The implications of the show’s success didn’t stop with the victory over Time Warner. As a result of the previous summer’s decision to schedule “Millionaire” three times a week for the upcoming 2000–2001 season, Eisner and Iger had slashed ABC’s development budget, the rationale being that with “Millionaire” occupying so much of the schedule, ABC didn’t need to order many new pilots. And in the chaos of Tarses’s final days and abrupt departure, ABC’s development efforts were in any event already faltering. For the 2000–2001 season, there were only six comedies and five dramas in development—less than half the usual number. By the time the final decisions about the new season were made that year, there were so few options that the show’s frequency was increased from three to four nights a week.
As ABC prepared for the annual upfront presentations for advertisers in New York in mid-May, it was riding the wave of its “Millionaire”-driven ratings success, just as the continuing Internet-driven boom in new dot-com companies, all competing for public attention, drove demand for advertising through the roof. Rarely had the stars been so favorably aligned for network television. At that year’s ABC upfront presentations at Radio City Music Hall, hosted by Bloomberg and Braun, the ABC executives reveled in it. As the lights dimmed, smoke billowed across the stage and a hydraulic platform ascended, transporting “Millionaire” star Regis Philbin toward the heavens. “Go ahead, take a good look at me,” Philbin proclaimed, “the guy who saved the ABC television network.”
ABC raked in nearly $2.5 billion in upfront ad sales for the 2000–2001 season, a new record for a single network.
On May 31, “Survivor,” twice turned down by ABC, made its debut on CBS in the 8:00 P.M. Wednesday time slot. After watching heavy promotions of the new show on the Viacom-owned MTV and VH1 cable channels, ABC decided to crush it from the outset by using the heavy artillery of “Millionaire.” ABC added an additional episode of “Millionaire,” already running on Tuesday, Thursday, and Friday, to the 8:00 P.M. Wednesday time slot.
“Survivor” was exactly the show that Mark Burnett and Charlie Parsons had pitched to ABC, right down to the desert island setting (actually the Malaysian island of Pulau Tiga) and the tribal council setting with tiki torches that looked like they might have been purchased at the nearest Kmart. The sixteen contestants carefully chosen for their demographic mix contended with bugs, rats, contrived physical challenges, and one another’s treachery in a Darwinian contest to “outlast” one another. Whether this was “reality” in any true sense of the word was open to question. But it was undeniably unlike anything ever seen before on American network television, far more original and risky than the game-show-with-a-reality-twist “Millionaire.”
The overnight ratings from the eagerly watched head-to-head matchup between “Survivor” and “Millionaire” stunned Disney executives, including Eisner and Iger, who claimed never to have heard of the program until it showed up on the CBS schedule. ABC claimed victory, with 16.8 million viewers for “Millionaire.” But “Survivor” not only managed to attract 15.5 million viewers, an astounding number for an unknown summer replacement, but it beat “Millionaire” in the critical eighteen- to thirty-four-year-old demographic most coveted by advertisers. “Millionaire” failed to deliver a knockout punch, and a barrage of press hailed “Survivor” as the breakout hit of the summer.
Was its debut a onetime event and ratings fluke? While top ABC and Disney officials ducked questions, it fell to ABC spokesman Kevin Brockman to argue the case that “ ‘Survivor’ is a good stunt—but it’s a stunt.”
The next week, on June 6, ABC again programmed an episode of “Millionaire” directly against “Survivor.” The results were devastating to ABC. “Millionaire” shed a million viewers, while “Survivor” jumped to 19 million. ABC abruptly canceled the following week’s episode, and two weeks later, “Millionaire” lapsed into summer reruns, leading The Washington Post to report that “Survivor” had “demolished” “Millionaire.”
Over the summer, “Survivor” became a national fixation. One contestant, Richard Hatch, became an instant celebrity when he came out of the closet in episode two and then went on to defeat former Navy SEAL Rudy Boesch and river guide Kelly Wiglesworth. Amid an avalanche of press, intellectuals struggled to define the appeal of the new “reality” genre. (“You grudgingly have to admit it’s a lot more interesting than another episode of ‘Friends’ or ‘Frasier,’ ” Robert Thompson, a professor at Syracuse University, told The Washington Post. “It’s a cross between a frat party, a Club Med vacation, and a Girl Scout camp-out.”) In its final episode in August, “Survivor” attracted an audience of 50 million, easily surpassing the peak episode of “Millionaire,” and larger than any other program except the Super Bowl.
