DisneyWar

by James B. Stewart

  The next morning Lyne met Braun in his office. She confessed that she’d known for a week that he was going to be replaced, and felt bad that she hadn’t told him. She hoped he understood. She’d loved working with him. “I’m glad you told me,” he said. “I know you’re in a difficult situation and I’m not going to let this ruin what has been a great relationship.”

  When Lyne returned to her office, people were lining up with questions. “Are you staying?” “What’s going to happen?” Lyne tried to reassure them. “I hope I will be here,” she said. “I expect to be here. In the meantime, we have to make good pilots. Hunker down. Don’t let them see us sweat.”

  That Thursday, Lyne had a meeting scheduled with Iger at five. At two, Eisner called. He’d just returned from a trip. “Come over right now,” he said. “I’ve got an hour.”

  When she arrived, Eisner seemed energized by the crisis at ABC, almost as though he was enjoying it. “Steve [McPherson, head of Touchstone] is coming over at three,” he said. “What do you think of him?”

  “Really talented,” she said. She expressed a few concerns, but concluded, “I’d keep him in a heartbeat.”

  Eisner started lecturing her about ABC. “We’ve got to get a hit!” he said. “We need someone like Mike Darnell at Fox.” (Darnell was the programming chief responsible for the reality shows “American Idol 2” and “Joe Millionaire.”)

  “We can’t do those shows on ABC,” Lyne countered. “We couldn’t even do ‘Are You Hot?’ ”

  “Yeah, but we need a killer,” he continued.

  “What about Mark Shapiro?” Lyne wondered. The mention of Shapiro prompted an outburst.

  “Shapiro! He’s dead. We’re writing him off. He’s thirty-four and he thinks he should run the place. He has all kinds of demands. I won’t take his calls. We won’t answer his emails. When I was offered ABC in 1974 I didn’t even ask what I’d be paid! When do you want me? Bob did the same thing. He was on a plane in an hour when Tom Murphy offered him the job. There was no contract, no deal.” This rankled with Lyne, since she herself still had no contract.

  When Lyne met with Iger at five, he was furious to discover that Eisner had inserted himself ahead of him, before he could talk to Lyne. Now Eisner was meeting with McPherson. “Maybe he’s offering him my job,” Lyne speculated.

  “That’s not going to happen,” Iger said. “There’s no interest in Steve at the network.” He assured her that she’d run prime time. Iger confirmed that it was over with Shapiro.

  Lyne went back to work, confident her position was secure. The following Wednesday she had dinner with Anne Sweeney and briefed her on the pilot process and what needed to be done, on the assumption that Sweeney would be replacing Wallau as president of the network and Lyne would be in charge of programming. It was a busy week, and Lyne returned to New York on Thursday night.

  On Monday she was back in California, and met again with Iger. He looked somber as he moved to a chair, and she sat down on the sofa. The chairman and chief executive of McDonald’s, James Cantalupo, had just died of a heart attack at age sixty while at a convention in Orlando. “I had lunch with him two months ago,” Iger said. “It puts things in perspective, doesn’t it?” Lyne nodded in agreement.

  “Well, this is hard for me because I like and respect you so much,” Iger continued. “I know I told you you’d run prime time. We decided to go another way. It was clear you wouldn’t report to anyone other than Anne. Steve said the same thing. So we had to make a choice. The consensus was that Steve should do it.”

  Lyne was speechless. She realized she was being fired.

  “We want you to stay with the company,” Iger assured her. “You can keep your salary, move back to New York, whatever works. We’ll figure out a job.”

  “Bob, you’re taking away my job. I’m not going to say anything definite, but that’s not going to work.” Lyne got up and walked to the elevator. She was late for a pilot screening. Suddenly she turned around and went back. “What do I say to my executives?” she asked.

  “Nothing,” Iger replied. He added that he, Sweeney, and McPherson would announce their new responsibilities to her staff the next day.

  When she reached her car, Lyne realized she couldn’t attend the screening and pretend nothing had happened. Instead she called her husband and her lawyer.

  The next morning, her phone rang at 7:30 A.M. It was Eisner. He told her how sorry he was.

  “I was blindsided, Michael. Bob told me a week ago I had his support,” she said.

