In the weeks after the retreat, Shapiro settled on the women’s idea, a segment she knew well from her experience in daytime. The eighteen to thirty-four age group also complemented Disney’s existing properties, since the Disney channel drew young viewers and ABC was skewing older. Her team named the prototype channel “Pink,” and created a logo, branding and marketing campaign, and sample schedules. In August, she and her staff members met with Iger and Disney’s general counsel, Alan Braverman, in Iger’s conference room to unveil the new concept. “This is what we can be,” Shapiro concluded.
Braverman looked awkward. “There’s one problem with this. We have an agreement with Hearst that we won’t compete directly with Lifetime.” Co-owned by Disney and Hearst, Lifetime was the leading cable channel aimed at women, though its audience skewed older than the target for “Pink.” The room fell silent. Were there loopholes? Braverman said he’d research the agreement.
Soon after, he delivered the verdict: “Pink” was out.*
So the Family staff went back to the drawing board, and developed another concept, still aimed at the eighteen- to thirty-four-year-old, post-MTV demographic—a “Pink” that would appeal to both men and women. It would be fun, sexy, with lots of reality, led by ABC’s “The Bachelor.” The leading competitor for that demographic was Comedy Central, but it skewed male. The new channel was dubbed “XYZ,” an amusing alphabetical counterpoint to ABC.
Shapiro gave another presentation in Iger’s conference room, this time with Eisner present. Everything was done in blue and green, the colors of XYZ’s new logo. “This is fantastic!” Iger exclaimed. “You’ve nailed it.” Eisner, too, said he loved it. He picked out the logo from several prototypes: slanted, spray-painted letters with a 1980s graffiti look. Even Braverman liked the idea.
Now that she had Eisner’s and Iger’s backing, Shapiro organized a second presentation for Anne Sweeney and members of her cable group. When she and her staff finished, Sweeney spoke up. “I’m not sure, but I think our affiliates are telling us we have to keep this a family channel. This may be tough.”
“What do you mean?” Iger asked.
“I didn’t know this was the direction you were moving in. All the contracts say this has to be a ‘family’ channel or the affiliates can opt out,” she said.
Once again the room fell silent. Sweeney suggested that Shapiro could try to slip the new programming into Family’s prime-time slots, without any marketing or advertising support. Perhaps the cable operators wouldn’t notice or, by the time they did, ratings would be high enough that they wouldn’t care. But Shapiro argued you couldn’t raise ratings if you couldn’t market the new shows. Braverman said he’d review the contracts. A few days later, he delivered the verdict: no to XYZ.
Shapiro and her staff couldn’t believe the issue of the channel’s name change was only being confronted now, and not before the acquisition. Hadn’t someone reviewed the affiliate contracts?* Discouraged, she and her staff locked themselves in a room for twelve hours. What could they do creatively if they stayed with the concept of “family”? Maybe they could stretch it. Just about anything could be a “family” these days—friends, boyfriends, girlfriends. They decided to try to recast “XYZ,” a hipper, younger bookend to ABC, but still a “family” channel, in the broadest sense.
There seemed to be no alternative. In anticipation of the new name and brand, Shapiro began running “Bachelor” episodes and another reality show developed at Disney’s Buena Vista studio and by Fisher Entertainment called “The Last Resort,” which featured couples trying to save their relationships at a tropical resort. Admittedly, scenes of scantily clad couples in hot tubs stretched the notion of “family” fare. But the channel still had vestiges of its previous identity, such as a morning block of Power Rangers and shows aimed at young boys.
Shapiro lobbied hard to introduce the new “XYZ” channel name and eighteen to thirty-four brand identity. But Sweeney and her staff said affiliates were threatening to use any name change as an excuse to drop the channel or to renegotiate their contracts with lower fees. “Who?” Shapiro asked. “What affiliates might we lose? Tell us what the risks are.”
No one at the Family channel got any answers. “XYZ” hung in limbo as the channel’s identity became even more confused. Shapiro may have negotiated a contract that guaranteed she wouldn’t report to Sweeney, but it was obvious to the Family staff that she was being blocked at every turn.
