DisneyWar

by James B. Stewart

  When he returned to California, Gold called Watson, now the longest-serving member of the board. They met for lunch at Sai Sai, a Japanese restaurant in the Biltmore Hotel in downtown Los Angeles, far from Burbank and Hollywood, as they did every year for a private discussion. “Things are bad,” Gold said. “I believe Michael has lost his way.” Like Murphy, Watson readily agreed that it might be time for a change. Management is in “chaos,” he said, adding that Eisner had “no sensible plan” for solving the problem or finding a successor.

  It came as a surprise to Gold when, less than a week later, he got a call from Eisner. “I know you’re talking to people,” Eisner said icily.

  Gold realized his confidence had been betrayed. He assumed Watson had told Eisner, since Gold had heard nothing after his lunch with Murphy. Still, he couldn’t be sure.

  With Iger making the decisions for the ABC network that spring, Steve Bornstein had little choice but to focus on the troubled Family channel. With the “repurposing” strategy in turmoil and the plight of the Family channel worsening by the day, he turned to Angela Shapiro, a veteran of ABC Daytime, whom he considered one of the company’s most talented creative executives. She was attractive and vivacious, and popular with her staff. “Why me?” Shapiro asked. “I know nothing about it. I don’t even watch cable.” She was also candid. Earlier, she’d warned that “I’m not a corporate politics person. If you ask me what I think, I’m going to tell you.”

  Bornstein insisted that he needed someone creative to take charge. Shapiro sat in on a Family channel meeting, where she quickly realized the strategy was a shambles. “What’s the brand identity?” she asked. No one knew. “Who’s the target audience?” No answer.

  Iger, too, tried to persuade Shapiro. She liked Iger. Like many people, she’d been smitten with his candor, sensitivity, and creative instincts when she first came to ABC. They discussed ABC Daytime, and found they agreed on nearly everything. Shapiro warmed to the idea of working with Iger on the Family channel.

  Still, she had one major reservation: She was not going to report to cable division head Anne Sweeney. Shapiro and Sweeney had clashed repeatedly after SOAPnet was launched. As a cable channel, it reported to Sweeney’s cable group, but it also had to work closely with ABC Daytime, run by Shapiro. Sweeney, the ambitious and polished administrator, and Shapiro, the more freewheeling creative executive, were polar opposites. Sweeney seemed to reject everything Shapiro and her staff suggested. As long as she didn’t have to repeat the experience with Sweeney, Shapiro was willing to at least consider taking the job.

  “Who will I report to?” Shapiro asked Iger. “I can work with anyone except Anne Sweeney.” Iger promised her she wouldn’t report to Sweeney.

  When Shapiro described the meeting with Iger to Bornstein, she stressed Iger’s promise, and said she wanted the same assurance from him. But she didn’t mind reporting to Bornstein. “If you’re the head of both ABC and this channel, then I’m sure we can get the job done,” she told him. Bornstein assured her that the channel would stay tied to ABC, even though the repurposing strategy was in doubt. “I guarantee this will never go to cable, and Anne Sweeney will never run it,” he pledged.

  Shapiro had another meeting with Iger, which she later described to her staff. “Michael and I really think you should take the job,” Iger told her. “You’re perfect.” Iger stressed that it would be Shapiro’s task to devise a new creative strategy for the channel. She asked specifically if it had to be a “family” channel, and Iger assured her she could change the channel’s name to reflect a new identity. Creatively, the channel was a “blank slate.”

  It seemed like an exciting challenge. Linked to the ABC Network, the channel could experiment with all sorts of original programming, and if something really took off, it could move to ABC’s prime-time schedule. When Shapiro accepted the job, she insisted that Iger’s promise that she would not report to Anne Sweeney be written into her contract, which guaranteed that she would report to the head of the ABC Network division, and not to the cable networks group. (Disney maintains that Shapiro’s contract was ambiguous on that issue.)

  In late April 2002, Bornstein was summoned to a meeting in Iger’s office. Iger began by talking about how hard it was to be age fifty-two with a baby at home. Despite their differences, he and Bornstein often bantered about the fact that they had much younger wives. Unlike Iger, Bornstein and his wife didn’t have children (the tables were later turned when Bornstein’s wife gave birth to twins). Iger said he’d been at the beach that weekend as part of a “baby group.” The conversation idled to a close, and then Iger turned to the real reason for the meeting.

