by Ben Fritz
Still, it was unimaginable that Disney would ever get out of the Touchstone and Miramax businesses. This was an era when most films made money, thanks to booming DVD sales, which meant that big and broad slates made sense. And at a time when movie stars were critical to box-office success, you could hardly expect them all to want to make Disney-branded kiddie fare. Touchstone films gave Disney’s slate “breadth and depth,” the studio chairman Dick Cook said, in 2004. “You can’t eat vanilla ice cream every day. You still want chocolate and strawberry too.”
A takeover by vanilla began with a movie that initially seemed the opposite of innovative, evolutionary, or even interesting. Pirates of the Caribbean was one of a pair of films Disney made in the early 2000s with the aim of exploiting corporate synergy between popular theme-park attractions and movies. The other was The Haunted Mansion. Walt Disney Studios’ chairman, Dick Cook, had started his career in Disney’s theme parks and pushed the idea. But most people at the company thought The Haunted Mansion, which starred Eddie Murphy, had more of the ingredients of a mainstream hit.
The other film was a riskier endeavor. The pirate genre had been dead since the 1995 flop Cutthroat Island, and few thought an adaptation of a parks attraction, featuring singing audio-animatronic figures, was likely to revive it. And in the lead role was Johnny Depp, best known for offbeat fare such as Chocolat and What’s Eating Gilbert Grape. He hadn’t yet achieved movie-star status in America, let alone around the world. Executives throughout the company expressed their concern to Cook, who had just taken over the studio as Pirates got going in 2002. Even the CEO, Michael Eisner, sent him e-mails questioning whether making the film was a good idea.
But the affable Cook, who began his career operating steam engines and monorails at Disneyland in 1970, firmly believed he knew what audiences wanted from the company. He was prepared to expand the scope of Disney-branded films with Pirates, which is why he gave the project to Bruckheimer, best known for PG-13 and R-rated action movies with plenty of sex and violence, to produce.
Still, nobody was prepared for just how different Pirates of the Caribbean: The Curse of the Black Pearl turned out to be.
Disney’s president of production, Nina Jacobson, told Bruckheimer and the director, Gore Verbinski, to “try very hard to get the PG,” urging them to “steer clear of things like language, sex, and significant amounts of blood” that would earn a PG-13. But as she and other executives saw footage of intense and sometimes scary violence, including stabbings, they started to realize a PG rating was unlikely. As they saw more and more of Depp’s performance, they also realized it would be anything but bland, vanilla fare. Rather than play a traditional yo-ho-ho, swashbuckling pirate, he made his villain, Jack Sparrow, into a fey, seemingly drunk blowhard wearing mascara and eyeliner—the persona was based on the actor’s rock-and-roll idol, Keith Richards. The raw footage making its way back to Disney headquarters was “very, very out there” compared to what Jacobson and others had been expecting.
Many on the Disney lot were concerned about the movie, but the company didn’t exercise nearly as much hands-on control over its films then as it does today. That was partly because it had several dozen movies on its slate at a time and partly because A-list talent had more power at the box office then, and thus more leverage in the creative process. By naming Bruckheimer producer, Disney had essentially made him CEO of Pirates of the Caribbean and was at best his partner and certainly not his boss (unless they wanted to go through the costly and embarrassing process of shutting down the production). If Bruckheimer and his hand-picked director and star were making a violent, creatively edgy Pirates movie, Disney would have to find a way to live with it.
Making it a Touchstone release was a possibility, but that was complicated by the fact that Pirates was an attraction at a Disney-branded theme park. And internally, some executives were starting to feel that the Disney brand name needed to expand to include PG-13, a rating used for more and more of the most successful films of that era, like Lord of the Rings and Spider-Man. Many families felt fine about allowing children as young as seven or eight to see them. And so Cook was convinced. If Disney theme parks could have all sorts of different attractions, he figured, perhaps the Disney film label could too. The PG-13 rating on Pirates, he said, was akin to the height restrictions and health warnings on rides like Space Mountain and the Tower of Terror.
