The letter’s salvo at Eisner, especially its harsh attack on micromanagement, did not go unnoticed, nor did it earn the animators any goodwill from Eisner. Weeks later, on January 12, Disney announced that it was shutting down its Orlando animation unit, where Lilo & Stitch had been created.
On Thursday evening, December 4, 2003, a phalanx of limousines blocks the driveway to the Century Plaza Hotel, a curving high-rise in the middle of Century City, long the favored venue for Hollywood celebrity tributes and fund-raising benefits. Tonight, Motion Picture Association chairman and chief executive Jack Valenti is presenting the Pioneer of the Year award to Eisner, a benefit for the Will Rogers Institute, considered among the film industry’s highest honors. Previous honorees have included Cecil B. DeMille, Jack Warner, Darryl Zanuck, and Sumner Redstone. Only now, nineteen years into his tenure as Disney chairman, is Eisner receiving the honor. He had previously declined invitations, insisting he found such events embarrassing, not to mention the fact that he was too young. But at the behest of Dick Cook, eager to enhance goodwill with the film community, and given the need to burnish his own public image, Eisner has relented.
The timing seems auspicious: Every guest is handed DVDs of Nemo and Pirates, whose huge box-office success is propelling Disney toward a record $3 billion year at the box office, as well as boosting just-released fourth-quarter earnings in which profit more than doubled and operating earnings rose 54 percent. But as women in evening gowns and men in business suits pass through security checks and gather for cocktails, everyone is buzzing about Roy Disney and Stanley Gold, who were certainly not on the guest list.
“Michael, I know it’s been a long week,” Phil Collins, the singer and composer of the score for Tarzan, among other Disney projects, says into the microphone as he kicks off the entertainment. “We’re here to help you forget all that.”
At the center of the ceremony is a filmed tribute to Eisner, with testimony from Steve Martin, Tim Allen, John Travolta, and both Harvey and Bob Weinstein of Miramax (despite their ongoing disputes). Even Jeffrey Katzenberg had gotten a call from a secretary in Eisner’s office, asking if he would participate by contributing a segment to the tribute to Eisner. Katzenberg could only wonder what was going through Eisner’s mind. He and Eisner weren’t on speaking terms, and he was also insulted that a secretary had made the request. He didn’t return the call. (Eisner says that he expressly said that Katzenberg was not to be asked, but that someone in his office must have been overzealous.)
There are other conspicuous absences. By tradition, other media and entertainment chief executives gather to pay their respects, but few are in attendance. A topic of speculation is the amount of last-minute arm-twisting Dick Cook and others at Disney had to perform to fill the tables. There is star power in evidence: I’m seated next to Jamie Lee Curtis, star of Freaky Friday, and at the same table as Diane Lane, star of Under the Tuscan Sun, both Disney productions, along with Disney’s studio president Nina Jacobson. Curtis is funny and charming. “You sure have something to write about,” she observes as we sit down. A few tables away I see Demi Moore and Ashton Kutcher, who is starring in a forthcoming Disney film. But I don’t see anyone I recognize who isn’t in some way beholden to Disney. Eisner is at a central table in the well of the ballroom, in front of the stage, surrounded by Jane, his sons, Bob Iger, and Willow Bay.
Jack Valenti, in dinner jacket and his trademark white coiffure, bounds onto the stage, seeming to defy the passage of time, and notes that he first met Eisner as a “tall, gangly twenty-something at ABC,” who had “a fresh, assertive manner spilling over with a torrent of a dozen creative ideas a minute.”
Within Eisner, he continues, “stir the molecular contradictions of business executive and creative artist, a marriage of fire and chaos, which Michael has brought into fluid harmony. That this unseemly combination has worked to the long-term interest of the Walt Disney Company is beyond doubt. Let me phrase it this way—in a manner that every Wall Street fiscal analyst (at least those not under indictment) can understand: If you invested $10,000 in the Disney company on the day that Michael became its leader and never sold a share, you would have today the tidy sum of $220,000! And that was before Nemo was found on DVD. When Michael became Disney’s chief, its market cap was $2.1 billion. Today, December 4,2003, it’s $48 billion….