  Eisner launched into a tirade about Iger. “ABC has destroyed Bob! Unless he fixes it, he will never be CEO. He can’t even get another job in this town. Bob is under terrible pressure. He had to do something.”

  “But he was doing something,” Lyne replied. “He was bringing Anne in to run the network.”

  “Anne wasn’t enough of an announcement.”

  Later that day, Lyne found herself in the odd situation of consoling others over her own firing. McPherson called, clearly uncomfortable over having helped to engineer her departure. “I wish you nothing but success,” she said.

  Then Sweeney called. She was in tears. “I feel terrible.”

  “It’s okay,” Lyne assured her. “Steve is a smart guy. He’ll be great.”

  “I don’t know him at all,” Sweeney said.

  Iger himself called as Lyne was returning from the set of Their Eyes Were Watching God, a movie she’d commissioned for ABC starring Halle Berry and produced by Oprah Winfrey.

  “I feel horrible,” Iger said. “There aren’t many people out here I’m close to. I considered you a friend, and I hope we can stay friends.”

  “I understand,” she said. “But not now. Give it time. Right now I can’t do it.”

  With turmoil swirling at ABC, Harvey Weinstein notified Eisner that the controversial Michael Moore film Fahrenheit 9/11, was now finished, and, as he had suggested a year earlier, he wanted Eisner to see it. In preview screenings, the film was “testing through the roof,” as Weinstein put it. Eisner expressed surprise, given that he thought he and other Disney executives had made it perfectly clear a year earlier that neither Disney nor Miramax would distribute the film. For his part, Weinstein didn’t see how Eisner or anyone else at Disney could be surprised given that the company had been paying invoices related to the film. Disney said it didn’t look at the invoices, and that Weinstein hid Fahrenheit by keeping it off production reports. In any event, Eisner declined the offer to see the movie. So Weinstein invited Bob Iger, Peter Murphy, even George Mitchell to a screening. All declined. Finally Disney dispatched Brad Epstein, a studio production vice president, who saw Fahrenheit 9/11 on April 24.

  Epstein told Weinstein that he liked the film, that he thought it was “great,” according to Weinstein. But in his written report to Eisner, subsequently distributed to the Disney board, Epstein evidently criticized it. Eisner called Weinstein after the next board meeting. “The board is against this,” Eisner said.

  “Why?” Weinstein demanded.

  “I don’t want to be political,” Eisner said. Weinstein thought this was rank hypocrisy, since Disney-owned stations broadcast conservative commentators Rush Limbaugh and Sean Hannity.

  Furious, Weinstein called George Mitchell, all but begging him to see the film himself. Mitchell, after all, was a prominent Democrat; surely he would sympathize with a documentary critical of the Bush administration. But Mitchell refused. “It’s a management decision,” he said, not something the board should get involved in.

  Weinstein had lawyer David Boies weigh in on the matter, also to no avail.

  All the conditions for a public relations hurricane were now in place, and on May 5 The New York Times ran a page-one headline: “Disney Is Blocking Distribution of a Film That Criticizes Bush.” In the ensuing media frenzy, Disney, and Eisner in particular, was cast as the censor caving into political pressure. Disney refused to reconsider. Spokeswoman Zenia Mucha had the thankless task of trying to
refute the charges, stressing that Disney had told Weinstein a year earlier that Disney and Miramax would not distribute the film, and that Weinstein and Moore were free to find another distributor.

  Adding to the furor, Fahrenheit 9/11 won the Palme d’Or, the top prize, at the Cannes Film Festival later in May, and Weinstein had no trouble lining up distributors. By the time the film opened nationally in the United States on June 24, it was a cause célèbre. While noting that the film was unabashed propaganda, critics were generally positive. No doubt reflecting on Moore’s stand against Disney as well as the quality of the film, A. O. Scott in The New York Times called Moore “a credit to the republic.” Lines formed at big-city theaters on opening day, and box-office revenues quickly soared past $100 million, making it the highest-grossing documentary ever.

  Made for $6 million, Fahrenheit 9/11 ultimately grossed $220 million worldwide. After paying distribution fees of about $60 million and marketing and other costs of another $40 million, Miramax realized about $120 million in profit, which Disney has said it will donate to charity.