Earlier that year, Dick Cook, now co-heading the film studio with Nina Jacobson, called Jerry Bruckheimer about a new project. “You won’t be excited, but take a look,” Cook told him—hardly a ringing endorsement. The project had begun life as another attempt to carry out Cook’s idea to mine the theme parks for movie ideas. First there had been the The Country Bears, based on Disneyland’s singing bears, and Disney vice president for production Brigham Taylor had sketched out an idea for Pirates of the Caribbean, initially as a cheap, direct-to-video project. (The Haunted Mansion, another venerable theme park attraction, was also in development.) But during a meeting to discuss whether Disney should invest in Master and Commander: Far Side of the World, an expensive seafaring adventure starring Russell Crowe (Disney passed), Taylor mentioned his pirate idea, and suggested Disney might do its own adventure movie set on the high seas. Jacobson had encouraged him to develop a script.
After talking to Bruckheimer, Cook sent over a new script by Jay Wolpert based on the pirate ride. As Cook had predicted, Bruckheimer was under-whelmed. “It’s not a movie I’d go see,” he told Cook, and Bruckheimer had long adhered to the self-imposed standard that he’d only make movies he’d want to see. But Bruckheimer knew two writers who were fascinated by the pirate genre, Ted Elliott and Terry Rossio, who had just written Shrek. Cook said he’d show them the script. Ironically, they’d already pitched a pirate movie to Disney and had been turned down.
After seeing the script, the writers called Bruckheimer with a fresh idea: make the pirates cursed (the same idea they’d pitched to Disney before). The pirates would already be dead, trying to return a stolen treasure to earn their final resting place. Visually, they’d look mortal, but would turn into skeletons in the moonlight. Now Bruckheimer’s interest was piqued. He called Cook to say he was interested in something that would merge the pirate and supernatural genres.
As the new writers went to work on the script, Bruckheimer flew to St. Tropez to meet with actor Johnny Depp. Depp, the sultry, iconoclastic star of the cult classics Ed Wood, Edward Scissorhands, and What’s Eating Gilbert Grape? was hardly an obvious choice for a Disney action-adventure. Depp had turned down the chance to star in such mainstream hits as Speed and Titanic. Nor had his films been big commercial successes. But Depp and his companion, French actress Vanessa Paradis, now had two young children, and Depp had hinted that he was interested in performing in films his children might enjoy watching.
It would be hard to imagine a more striking contrast between the bohemian, irreverent Depp and the conventional, buttoned-down demeanor of Dick Cook. But the two had met six months earlier, and had gotten along surprisingly well. Cook stressed that he hoped Disney and the actor could work together. Still, a pirate movie conjuring up dated images of Errol Flynn with earrings and bandanna was hardly what Depp had in mind. Bruckheimer stressed that this wasn’t going to be a conventional pirate movie, especially if Depp took the lead role of the renegade pirate, Jack Sparrow. Bruckheimer wanted to reinvent the genre.
With Depp at least interested, Bruckheimer approached director Gore Verbinski, someone he’d been talking to since Con Air. A former rock guitarist, Verbinski had moved from directing music videos to the cult horror hit The Ring. “I thought the pirate genre was extinct,” Verbinski told Bruckheimer. But the more Verbinski thought about it, the more intriguing the project sounded, especially if Depp committed to it. With Bruckheimer attached, he knew he’d get a big budget. If they failed, they’d fail big. He liked the element of risk. When else would he get the c
hance to do a big-budget pirate movie?
With Depp still uncommitted, Verbinski met the actor in London. Depp was having some trouble with the notion of working for Disney, which symbolized everything he wasn’t. “What can we do that will really freak the studio out?” Depp wondered.
“Pirates are gross and disgusting,” Verbinski pointed out, encouraging Depp to use his imagination.
“Yeah! That’s great,” Depp said. Then he had an inspiration: Jack Sparrow would already have had his nose cut off, leaving nothing but a bloody wound. “I could play the whole part without a nose!” Depp enthused.