“Finally, there is another side to Michael and Jane Eisner. Beneath a canopy of anonymity, they have given millions to causes that count to them—and to this country. They have never sought gratitude or press headlines for this. They give because they care, without a need for public plaudits.
“I count Michael as one of the great giants of our industry.”
To warm applause, Eisner rises from his table and comes to the stage. “Let me just say to Phil Collins that it’s been a great week.” He mentions that his son has just been hired to direct a big-budget film for Paramount, that his two other sons have joined him for the dinner, along with his wife, and so, “to say that I have had anything but a wonderful week would be an understatement. Let me say that I do believe what we do is very important. The entertainment that we deliver, the movies that we make are the cultural legacy on which our country is founded and on which it stands. What we do…is a testament to individual creativity. This country stands above any place in the world…the hope we have for the future is the creativity that evolves out of the democratic process.
“I thank Jack. I thank the Motion Picture Pioneers and intend to be here in thirty years in my wheelchair applauding some other person who will be getting this award.”
As Eisner is making his way back to his table, pausing to shake a few hands, people are streaming toward the exits. Curtis has already excused herself, leaving before Eisner’s remarks. As the lights come up, I expect to see Eisner surrounded by well-wishers, but the only people near him are his wife and sons, and by the time I work my way to the table, his sons have also departed, as have Iger and his wife. As Eisner gazes at the rapidly emptying room, I step into the breach, and he thanks me for coming. It’s the first time we’ve met since Roy’s resignation. I congratulate him on the award, and ask how he’s feeling. “Great,” he replied. “I’m at my best in a crisis. I love a good fight.” He does seem energized, and eager to talk, but then Jane takes his elbow.
“It’s time to go,” she says, leading him toward a rear entrance.
“I’ve always believed that good news shouldn’t wait,” Eisner wrote that year in his annual letter to shareholders. Buoyed by the box-office success of Nemo and Pirates, Eisner could extol a 36 percent gain in Disney’s stock price and an over 50 percent improvement in cash flow, a welcome change from the previous two years’ glum results. He devoted considerable space to Mission: SPACE at Disney World; to Pirates; to ESPN, reporting overall ratings gains of 13 percent for ESPN, making it the number one basic cable network; and to the Disney channel, the number one cable channel among kids aged six to fourteen.
As for the struggling ABC Network, Eisner wrote, “The network is slowly but surely dealing with its financial and ratings performance issues. In 2003 we stabilized its primetime ratings and established a solid foundation for future growth.” He praised ABC’s “strategic emphasis on comedy,” and noted that “this strategy plays to ABC’s historic strengths, since the network was known for its strong comedy lineup throughout its years as the number one network.”
The only mention of ABC Family was that it had been “integrated into our cable organization so that all of our cable holdings can work more effectively together.” And there was no mention at all of Roy Disney or Stanley Gold.
Cold Mountain opened on Christmas Day 2003. Weinstein had never found the partner he promised Disney. He had managed to sell the foreign rights—no small feat for a film about the American Civil War—but only for $30 million. Reviews were generally admiring, but not positive enough to turn it into a major hit. The film grossed a respectable $95 million in the United States, but didn’t make back
its costs, confirming Eisner’s apprehensions that a Civil War costume drama would have limited appeal. Still, it came close to turning a profit, and may well do so over time. The real issue was that Eisner, Peter Murphy, and Dick Cook felt that Harvey Weinstein had brazenly defied them and breached his contract. It hardly enhanced the tone of their ongoing negotiations.
During the first week in January 2004, Steve Burke, now president of Comcast; Brian Roberts, Comcast’s chairman; other top executives and a group of investment bankers and advisers gathered at the Marriott hotel near the Philadelphia airport, a site where they were unlikely to be noticed. In case anyone did, the ostensible purpose of the meeting was to discuss Comcast’s “strategic direction.” But this was clearly no routine meeting. Among those attending were major deal-makers, including the Quadrangle Group’s Steve Rattner, who’d hosted the media conference where Eisner was interviewed by Charlie Rose.