  Though Eisner has characterized himself as the Weinsteins’ biggest supporter inside Disney, noting that Dick Cook and other studio executives would have loved to get rid of them, this was too much even for Eisner. In a June conference call with analysts, he said that Miramax had only earned a profit in two of the previous five years, a claim that infuriated Harvey Weinstein. It was especially damaging to his efforts to raise capital on Wall Street to either buy Miramax back from Disney or to finance a new studio in the event he and Bob left Miramax and Disney. Weinstein charged that Eisner’s figures were false; that for 2003, for example, Miramax’s profits were actually $211 million, and that he and his brother wouldn’t have earned a bonus in each of the five years if Miramax hadn’t earned a profit.

  But Disney was using generally accepted accounting practices, and Miramax was not. Miramax amortizes costs over a longer period; Disney allocates to Miramax a share of corporate overhead, among other differences. But haggling over year-to-year profit figures isn’t really the issue. No one disputes that Miramax has, over time, produced valuable assets for Disney that will continue to generate substantial revenue. Notwithstanding his irascible temperament, Harvey Weinstein has displayed an eye for talent and both artistic and commercial instincts that are unrivaled in Hollywood.

  By the summer, Eisner and the Weinsteins were at loggerheads. A last straw for Weinstein was Eisner’s claim, reported in The New York Times, that Harvey Weinstein had hidden the financing of Fahrenheit from Disney, a claim Weinstein denounced as an “out-and-out lie.” But with Miramax a wholly owned subsidiary of Disney, Eisner held all the cards. When the brothers wanted to raise capital and buy back Miramax from Disney, Eisner refused to take any proposal to the board. The brothers suggested splitting up, leaving Bob and his Dimension studio at Disney, freeing Harvey to go elsewhere. Disney offered Bob a contract that was so inadequate it was “insulting,” Harvey maintains. Talks shifted from renewing their employment arrangement to severance terms. With their options dwindling, the Weinsteins watched the shareholder unrest and the Save Disney campaign with keen interest. Their relationship with Eisner was, for all practical purposes, over. Their only hope was that Eisner would have to leave before their contract ended in 2005. The question was, Who could hang on longer?

  At its June 2004 meeting, the Disney board conducted a “management review” of all high-ranking Disney executives, and pressed Eisner on the issue of succession. Iger finally got his wish: In the wake of the upheaval at ABC, Eisner told the board that Iger was his chosen successor as CEO. In July, Eisner and Iger both appeared at Herb Allen’s annual Sun Valley media conference. This year’s appearance loomed large for Eisner, his first conference since the humiliating shareholder meeting the previous March. He also promised Iger that he would introduce him to this exclusive crowd for the first time as his heir apparent.

  Eisner’s talk drew a standing-room-only crowd. Afterward there were some questions from the audience. But as the session reached its end, and even before Eisner received a warm round of applause, Iger rose from his seat and stalked out of the room, obviously angry, prompting a buzz of speculation. Eisner had failed to even mention Iger, let alone introduce him as his designated successor. (Eisner later maintained that he assumed someone would ask him a question about succession, at which time he would have mentioned Iger. But no one did.)

  At the shareholder meeting in March, Eisner had staked his reputation—and his future—on Disney’s bottom line, and as the year unfolded, Disney remained on track to deliver the earnings growth that Eisner had promised. But much of the earnings came from DVD sales of Finding Nemo and Pirates, hits from 2003, as well as a recovering economy and higher attendance at the theme parks. At the feature film meeting I attended, Eisner had been right to worry about the summer of 2004.

  Disney’s performance at the box office in 2004 was nearly as abysmal as 2003’s had been outstanding. The studio unveiled a string of critical and box-office flops. The much touted Hidalgo, Alamo, Around the World in Eighty Days, and most surprisingly, the latest Bruckheimer epic, King Arthur, each costing $100 million or more, opened to mostly devastating reviews and disappointing ticket sales (though King Arthur did better overseas). Even The Woods, now renamed The Village, Shyamalan’s latest thriller, faded after a strong opening and tepid reviews. Although it eked out $100 million in domestic box office, it was no Sixth Sense. Another Bruckheimer film, National Treasure, performed well, but Disney didn’t even have an “event” movie on its release schedule for the vital holiday season. The only sure thing seemed to be November’s The Incredibles, but that, after all, was a Pixar project.