“Uh-huh,” Verbinski replied, noncommittal. He knew that would never fly, but why make an issue of it? “See how liberating this could be?” Verbinski continued, noting that there was another “straight” part, the romantic hero, which meant the Sparrow character could be as eccentric as Depp wanted.
Images started popping into Depp’s mind: Lee Marvin in Cat Ballou. Rock stars. Keith Richards prancing around the stage as lead guitarist for the Rolling Stones.
“This could be the end of our careers,” Verbinski mused, “but let’s have fun.”
Once Depp committed to do the film (for a relatively modest fee, but also a cut of the gross), Verbinski turned to Orlando Bloom for the role of the “straight” romantic lead, and sent a script and cover letter to Geoffrey Rush, whom he wanted for the part of Barbossa, the villain and pirate captain. “Barbossa is both treacherous and charming and requires a commitment to that wondrous archetype of villainy that has been missing from cinema for so long,” Verbinski wrote Rush in a cover letter with the script. “As I look across the landscape of contemporary actors I cannot think of anyone else but you who has the ability to make Barbossa simply delicious. This is a big pirate movie that turns the genre on its head.”
Rush loved the reference to “simply delicious.”
All that remained was the issue of budget. Eisner had groaned when Cook presented him with the notion of a $120 million period costume drama on the high seas—a recipe for disaster. Every recent pirate movie had failed, including 1980’s The Island, based on a Peter Benchley novel that Eisner had tried to buy while he was still at Paramount. Thankfully he’d been outbid by Universal. Cutthroat Island with Geena Davis was a 1995 flop. Why would this be any different? Eisner rejected the idea out of hand.
Bruckheimer called him repeatedly. Finally Eisner agreed to attend a meeting at Bruckheimer’s luxurious offices in Santa Monica, but he was still determined to kill the project. Bruckheimer had assembled storyboards, and drawings of the major scenes: the island of the dead, the Caribbean port under siege, the skeletons under water and on the moonlit pirate ship. After getting a tour and running commentary from Verbinski, Eisner sat down. “I love it,” he said. “Why does it have to cost so much?”
“Your competition is spending $150 million,” Bruckheimer countered, ticking off projects like the Matrix and The Lord of the Rings, franchise films that were allowing Warner Bros. to dominate at the box office. Disney desperately needed a franchise of its own.
Eisner shook his head in exasperation. “The theme park is a drawback,” he said, “Country Bears” still in mind. “Let’s move this away from the park.”
If only he knew, Verbinski thought. With Depp as Jack Sparrow, there was no danger that anyone would confuse this film with the charming but tame Disneyland ride.
It was no wonder Eisner was worried about a $120 million budget for a pirate movie. As the summer of 2002 unfolded, forces beyond their control buffeted Disney and Eisner. Economists confirmed that a recession had begun even before the terrorist attacks of September 11. Investor and public confidence had been shaken by an unprecedented series of corporate scandals beginning with Enron in the fall, and continuing with WorldCom, Tyco, Adelphia, and HealthSouth. It was the dark side to the booming 1990s. The stock market decline that began with the bursting of the Internet bubble in the spring of 2000 had turned into a rout, with the technology-heavy NASDAQ index losing an unprecedented 80 percent of its value.
Eisner’s view of the AOL Time Warner merger was vindicated when AOL stock turned out to be the inflated paper he had always claimed it was. In the midst of an SEC investigation into accounting fraud at AOL, Gerald Levin was forced to resign. A shareholder initiative to withhold support for the reelection of chairman and director Steve Case garnered about 22 percent of the total, not enough to force his ouster, but a shocking vote of no confidence nonetheless. Bowing to the inevitable, Case resigned on May 16, 2003.
