed annoyed by it. “Why do this with anyone else? We’ll do this ourselves,” Eisner insisted. He derided Murphy and his team as “wimps.” “Go back to the drawing board and come up with a plan to do this ourselves,” he demanded.

  Murphy told Yahoo! that Disney would pass on the deal. But the more he studied the alternatives, the more discouraged he became. After six months, he argued again that Disney could not enter the race alone and hope to catch up. Eisner still balked at the price of an acquisition. In the months Murphy had been studying the alternatives, Internet mania had driven stocks to extreme levels. Even as he was slightly envious about the fact that Disney stock was languishing by comparison, Eisner thought the values were absurd for companies that hadn’t earned any profits and had no clear strategy for doing so. He was determined not to pay cash, and equally determined not to use Disney stock, backed by the hard assets of the company, to buy into someone else’s “vision.” But there was also the nagging worry that a Yahoo! or AOL might make a bid for Disney, using its stock to pay for it.

  At a company meeting in New York called the “Digital Future Summit” attended by Eisner and Sid Bass, Eisner listened to various strategies, including buying one of the major portals, but decided once again that Disney should build its own. It already owned a stake in Starwave, which ran the ESPN and ABC sites, and in June 1998, Disney swapped its Starwave position plus $70 million in cash for a 43 percent stake in Infoseek, the third most popular Internet search engine after Yahoo! and Excite.