When Burke left Disney to join Comcast, the cable operator had 4.5 million subscribers. By 2002 it had nearly doubled, to 8.5 million. Then it had doggedly pursued and ultimately succeeded in buying the cable assets of distressed AT&T, making Comcast the largest cable operator in the country, with 21.3 million subscribers. Despite widespread skepticism on Wall Street, Comcast had successfully integrated AT&T’s far-flung cable operations, an undertaking directed by Burke, and its stock had nearly doubled from its low in 2002. Comcast was now seen as a major deal-maker, and with the AT&T merger behind it, was ready for something new.
Alone among the biggest cable companies, Comcast was an almost pure “distribution” company, exactly the kind of company that Eisner had derided as being from a “different planet” from “content” companies like Disney. Time Warner, the second largest cable operator, had major content holdings in its Warner Bros., HBO, and CNN operations, and Fox under Rupert Murdoch had DirecTV as well as its studio and network operations. By contrast, Comcast derived 95 percent of its revenue from cable, with the remainder coming from its modest part-ownership of the E!, Outdoor Life, and Golf channels (E! in partnership with Disney). But now Comcast had 21.5 million subscribers, with 20 million considered the critical mass necessary to launch a profitable cable channel. That meant that Comcast could launch programming on its own cable systems.
This had taken on more urgency the previous summer, when France’s Vivendi put its Universal Studio on the block. Roberts and Burke had spent three months analyzing the Universal assets, and had grown increasingly excited about the potential for a Comcast-Universal combination. But once General Electric entered the bidding, the price soared. Roberts and Burke thought it was too expensive, and Comcast never surfaced with a bid.
Nevertheless, the experience had fundamentally changed Roberts’s and Burke’s thinking about the future of Comcast. They met with investment bankers to consider the options, which were limited: Fox, Time Warner, Viacom, Sony, Universal, and Disney. None was for sale, and all posed formidable obstacles—except possibly Disney. It was, of course, a company that Burke knew well, but he initially opposed the idea. He argued to Roberts and Comcast’s board that the theme parks offered limited synergy and, post-September 11, was going to be a tough business. It was not a business that held any interest for Comcast, and yet it produced 40 percent of Disney’s cash flow. Network television also looked to be a wasting asset. Not to mention an entrenched management and a board that seemed to be Eisner’s captive.
But then Roy and Gold resigned, suggesting instability on the Disney board. Shortly after, Dennis Hersch, a partner at the prominent New York law firm of Davis, Polk & Wardwell, and a longtime adviser to Comcast, said he knew someone who was close to George Mitchell, the Disney board’s presiding director. This person had reported a curious conversation with Mitchell in which Mitchell had allegedly said, “I’ve got a problem. Michael Eisner is exhausted. He’s looking for a graceful exit.” Mitchell had further ruminated that Eisner should have left two years ago, adding that several Disney board members agreed with this assessment.
Was Mitchell suggesting that a merger with Comcast might be the “graceful exit” Eisner was looking for? This was electrifying news to Roberts and Burke. He had assumed that Eisner would be a nearly insurmountable obstacle to any deal, but this suggested he might even welcome it. Still, knowing Eisner, it was hard to believe. How should they proceed? Comcast’s board met for dinner in Philadelphia on December 16, and after hearing about the latest developments, agreed that Hersch should have the intermediary approach Mitchell again to gauge the board’s appetite for a Comcast-Disney merger. To preserve confidentiality, no one but Hersch would know the identity of the intermediary, who was someone close to Mitchell. The first approach was made the next day, on December 17.
A week or so later, Roberts, Burke, and Hersch had lunch to discuss the results of the latest contacts with Mitchell, which included several conversations with the intermediary. Hersch had stressed the success of Comcast’s merger with AT&T, and reported that Mitchell had agreed that “this makes a lot of sense,” referring to the marriage of content and distribution. “Murdoch is putting a lot of pressure on us,” Mitchell had added, referring to Rupert Murdoch and the vertically integrated News Corporation.
As the Comcast executives and their advisers gathered at the Philadelphia Marriott in January 2004, it appeared that the Walt Disney Company might indeed be for sale. Burke swept aside his reservations about the theme parks and the network, and argued that under these circumstances, this was a unique, probably once-in-a-lifetime opportunity to acquire a major entertainment company and one of America’s most esteemed brands, not to mention a chance for Burke to run the company where he’d once worked.