Pirates of the Caribbean: The Curse of the Black Pearl was a massive hit in 2003. Its combination of action, comedy, and a mesmerizing performance by Depp, which earned him an Academy Award nomination, pulled in $654 million of ticket sales worldwide. It was not only the number four movie of the year. It was Disney’s highest-grossing live-action film ever, under its own label or Touchstone’s.
For Disney executives, it was like a river had parted. Finally they could get the benefit of their company’s brand name—signaling to families that it was a safe and wholesome film, in line with the values of Walt Disney himself—without having to sacrifice the action, adventure, and interesting performances that were the hallmarks of most successful movies in the 2000s.
Cook still had some rules for Disney-branded movies: no cursing, no drugs, no sex, and no blood. But fantastical action and adventure now had a green light. Which meant that teenagers, young adults, and even middle-aged people who wanted to enjoy the movies they took their kids to could now consider releases from Walt Disney Pictures. For the first time, Disney live-action films could appeal to everyone.
Not long after that, studio executives were screening an early cut of National Treasure, a Bruckheimer-produced adventure movie starring Nicolas Cage as a code-breaker seeking a pile of loot, the location of which is hidden in the Declaration of Independence. National Treasure was intended to be a Touchstone release. But during the screening, with Pirates on his mind, the studio’s marketing president, Oren Aviv, leaned over to Cook and asked, “Is there any reason this can’t be a Disney movie?”
Cook thought for about five seconds. “Nope,” he replied.
Bruckheimer had to be convinced that making it a Disney movie wouldn’t necessitate watering down the movie or alienating the young adults who loved Cage’s action flicks. But he was won over and National Treasure was another huge hit, grossing $348 million and becoming the second-highest-grossing live-action film ever under the Disney label, behind only Pirates.
All of a sudden the Disney brand was thriving, regularly outperforming Touchstone at the box office and in terms of profitability. Which led the company’s new CEO in 2005 to ask a simple question: why don’t we make more of what works and less of everything else?
“An Awful Business”
Bob Iger became CEO of the Walt Disney Company in October 2005, after several years of corporate drama and weakened financial results that resulted in the departure of his predecessor, Eisner. Many dismissed Iger, a former TV weatherman, as a lightweight, an empty suit who had reached the top not because he was most qualified, but because he was the least controversial among the company’s top executives—the lowest common denominator.
Certainly, among those who ran Disney’s movie business, Iger wasn’t taken too seriously. Unlike Eisner, who in 1984 came from Paramount Pictures, Iger had no experience in film. He was purely a TV guy who had come to Disney in 1996 when it purchased the ABC network, where he was president.
But Iger, who had a bachelor’s degree in television and radio from Ithaca College but talked and thought like an MBA, was smarter and more ambitious than many gave him credit for. He decided right away to try to smooth over the corporate feuds that had festered under Eisner and to improve the company’s weak bottom line of the past few years. Both missions ended up having a dramatic impact on the movies Disney made.
On the first front, Iger made it his priority to heal Disney’s rift with Pixar Animation Studios, the hugely successful company behind Toy Story, Finding Nemo, and Monsters, Inc. Though Pixar was an independent company in the San Francisco Bay Area, Disney mar
keted and released all of its movies under a multi-year deal, according to which the two companies equally split all costs and profits.
Eisner and the chief of Pixar, Steve Jobs (who ran the animation studio simultaneously with running Apple), were both men of monumental egos. Rather than try to work together as that old deal was wrapping up near the end of Eisner’s tenure, they took to sniping at each other in the press about which side needed the other more.
Iger, a technology nut, had great admiration for what Jobs had accomplished since taking over Apple for the second time in the late 1990s and then revolutionizing the music business with the iPod and iTunes. He was also more clear-eyed than his predecessor about the need to revive Disney’s own struggling animation unit. Iger had no prior involvement in it and thus no personal stake in how it was perceived. And so he started a rapprochement soon after becoming CEO by making Disney the first company to sell movies and TV shows to be watched on Apple’s new video iPod. And then, in January 2006, he bought Pixar for $7.4 billion, bringing the world’s most respected animation studio into his company and also tasking its creative heads, John Lasseter and Ed Catmull, with fixing Walt Disney Animation Studios, which had been lagging behind Pixar throughout the 2000s.