At Disney and ABC, the euphoria of the previous spring vanished with stunning speed, even before Braun, Bloomberg, and their colleagues had a chance to savor their success. “Millionaire’s” defeat at the hands of “Survivor” was humiliating. For Andrea Wong and Lloyd Braun, who had championed the series, it was especially agonizing. Eisner insisted publicly, if implausibly, that he would turn down “Survivor” again if offered the opportunity because it was “low brow,” didn’t measure up to ABC’s standards, and would cheapen the Disney brand. The enormous viewership for “Survivor” also gave CBS the chance to promote its fall lineup, including the other prominent ABC reject, “CSI.” Apart from “Millionaire,” ABC had failed to create a single new bona fide hit, though “The Practice,” “The Drew Carey Show,” and “Dharma & Greg” benefited from proximity to “Millionaire.”
Of course ABC still had “Millionaire.” The network hoped for another ratings sweep when the new season debuted that fall. (Unlike ABC, CBS opted to maintain “Survivor” as a thirteen-week “event,” and the next installment wouldn’t be aired until after the Super Bowl the following January.) But “Survivor” had dealt “Millionaire” a serious blow. It had lost the momentum of TV’s “hot” smash hit. Next to “Survivor,” it seemed staid and predictable. Young people abandoned it in droves, leaving “Millionaire” and its aging host to cater increasingly to an audience of couch-bound retirees.
In the November 2000 sweeps, ABC eked out a victory in total viewers, but lost the key eighteen- to forty-nine-year-old demographic to NBC, the focus of all the headlines with its hit shows “Friends” and “ER.” Because of “Millionaire,” the age of the network’s average viewer leaped from forty-one to forty-nine years. Michael Davies came under increasing pressure to create special episodes to inject some freshness into “Millionaire,” not just “Celebrity Millionaire,” but also shows featuring sports stars, college kids—anything with a twist. Braun dutifully articulated the company line: “Millionaire” “is going to be a staple of the network for quite a while.”
At the same time the network’s fortunes were faltering, the consumer products division continued its precipitous slide, with operating income dropping from nearly $900 million in 1997 to just $386 million in 2000. Disney hired Andy Mooney, a Scotland-born Nike marketing executive, to try to resurrect the Disney brand, which was still suffering from a dearth of product spin-offs from animated hits. Eisner made a point of introducing Mooney to Roy, stressing that Roy was the custodian of the Disney image, and urging Mooney to work closely with him.
In the fall of 2000, Mooney asked Roy to speak to the creative people who worked with the consumer products division, who had gathered for a retreat at California Adventure, Disney’s newest park, not yet open to the public. Mooney spoke first, stressing the importance of the Disney brand. But Roy immediately contradicted him. “Branding is for cattle,” Roy said, arguing that what was important was creating stories and the products they generated.
That Christmas, Mooney had the idea of creating a mountain of all-white plush toys in the Disney stores. This meant that Disney would have to produce a “white” version of a plush Mickey. Store managers warned Mooney that this was heresy; Mickey was black, period. Moone
y thought this was ridiculous. Roy complained to Eisner and Iger, who nonetheless backed Mooney.
Mooney and Roy began clashing over nearly everything Mooney proposed. When he wanted to launch a “princess” line of merchandise, Roy argued that it was inappropriate to portray and market characters like Cinderella and Snow White together when in the fairy tales they inhabited separate worlds and never knew each other.
For Roy, the last straw came when Mooney began marketing Disney-themed vintage T-shirts in upscale clothing boutiques like Fred Segal and Barneys and trendy clothing chains like Hot Topic. One shirt showed Snow White with the caption “Hangs out with seven small men.” Another showed an archival drawing of Tinker Bell eyeing her derriere in a mirror. Roy sent Mooney a handwritten note: “You are positioning Tinker Bell as a prostitute.” The shirts were hastily withdrawn, and Iger made Mooney apologize.