“What do we do next?” Roberts asked. “Let’s go out there,” Burke suggested, and meet with Eisner in Los Angeles.
The intermediary again approached Mitchell, and this time reported that Mitchell had replied, “Michael doesn’t want a meeting. Maybe there’s another way…. Maybe I should do it,” Mitchell had told the intermediary. “I don’t know…Can you give me some more information on Comcast?” Then, in another conversation, he said, “Well, why doesn’t Comcast just write a letter to me and the board. We can take it from there.” At this juncture, Mitchell reported the contact to Eisner, who wrote an email to Disney board members. “I want you to be aware of Comcast chatter,” he said. “On January 15, George Mitchell reported that a friend came to him and asked as a favor if they could have dinner with George and me. Last week the friend came back asking for lunch just with George. He responded in accordance with guidelines for directors. The guidelines are: call Michael if you want to discuss this issue, but Disney is very comfortable with its current strategy.”
There was concern at Comcast that Mitchell, however skilled a politician and diplomat, was out of his depth in the rarefied world of mergers and acquisitions. They were also in the highly unusual position of negotiating through not one but two intermediaries, the identity of one of whom they didn’t even know.
“Does Mitchell understand this?” Burke asked, somewhat skeptical. “He’s not an investment banker. A letter from us will have to become public. In effect, it’s a bid.”
“Yes,” Hersch insisted. “He’s got a lawyer advising him.” Indeed, Mitchell had said, “Let me assure you,” that such a letter would be “welcomed” by the Disney board.
Academy Award nominations were announced on January 27, and Disney/Pixar’s Finding Nemo, received four—Best Animated Feature, Best Original Screenplay, Best Original Score, and Best Sound Editing. Roy Disney was also nominated for Best Animated Short Subject, for “Destino.” Nemo’s worldwide box office was approaching $1 billion, eclipsing Disney’s Lion King as the highest-grossing animated film ever.
For Disney however, the ongoing, runaway success of Nemo was double-edged. While it was boosting the Disney studio’s revenues to a record $3 billion, it had also, as Eisner had feared, emboldened Pixar and its mercurial chairman, Steve Jobs, to demand more from Disney in the alread
y contentious negotiations to extend their agreement. Just two weeks before, Disney had rejected the latest proposal, in which Pixar wanted exclusive rights to sequels, in addition to earlier demands for a far greater share of the profits and to include the films The Incredibles and Cars in the new deal. But Eisner and Dick Cook expected Pixar to come back with a revised proposal.
Instead, two days after the Academy Award nominations, Jobs called Cook and told him he was terminating discussions. He issued a statement to the press: “After ten months of trying to strike a deal with Disney, we’re moving on. We’ve had a great run together—one of the most successful in Hollywood history—and it’s a shame that Disney won’t be participating in Pixar’s future successes.”
Eisner in turn issued a conciliatory response: “We have had a fantastic partnership with Pixar and wish Steve Jobs and the wonderfully creative team there, led by John Lasseter, much success in the future. Although we would have enjoyed continuing our successful collaboration under mutually acceptable terms, Pixar understandably has chosen to go its own way to grow as an independent company.”
After calling Cook, Jobs called Roy Disney. He conceded that Disney was the logical partner for Pixar, but said, “I can never make a deal with Disney as long as Michael Eisner is there.”
Roy commiserated with him. “When the Wicked Witch is dead, we’ll be together again.”
I am scheduled to see Eisner in New York the next day, and am surprised that, in the wake of the Pixar news, his office calls to confirm rather than cancel. The press had been uniformly negative for Eisner, even though Disney had dispatched both Iger and chief financial officer Tom Staggs to make the argument that Pixar was asking Disney to give up more potential revenue from Incredibles and Cars than it could hope to earn from distributing future Pixar films. When I arrive I can tell Eisner has been shaken by the Pixar setback, which he says he doesn’t want to talk about. He invites me to join him that afternoon at a “table read” of a new Broadway musical version of Tarzan. “This is what I really care about, not all this shit,” he says, referring to the press coverage of the Pixar breakdown.
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