It turned out to be a smart deal. Disney benefited from the future success of Cars, Toy Story 3, and Up, not just at the box office, but also in its consumer products and theme-park businesses. And though it took several years, Catmull and Lasseter eventually did turn around Walt Disney Animation Studios by applying the Pixar strategy of having directors honestly critique one another’s ideas and reworking films in production as many times and for as long as necessary to make them excellent. By the mid-2010s, Disney Animation was regularly outperforming Pixar, with successes like Frozen and Zootopia.
But the company could release only one or two animated movies per year. That wouldn’t fundamentally turn around its studio, which when Iger took over was coming off a disastrous year. It had made a profit of only $207 million on revenue of $7.6 billion—a margin of less than 3 percent. Among the reasons for the weak performance were two Touchstone flops: A Lot Like Love, a romantic comedy with Ashton Kutcher, and director Wes Anderson’s The Life Aquatic with Steve Zissou.
In fact, Walt Disney Studios had posted weak results in 2001 and 2002 as well. In 2003 and 2004, its margins of 8 percent were solid for the movie industry, but hardly impressive to anyone who wasn’t used to the generally poor return on investment that movies had long offered. The television business that Iger came from, for example, had a profit margin of about 20 percent at the time.
Soon after taking over, Iger began to analyze Disney’s businesses one by one, on the basis of “return on invested capital,” the profit made on every dollar invested. There were troubles throughout the company, but the movie studio stood out the most. And within the studio, it was Touchstone and Miramax that returned the lowest profits, with average margins in the low single digits. “That’s an awful business. Awful,” Iger concluded. The solution, he believed, was obvious. Disney-branded movies consistently returned the biggest profits, particularly in the wake of Pirates of the Caribbean and National Treasure. And so he started asking how quickly his studio could pump up production of Walt Disney Pictures films and abandon everything else.
But Iger didn’t parachute in and start giving orders at the studio. Others in the movie business, including Disney veterans, warned him that such changes would be viewed suspiciously, especially coming from an outsider. They asked how the company would support its worldwide distribution infrastructure if it slashed the number of pictures that came out each year. Who among Hollywood’s A-list stars and directors would want to make “Disney” movies, which despite Pirates and National Treasure still carried a stigma as bland kiddie fare, instead of the interesting, more mature movies that Touchstone had long specialized in? And what kind of signal would it send to the artistic community if Disney pulled out of Miramax and stopped making the kind of indie films that wowed critics and won awards?
The longer a person had worked in the movie business, the more likely he or she would tell Iger that his idea couldn’t work. It never had worked. Studios released lots of different movies for lots of different people. At the time, that’s what the market dictated. Most insiders could not imagine that this would change. Some also questioned whether Iger’s plan to make fewer movies, all of them big ones, was wise. Katzenberg’s 1991 memo had warned of the dangers of big bets that, when they failed, could derail the financial performance of the entire studio in a given year. A broader, more diverse slate was designed to help balance out the bottom line when some films flopped.
But with international markets starting to grow in importance and the video iPod signaling that home viewing on digital devices would soon take off, Iger correctly surmised that big “event” movies were needed to draw people into theaters. He loved the 2006 hit Little Miss Sunshine, which Miramax’s competitor Fox Searchlight bought at Sundance, but he wondered how many years longer people would go to theaters to see that type of film, rather than wait to watch it at home. Iger surmised that major studio movies would have to become “must see” offerings, and Disney’s job was to make them so, even if it was difficult and even if some of those big swings lost a lot of money along the way. This conclusion matched the results of research that Cook and his team of executives were doing at about the same time. They found that movies costing more than $100 million to make were less risky than those with smaller budgets—a counterintuitive conclusion indeed.