Iger was increasingly annoyed with Roy, who even urged that Mooney be fired. But the dispute over such seemingly minor details was a symptom of a far deeper disenchantment between a management determined to boost revenue and profits, and Roy, who felt the Disney company was abandoning the creative heritage he had spent his life trying to protect.
Despite those disquieting signs, Disney was enjoying an excellent fiscal year. The combination of a strong ad market, ESPN’s continuing success, and ABC’s rating performance contributed to a 39 percent jump in Disney’s operating income for fiscal year 2000, which ended in September. The Miramax and Dimension units had proven to be a wildly successful acquisition, with hits in 2000 like Scary Movie ($157 million gross domestically) and Scream 3 ($89 million) as well as continuing revenues from 1998’s Shakespeare in Love and 1997’s Good Will Hunting. The Weinsteins had seized on their success to renegotiate their contract, and had expanded their financing commitment to $700 million.
The theme parks also contributed a strong performance, partly due to millennium celebrations and a healthy economy leading to robust tourism throughout the summer. Still, in contrast to Eisner’s early years at Disney, where raising the admission prices and building hotels had made the theme parks a spectacular engine of growth, it was increasingly clear that the theme parks were becoming just another cyclical business, ebbing and flowing with consumer confidence and the strength of the economy, which were factors beyond Disney’s control.
Cost containment at the studio and in animation helped to mask the fact that the projects hailed by Eisner just a year earlier had been commercial and critical failures. The much-anticipated Dinosaur, Disney’s first computer-generated animated feature, meant to show that Disney could match the technical prowess of its partner Pixar, opened a week before the Memorial Day weekend to mixed reviews and a $39 million opening weekend at the box office, a disappointment considering Dinosaur’s $128 million budget. It wasn’t the technology that was at fault. Dinosaur featured actual locations filmed as backdrops, with computer-generated dinosaurs and other characters imposed onto them. The opening sequence, a sweeping, panoramic excursion through a tropical, prehuman world, was uniformly praised, as was the realism of the computer-generated dinosaurs. But the story left many viewers and critics cold. Apart from elements of the standard Disney formula (the orphaned protagonist, the wise-cracking sidekick, the uplifting ending), Dinosaur was criticized for its graphic depiction of carnivorous T. rexes devouring other animals, and for the stark devastation of a meteor impact.
Whatever the shortcomings of Dinosaur, they paled next to Kingdom of the Sun, which was little short of a disaster. It had now been rechristened The Emperor’s New Groove, a transparently desperate attempt to make the story, set in the Inca empire, seem more hip. The original drama and musical score had been almost entirely discarded in favor of a lighthearted comedy. Groove was now scheduled for a Christmas release, with Atlantis pushed back to summer 2001. Only Remember the Titans, a Jerry Bruckheimer production based on the true story of the integration of a Virginia high school football team, made on a non-Bruckheimer budget of just over $30 million with no big stars, turned out to be a solid hit, grossing over $100 million.
Still, the success of Titans was just what Eisner needed to feel that his decision to get rid of Joe Roth and his return to the low-budget “singles and doubles” strategy had been vindicated. He extolled “this wonderful—and moderately budgeted—motion picture” in his annual letter to shareholders. Peter Schneider had green-lit the project on the proviso that the script, which was riddled with profanity, be rewritten to eliminate all four-letter words, so the film could be marketed under the Disney label. However odd it seemed that no member of a 1971 Virginia high school football team ever swore, it nonetheless was precisely the kind of “family” entertainment Eisner wanted more of.
Eisner’s real excitement was reserved for Pearl Harbor, which he was forcing Peter Schneider and Bruckheimer to bring in on the sharply reduced budget of $140 million. “Coming Memorial Day weekend, we have as close to a sure thing as you get in this business—‘Pearl Harbor,’ produced by Jerry Bruckheimer and directed by Michael Bay, the same team that brought us ‘The Rock’ and ‘Armageddon,’ with an all-star cast headed by Ben Affleck,” Eisner wrote shareholders. “Wait a second. I take back that this is a ‘sure thing.’ That is bad luck. It is not a sure thing. It’s an absolutely fantastic, probably successful film that should surely draw a significant audience.”