  “This isn’t working out,” Iger said.

  “No, it isn’t,” Bornstein readily agreed.

  Angela Shapiro was at the airport waiting for Bornstein. They were scheduled to embark on a goodwill tour to introduce Shapiro to media and advertisers. Shapiro had just boarded the corporate jet when she got a call from Zenia Mucha, the head of corporate public relations, telling her that Bornstein wouldn’t be showing up, and she should go ahead on her own.

  After the plane took off, Bornstein called Shapiro. “I had a meeting this morning,” he reported. “I’m not here anymore.”

  For the man most responsible for building ESPN, once perceived as a possible successor to Eisner, it was a dizzying fall from grace. It wasn’t as though he hadn’t seen it coming. Bornstein had resisted both the Internet and subsequent ABC assignments, but had taken both out of a sense of corporate duty. At ABC, wedged in the cumbersome management hierarchy between Eisner and Iger above him, and Braun, Lyne, and Wallau below, it was hard to see what authority he had, yet he was blamed for two doomed missions, first the Internet operation and then the Family channel. With his departure, yet another threat to Iger—or, for that matter, Eisner himself—had been dispatched.

  Two weeks later, Susan Lyne and Braun stepped onto the stage at Disney’s New Amsterdam Theatre to unveil ABC’s lineup for the 2002–2003 season—the third executive team to greet advertisers in as many years. With Eisner and Iger in the audience, Lyne and Braun outlined the strategy that had evolved from Braun’s earlier presentation to the board, a return to ABC’s “roots” as a haven for family-oriented comedies like the Eisner-era “Happy Days” and “Laverne & Shirley” or, more recently, “Roseanne.” This year, Braun and Lyne had twenty-nine pilots to choose from, far more than the previous year’s impoverished development slate. Yet twenty-five of them came from Disney’s own Touchstone studio, fueling the perception that Disney was inhospitable to promising shows from other producers. Besides the mid-season entries of “George Lopez” and “According to Jim,” ABC touted “8 Simple Rules for Dating My Teenage Daughter” and “Life with Bonnie,” starring Bonnie Hunt as a talk-show host. Of course, ABC could not simply return to a past of scripted comedies. It planted the second installment of its new reality hit, “The Bachelor,” on Wednesday night against NBC’s acclaimed “The West Wing.”

  Disney executives were especially hopeful about “8 Simple Rules,” starring comedian John Ritter as a sportswriter who must take a more active role raising his teenage daughters, especially after his wife goes back to work. The program had a special resonance for Eisner, since Ritter was a star of “Three’s Company,” a huge ratings success for ABC twenty-five years before, during Eisner’s tenure at ABC. Ritter hadn’t had a hit series since, and had been reduced to guest star appearances on other shows. Initially, ABC wanted “Roseanne” star John Goodman for the role, and even made Goodman an offer. But when those negotiations foundered over the issue of Goodman’s salary demands ($200,000 per episode), ABC executives reviewed tapes of Ritter’s recent appearances on J.J. Abrams’s “Felicity” as well as “Ally McBeal” and “Law & Order,” and liked what they saw.

  Braun was so impressed by the pilot that he and Susan Lyne placed “8 Simple Rules” in the critical time slot of 8:00 P.M. Tuesday, when it would serve as the lead-in to a comedy bl
ock that included “According to Jim,” “Life with Bonnie,” and “Less Than Perfect.” Eisner had used Tuesday night to rebuild the ABC schedule when he was in charge of programming, and “8 Simple Rules” inherited the slot once occupied by “Happy Days.” Viewer reaction to the new Tuesday lineup would thus be a referendum on ABC’s new strategy of family comedies with broad appeal.

  Still, the new schedule was hardly the unfettered work of Braun, Lyne, and their staff. ABC announced that a remake of the 1960s hit police drama “Dragnet” would air once “NFL Monday Night Football” ended its season. “Dragnet” was hardly original, but Braun and Lyne were eager to get something from producer Dick Wolf, famous for “Law & Order.” Eisner liked it, as did Fred Silverman, the former ABC programming head and Eisner’s former boss, whom Eisner had retained that spring as a consultant to the network. That meant that at least seven high-level executives had a say in the ABC schedule—Eisner, Iger, Silverman, Bornstein, Wallau, Braun, and Lyne, as well as Jeff Bader, who was in charge of scheduling.