Iger had the support of his board of directors, who wanted higher and more consistent profits from the movie studio. He also had the backing of other divisions of the company that wanted the kind of popular intellectual property that Disney-branded movies provided. Pearl Harbor didn’t sell toys, and there was never going to be a Pretty Woman attraction at Disneyland. But Pirates of the Caribbean and National Treasure and, later, the princess film Enchanted were brands the rest of the company could use, as were most of the studio’s animated features.
Nonetheless, the changes weren’t quick. Due to the long period of time it takes to develop scripts and then shoot and edit a film, Iger couldn’t really force changes on Disney’s release slate until 2008 at the earliest. Rather than give notes on scripts and footage or other meddling, Iger was more strategic, trying to effect change via intermittent but ground-shaking strategic moves, such as the Pixar acquisition.
Miramax was already in the midst of a revolution when Iger took over. The Weinstein Brothers had been feuding for years with Eisner and Cook over how much money they were allowed to spend making movies or on business investments, as well as creative latitude. One of the biggest points of conflict came in 2004, when Disney blocked Miramax from releasing the director Michael Moore’s controversial Fahrenheit 9/11, about the current president, George W. Bush, before the election. It was released instead by Miramax’s competitor Lionsgate and grossed a staggering $119 million, still the record for a documentary.
Bob and Harvey Weinstein left Miramax in March 2005. Iger was by that time CEO-designate, and he and the board of directors pushed to shut down Miramax, figuring the money would be better spent on Disney tentpoles that could potentially create a windfall. The art-house division in its best recent years had eked out only a small profit. But Cook fought adamantly to save Miramax. Like many in Hollywood, he disagreed with Iger’s view that a film studio should be run solely to maximize the return on investment. He thought benefits that couldn’t be measured on a balance sheet were important to the long-term vitality of a studio and its industry, such as fostering creative relationships, finding new talent, and winning awards.
Miramax brought Disney all of that, he argued, and shutting it down would send a distressing signal to Hollywood and mature moviegoers that the company didn’t care about them. And so he and corporate management agreed on a compromise. A veteran studio executive named Daniel Battsek was put in charge of a severely slimmed-down Miramax
. He had only about $300 million to spend annually on six to eight movies, instead of the more than $600 million that the Weinsteins used to make close to twenty films a year.
As many in Hollywood suspected, though, the mini-Miramax was just an evolutionary step. Despite winning the best picture Oscar for 2007’s No Country for Old Men, Miramax enjoyed few hits under Battsek and became increasingly out of place in Iger’s franchise-focused Disney empire. Cook had to fight each and every year to save it from Iger and the board’s desire to make it disappear. Not until 2009 did Iger finally put Miramax on the auction block, eventually selling it to a group of investors for $663 million.
Phasing out Touchstone took time as well. The label had a backlog of adult movies in the works, and studio executives didn’t want to announce that they were killing their brand for original and more mature pictures until they had perfected a new slate focused on Disney-branded movies. “There was still some stigma for Disney live-action movies, and if you just made an announcement that’s all we were doing, agents and talent managers might not bring us cool projects anymore,” said one executive who worked for the studio at the time.
Slowly but surely, however, Disney made fewer Touchstone movies. It released seven under the label in 2005 and 2006, but just three or four in 2008, 2009, and 2010. By 2011, Disney had stopped making Touchstone movies. Its last one was You Again, a forgettable romantic comedy starring Kristen Bell and Sigourney Weaver that grossed a weak $32 million. Disney kept the Touchstone label alive for the next few years only as part of a deal to release movies made and fully financed by Steven Spielberg’s DreamWorks Pictures, such as the hits Lincoln and The Help. But DreamWorks was in the mid-budget movie business and, unsurprisingly, most of its productions flopped, including the Vince Vaughn comedy Delivery Man and the video-game adaptation Need for Speed. By 2016, nearly defunct, DreamWorks raised new money to stay alive and moved to Universal Pictures. Its departure from Disney marked the official and final end of Touchstone, a death barely noticed in Hollywood or elsewhere.