In contrast to the rosy optimism about the Internet expressed by Eisner just a year earlier, in the 2000 letter to shareholders he sounded a cautious, even defensive, note. Disney’s Internet group was now characterized as “embryonic and evolving. But, unlike many Internet businesses, ours is based on solid assets that should help power this cylinder to performance down the road. Yes, the Internet Group currently posts losses, and yes, that really concerns me and our management…. In many ways, today’s Internet environment is reminiscent of Disney’s early days. Walt and Roy achieved moderate success experimenting with silent cartoon shorts. Then came what we today would call a ‘killer ap’—in this case, synchronized sound. The Disney Studios produced the first sound cartoon, starring Mickey Mouse, and overnight, Disney became a household name. The Internet is still in its infancy, but we are closer to the day when it will be transformed into a true entertainment medium…and our company will once again be poised at the cutting edge—and helping us out will be Mickey Mouse.”
It could be argued that this is exactly the kind of visionary thinking a chief executive should possess, but it was also what Steve Bornstein, the person in charge of the Internet Group, who was somehow supposed to wring a profit out of the assets, found so frustrating. The truth was that Mickey Mouse was not going to rescue Go.com.
In February 2000, Bornstein convened a meeting at the Team Disney building to confront the future of Go.com. He saw no way out of the financial morass, and he was tired of arguing about it with Eisner. “Let me be blunt about this,” Bornstein said. “We cannot compete and win.” The portal strategy was a failure. Go.com was never going to be another Yahoo! or AOL. It was a hodgepodge of Internet assets that Disney had cobbled together on the cheap. Building a portal “was a flawed objective carried out with a poor strategy,” he argued. Bornstein argued again that Disney should maintain its websites as line extensions of its various brands—ABC, ESPN, the Disney channel, the theme parks—but abandon the idea of a portal and a separate Internet division.
Bornstein knew this was the equivalent of corporate suicide. After the meeting, Peter Murphy came up to him. “I’ve never seen anyone at Disney show that kind of courage or conviction,” he said. Bornstein wasn’t looking for protective cover. This was his conclusion and he was ready to take responsibility for it. He knew it wasn’t what Eisner wanted to hear. He had done what he could for Go.com, but he wasn’t going to remain in a hopeless quest. He knew his future at Disney was probably doomed, no matter how successful he’d been at ESPN. Disney was not a culture where anyone could admit defeat and expect to survive. His relationship with Eisner was alre
ady damaged. Now it was probably beyond repair.
In a public concession of defeat, Disney exchanged the tracking stock for regular Disney shares in January 2001. In its own way, Disney’s failure marked the end of Internet euphoria, and the stock market bubble that accompanied it. It was the first major concession of what was becoming obvious, but still unspoken: For all its promise, the Internet was yielding few business models that made any sense. Go.com tracking stock ceased trading on January 29; the NASDAQ composite average had hit an all-time peak ten months before, in March 2000.
In the ensuing months, the bottom fell out of the technology sector as a whole, and the Internet segment in particular. AOL Time Warner was especially hard hit, fully vindicating Eisner’s belief that Time Warner had exchanged valuable hard assets for a grossly inflated stock. Although Eisner had long argued that chief executives should be measured by what they did—the movies they green-lit, the TV pilots they bought—as opposed to the things they turned down, rebuffing an offer from AOL was arguably Eisner’s best decision of the decade, since the consequences would have been ruinous.
Still, it is faint praise to say that things could have been worse. The AOL Time Warner disaster didn’t change the fact that Eisner, too, had been seduced by the promise of the Internet. Disney had squandered the assets it built up in Starwave to buy Infoseek at the peak of the market, and had poured more millions into trying to make the unwieldy combination work. Ultimately Disney’s foray into the Internet cost it over $1 billion on paper, and when it bought back the Go Network’s shares, Disney had to take a write-down of $790 million.
Somewhat to Bornstein’s surprise, Eisner said he didn’t want him to leave the company. Despite the optimism about ABC in his letter to shareholders, and his decision to make Iger president, with primary responsibility for ABC, Eisner was nervous about the network’s faltering prime-time development and its dependence on a single hit, “Millionaire.” So he asked Bornstein to assume a new position as president of ABC, Inc., which inserted him into the management hierarchy under Eisner and Iger, but over Alex Wallau, president of the ABC Network, as well as Stu Bloomberg and Lloyd Braun.
DisneyWar Page 48