  Disney’s own major animated release, the two-dimensional Home on the Range, sank from view with hardly a trace, all but sealing the fate of Disney’s traditional hand-drawn animation unit. The film was excoriated as “seldom funny” and the theme song as “corny, jokey,” by The New York Times. Its watercolor backgrounds were inevitably compared unfavorably to the vivid images of Finding Nemo. The forgettable score by the celebrated composer of Beauty and the Beast, Alan Menken, only underscored once again the loss of Howard Ashman. It was especially galling that Katzenberg’s Shrek 2 proved to be the highest-grossing movie of the year, raking in $450 million in the United States alone by the end of summer, and that even Shark Tale, an animated effort from DreamWorks that suffered from comparison to Nemo, grossed over $150 million.

  As the September board meeting approached, Eisner found himself thinking increasingly about his own future at Disney. As a result of the shareholder vote, his options had narrowed drastically. Except for a few die-hard Eisner loyalists on the board, Disney directors had decided not to extend Eisner’s contract as CEO when it expired in September 2006. While none has acknowledged explicitly telling Eisner this, others have said it was implicit in their conversations leading up to the June board meeting, when Eisner named Iger as his chosen successor. Moreover, Eisner was the lightning rod for Stanley and Roy’s campaign. As long as Eisner remained CEO, there remained the real chance that they would win the proxy fight the following year, and Eisner would be forced out even before the end of his contract.

  So as Eisner’s twentieth anniversary at Disney approached, he began drafting a letter to the Disney board resigning as chief executive, effective when his contract expired in 2006. He relied on Jane as his editor and showed it to no one at Disney. “Putting last things first, I plan to retire from my role as Chief Executive Officer of the Company upon the conclusion of the term of my employment agreement on September 30, 2006,” he wrote. “Until then I shall continue to exert every effort to help the company achieve our goals, to assist the Board in selecting the new Chief Executive Officer, and to make the transition expeditious, efficient and smooth and easy.”

  Over the Labor Day weekend and during the following week, Eisner met or spoke with board members individually and discussed his plans. He showed copies of the
letter to at least some of them. The Wall Street Journal’s Bruce Orwall had been hearing reports all summer that something was afoot with Eisner, and was already close to writing a story when he heard about some of these meetings. Faced with the imminent prospect of a story, Eisner gave Orwall a copy of his letter and an exclusive interview that Thursday. Eisner insisted that his decision had nothing to do with the shareholder vote, the loss of his chairman’s title, Stanley and Roy’s campaign, or any pressure from the board. It was “not asked for, not motivated by current circumstances at all,” Eisner insisted. In a September 10 page-one scoop, Orwall wrote that “The decision signals the end of Mr. Eisner’s two-decade stewardship of one of the world’s best known brands.”

  But did it signal the end of Eisner’s reign? Or was the resignation a clever ploy to derail Roy and Gold’s proxy fight and buy time? Eisner’s conversations with directors triggered a flurry of phone calls and conversations among them. Except for Judith Estrin and Leo O’Donovan, most agreed it was the latter, noting that Eisner’s letter said nothing about remaining on the board or reclaiming his title of chairman. In Eisner’s “master plan,” as one director described it, Iger would assume the chief executive’s title in 2006, Eisner would remain as chairman—and nothing much would really have changed.

  Gold and Roy were certainly skeptical in a September 13 letter to board members. “While Mr. Eisner’s announcement at first blush looks like a major change, it is in truth mere window dressing,” they warned. “What he has really proposed is a scheme to arrogate the authority of the Board and maintain the status quo at the Company’s expense…his ‘succession plan’is for a company led by Michael Eisner and his obedient lieutenant, Bob Iger, to be handed over to…Michael Eisner and Bob Iger.” They urged the board to hire a qualified search firm, and announce that Eisner would leave as soon as his successor was decided—no later than the 2005 annual meeting. If not, they would proceed with their proxy fight.