By these standards, Eisner and Disney seemed like pillars of ethical and prudent behavior. However much Disney had lost on its own failed Internet venture, it paled in comparison to Time Warner, whose deal with AOL was now widely derided as the worst deal in business history. And yet Eisner was drawn into the vortex. A common theme in the egregious cases of corporate fraud was a passive and often compromised board of directors that failed to protect shareholder interests. Disney’s board had always been something of a special case. Not only was its independence compromised by numerous conflicts of interest, but as long as Sid Bass had remained, in effect, a controlling shareholder and staunch ally of Eisner, the board had served as little more than a figurehead of corporate governance, with Bass and Eisner making all the critical decisions. Now Eisner faced calls for reform at a critical time, just as Bass had relinquished his grip and Gold and Roy were beginning to assert their independence.
Perhaps Eisner could turn the calls for reform to his own advantage. At the June board meeting, he announced that Disney had hired Ira Millstein, a senior and respected partner at Weil, Gotshal & Manges in New York, and an expert on corporate governance, to help draft reforms that would govern the Disney board. While no one could argue that reforms were in order, the undertaking also carried an implied threat to anyone who decided to support Gold and Roy. After all, there were any number of “reforms,” such as shrinking the size of the board, that could be used to get rid of Eisner’s critics.
At the June 2002 meeting Eisner unveiled his latest five-year plan for Disney’s return to annualized 20 percent growth. The plan depended heavily on the performance of the new Family channel, projecting an 88 percent annualized growth in operating income for the channel. The other pillar was ESPN, with a projected 75 percent annualized growth. In addition, Eisner predicted that theme park revenues would return to their peak 2001 levels and that all the ABC network needed was a “stroke of creative lightning.” But even as he unveiled the projections, it was clear that Disney’s results were falling hopelessly behind the results forecast for the current 2002 fiscal year, which would end in September.
Disney had some successes to its credit, notably Lilo & Stitch, the first animated feature to emerge from the animation unit in Orlando. And the latest film from M. Night Shyamalan, the supernatural Signs, starring Mel Gibson, opened nationwide on August 2, and made $117 million in its first week. But two successful films couldn’t compensate for the continuing slump in tourism and the turmoil at ABC. In July, Disney released its fiscal third-quarter results and its stock plunged to an eight-year, split-adjusted low of $13.75 a share—lower than it had been in the wake of September 11, when Sid Bass had faced a margin call.
Under the new Sarbanes-Oxley Act passed by Congress to combat corporate fraud on the scale of Enron and WorldCom, Eisner and Tom Staggs, as Disney’s CEO and chief financial officer respectively, had to personally certify the accuracy of Disney’s financial results by August 1. In reviewing its filings, Disney discovered it had failed to make certain public disclosures, including relatives of directors employed by Disney, required by SEC Regulation SK. Toward the end of July, Eisner reached Gold at his apartment in New York. He sounded almost gleeful when he told him that Millstein had advised him that, under new rules being considered by Disney, Gold was no longer “independent” because his daughter had a job in the consumer products division of Disney.
Surprised, Gold had no ready response, but he had his
lawyers consider the issue. They responded that at the very least the issue was premature. The New York Stock Exchange was examining the question but hadn’t promulgated any new rules. Eisner agreed to hold off at least temporarily, but Gold now had to share his pivotal position as chairman of the nominating and governance committee with George Mitchell, who was rapidly emerging as a staunch backer of Eisner on the board. Gold thought it ironic that Mitchell was being hailed as “independent” while his law firm had earned $2 million in fees from Disney, while Gold’s daughter’s job paid $86,000. (Mitchell also received a $50,000 annual “consulting” fee from Disney in addition to his $45,000-a-year director’s fees and stock options. He also served at one point on eight other corporate boards, six of which paid fees to his law firm.)
The growing conflicting tensions within Disney burst into public view on August 8, when Los Angeles Times reporters James Bates and Claudia Eller reported that “Key directors are increasingly impatient with its lagging financial performance and stock price…. According to sources close to the board, relations have become increasingly strained between Eisner and two of Disney’s most powerful board members, Roy E. Disney and Stanley Gold.…Tensions have risen in recent weeks, including some pointed exchanges between Eisner and Gold, sources said.”
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