  At least the schedule had some semblance of coherence. But Braun and Lyne didn’t want to overpromise, or suffer from inflated expectations. “We want to be as aggressive as we can in the fall with our new shows but at the same time be realistic that we can’t expect to fix things all at once,” Braun told the press.

  One of the new shows that didn’t fit Braun and Lyne’s “back to basics” theme, but was undeniably original, was a show from LivePlanet, Ben Affleck and Matt Damon’s new production company, called “Push, Nevada.” Iger was especially enthusiastic about the unusual drama, which featured a fictional IRS agent in a peculiar town in which viewers looked for clues and could win a prize for solving the mystery. Iger said he thought it could be the next “Twin Peaks.”

  Produced by Disney’s Touchstone division, Disney did own the repurposing rights for “Push, Nevada,” and Eisner thought it was perfect for demonstrating the inherent synergies in the Family channel acquisition. At one of his first meetings with Shapiro, he urged her to run episodes of the series on the channel. “Are you kidding?” she asked. “There’s a guy stark naked, seen from the rear end. You can’t put that on a ‘family’ channel.”

  Eisner said he didn’t see why not. “Get edgy,” he urged.

  Shapiro resisted. “Push, Nevada” had such low ratings that Eisner stopped mentioning it. It was soon canceled.

  Soon after, Shapiro had a testy exchange with Peter Murphy, head of strategic planning, who called demanding to know what her “vision” was for the channel. In a version of their encounter soon circulating within the Family staff, Murphy demanded an immediate answer, adding that he was under pressure from the board. Shapiro said she needed time to research the issue, but Family staff members were indignant. Murphy and other members of top management must have had a vision when they bought the channel. Otherwise, what were they thinking?

  In light of Gold’s intensified scrutiny and the recent weak results, preparation of Disney’s new five-year forecast, which would be presented at the June 2002 board meeting, took on unusual importance. In May, Eisner and Iger convened a series of meetings with division heads to review the targets, and prior to those meetings there were numerous rehearsals. At the Family channel, responsibility for the plan fell to Angela Shapiro, but for the financial aspects she relied on Jim Hedges, chief financial officer for the ABC TV Network, and Spencer Neumann, who reported to Alex Wallau. Neither Hedges nor Neumann could get Murphy or anyone else at strategic planning to give them the projected numbers that had been used to justify the purchase. Finally, strategic planning delivered the targets, but the Family executives couldn’t figure out how they had been derived. All projections are necessarily somewhat conjectural, but the assumptions are supposed to be based on fact.

  In reality, the Family channel was falling far short of the projections from strategic planning. Hedges and Neumann worked with their numbers, but couldn’t come up with anything close to the strategic-planning targets. Tensions mounted. Finally Shapiro and her staff were told that Iger was taking the unusual step of attending the next rehearsal for their presentation, an ominous sign that Peter Murphy and his staff weren’t happy.

  Shapiro was out of town, so she participated by phone. There were at least ten people in the room. Iger had a copy of the latest projections from Neumann and Hedges. “You’ve got to go back and rework these,” he ordered.

  Neumann and Hedges said they had tried, but couldn’t get to the numbers.

  “We can’t be this far off,” Iger insisted.

  “We don’t know how to get even close to these numbers,” Shapiro interjected over the speakerphone, a point reiterated by her staff.

  “We can’t present a number to the board that is hundreds of millions lower than we just gave them a few months ago,” Iger insisted.

  “Bob, I’ve never presented numbers I can’t deliver,” Shapiro replied. “You should know that I’m having a very hard time with this.”

  Still, the Family staff went back to the drawing board, and came up with numbers that, while still short of what strategic planning wanted, were as aggressive as they felt they could possibly justify. (Iger confirmed that Family executives and Murphy were at loggerheads, and that he intervened. He said it’s entirely appropriate to push executives to produce better numbers, he has done so many times, and that it often produces better and more accurate results.)

  All of this was in preparation for the meeting in late May 2002 where Shapiro had to present plans for the channel to Eisner, Iger, chief financial officer Tom Staggs, and Peter Murphy. At the meeting she stressed the creative approach she was hoping to develop for the channel, which would be aimed at younger women. She obviously wished she could leave it at that, but she couldn’t avoid the numbers. “Michael, the finance people will take you through the numbers, but you should know that they’re incredibly aggressive.” For good measure, she repeated, “Corporate has made me feel that it’s imperative that we reach these numbers, but you should know that these numbers are incredibly aggressive.” She stressed the word incredibly.

  As she paused, there was silence in the room. Finally Eisner spoke. “Angela, I need you to look at me. Either you are totally exaggerating, and these numbers are not aggressive, or you’re saying that we really overpaid for this channel.”

  Shapiro paused to ponder her alternatives as everyone at the meeting practically held their breath. There was no good response.

  “I’m waiting for an answer,” Eisner said.

  Shapiro took a deep breath. “I had nothing to do with the purchase of the channel,” she said. “I can’t speak to the reasoning or the purchase price. All I can tell you is that these numbers are more than incredibly aggressive.”

  Eisner frowned, then seemed resigned. He stood up. “I hear what you’re saying. I don’t envy you,” he said. “You have a really bad job.” Then he walked out.

  Early in the summer of 2002, Pixar’s Steve Jobs invited Disney’s Thomas Schumacher to visit Pixar’s new animation facility in Emeryville, just outside of San Francisco, which featured a badminton court in the lobby. Jobs and Lasseter were obviously proud of their new creation. At the end of the tour, Lasseter said, “I’ll see you guys back at the studio,” and walked toward his car. “I’ll give you a ride back,” Jobs told Schumacher. It was obvious he wanted a chance to speak to him alone.

  The relationship with Disney is “going so well,” Jobs began, ticking off the amazing string of successes: Toy Story, Toy Story 2, A Bug’s Life, and the previous year’s Monsters, Inc. “I love you,” Jobs continued, “but I’m furious with Michael.” He reminded him of Eisner’s stubbornness over the sequels to Toy Story, and again brought up Eisner’s testimony in Congress. “How can I be a partner with someone like that?” Jobs asked. “I don’t trust Michael. I don’t know who I can trust.”

  It was an awkward half-hour ride, since there wasn’t much Schumacher could say without seeming disloyal to Eisner.

  W
hen he returned to Disney headquarters, Schumacher sought out Eisner. “Michael, let me tell you, they’re really pissed off.”

  Eisner brushed aside his concerns. “They’ll get over it. Steve Jobs and I will take a walk.”

  Schumacher wasn’t the only Disney person to whom Jobs reached out that summer. One day, Roy Disney bumped into Dick Cook, chairman of the studio, in the parking lot. Jobs had refused to negotiate directly with Eisner. So Cook was acting as an intermediary. “Steve Jobs would love to talk to you,” Cook reported, “but he doesn’t want to call you directly.”

  So Roy called Jobs. As he had to Schumacher, Jobs aired a long list of grievances against Eisner. “He’ll say one thing one day, another the next, and then he’ll deny saying it at all,” Jobs complained. Roy had heard much the same thing from Lasseter. “I just don’t see how the relationship can continue as long as Eisner is there,” Jobs concluded.

  Roy empathized with Jobs, and the next time he was in San Francisco, he had dinner at Jobs’s home in Palo Alto. Roy had an Eisner story of his own to match every one that Jobs told. He shared his observation that when Eisner and Wells came to Disney in 1984, it had been like the scene in The Wizard of Oz where the Munchkins are freed from the Wicked Witch of the East, and sing, “Ding, dong, the witch is dead.” Now Eisner had become the witch. Jobs nodded in agreement. “I’ll never make a deal as long as Eisner is there.”

  When he returned to Los Angeles, Roy briefed Gold on the dinner, and said he was gravely worried about the Pixar relationship. Though they didn’t want to reveal that Roy had met with Jobs, they began injecting concerns about the Pixar negotiations into their periodic letters to the board. But it didn’t seem to do any good.

  Later that summer, Shapiro convened a retreat at the new Grand Californian Hotel at Disneyland to forge an identity and a new brand for the Family channel. Now that “repurposing” had been discredited as an overall programming strategy, and Bornstein was gone, the staff felt liberated. Using reams of market research, they examined the landscape of cable channels to find a demographic that was underserved, and while there were no obvious holes, they targeted two: baby boomers, a group now in its forties and fifties, and thus neglected by the major networks and their advertisers, and women aged eighteen to thirty-four, a key advertiser demographic. The group could find no rationale for a broad “family” channel, which made little sense given cable’s appeal to narrower interests, and the wide range of alternatives already available.