by Robert Iger;
As their success and stature grew, the unequal dynamic between the two companies began to gnaw at Steve, who hated it when anyone tried to push him around. Michael was more focused on the specifics of the deal that had been negotiated, and seemingly unaware or uncaring of Steve’s feelings. The situation worsened as Toy Story 2 was being developed. It was originally supposed to be released straight to video, bypassing movie theaters, but when early iterations of the film demanded more production resources, the two companies concluded it should be released on the big screen first. The movie grossed nearly $500 million worldwide, and then a contractual argument ensued. Pixar argued it should count toward their five-film Disney commitment, and Michael refused, since it was a sequel. This became another bone of contention between Michael and Steve.
As Pixar’s reputation and influence grew with each release, so did the tension with Disney. In Steve’s mind, he and Pixar deserved more respect from Disney, and he wanted the contract to reflect the shifting leverage. He also thought, because they were eclipsing Disney both creatively and commercially, that Disney should have turned to them for creative assistance. Instead, he felt Michael always treated them as a lesser partner in the relationship, a studio for hire, which he took as a huge slight.
Michael felt equally disrespected. He and others at Disney believed they were much more than just silent partners in the creation of the films, and that Steve never gave Disney the credit it deserved. I wasn’t involved at all in the Pixar relationship during my time as COO, but it was clear that Pixar was gaining swagger as Disney was losing it, and these two strong-willed personalities were destined to battle each other for supremacy.
That was the lay of the land throughout much of 2001—our industry changing at blinding speed; tensions between Michael and Steve threatening the future of a vital partnership; a string of box-office failures leading to a public loss of faith in Disney Animation; sinking ratings at ABC; and a board of directors that was just beginning to take note and question Michael’s leadership.
Then came September 11, which would change the world and challenge us in ways we never imagined. I was up that morning at the crack of dawn, working out at home, when I looked up at the TV and saw a report that a plane had just flown into one of the Twin Towers. I stopped my workout and went into another room and turned on the television in time to see the second plane hit. Immediately, I called the president of ABC News, David Westin, to determine what he knew and how we were planning to cover these events that were unfolding before our eyes. David had little information, but like all major news organizations, we were scrambling hundreds of people in many directions—to the Pentagon, the White House, lower Manhattan—to try to understand what was happening.
I rushed to my office and called Michael on my way. He hadn’t seen the news yet, but as he turned on his television, we shared our concern—that Disney might also be a target. We made the decision to close down Walt Disney World in Orlando immediately and empty the park, and not to open Disneyland at all. I spent the rest of the day coordinating our response on various fronts—spending hours on the phone with ABC News, making sure all of our people were safe, strategizing security in our parks for the days to come, and generally trying to help people keep calm during what was the most unsettling time of our lives.
Among the many ripple effects of the attacks was a global slowdown in tourism that lasted long after September 11. The impact on Disney’s business was devastating. The stock market as a whole fell sharply, and Disney lost nearly a quarter of its value within days of the attacks. Then our largest shareholder, the Bass family, were forced to sell a massive amount of Disney stock—135 million shares, worth about $2 billion—to cover a margin call, which precipitated another steep drop in our share price. Companies around the globe would struggle to recover for some time, but our issues were piling up, and this marked the beginning of a long slide into controversy and strife for Disney, and for Michael.
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IN MANY WAYS, he handled the trouble to come admirably and stoically, but it was impossible not to fall prey to pessimism and paranoia as the stress became more intense. I would occasionally answer my phone and Michael would be on the line saying that he’d just been in the shower, or on a plane, or in a conversation over lunch, and had become convinced that something we were doing was going to fail, someone was going to overtake us, some deal was going to go south. He would literally say to me, “The sky is falling,” and over time a sense of doom and gloom began to permeate the company.
Michael had plenty of valid reasons to be pessimistic, but as a leader you can’t communicate that pessimism to the people around you. It’s ruinous to morale. It saps energy and inspiration. Decisions get made from a protective, defensive posture.
Michael’s natural pessimism often worked for him, up to a point. He was motivated in part out of a fear of calamity, and that often fueled his perfectionism and his success, although it’s not a very useful tool to motivate people. Sometimes his concerns were justified, and it was right to address them, but often a kind of free-floating worry had him in its grip. This wasn’t Michael’s only state. He also had a natural exuberance that was often infectious. But in his later years, as the stress on him steadily increased, pessimism became the rule more than the exception, and it led him to close ranks and become increasingly cloistered.
No one could have handled the stress that Michael was under perfectly, but optimism in a leader, especially in challenging times, is so vital. Pessimism leads to paranoia, which leads to defensiveness, which leads to risk aversion.
Optimism sets a different machine in motion. Especially in difficult moments, the people you lead need to feel confident in your ability to focus on what matters, and not to operate from a place of defensiveness and self-preservation. This isn’t about saying things are good when they’re not, and it’s not about conveying some innate faith that “things will work out.” It’s about believing you and the people around you can steer toward the best outcome, and not communicating the feeling that all is lost if things don’t break your way. The tone you set as a leader has an enormous effect on the people around you. No one wants to follow a pessimist.
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IN THE YEARS after September 11, two key board members, Roy E. Disney and Stanley Gold, who was Roy’s lawyer, began to openly express their lack of faith in Michael’s ability to run the company. Roy had a long, complicated history with Michael. He was largely responsible for bringing Michael on as CEO and chairman of the board, and along with all shareholders, he benefited greatly under Michael’s leadership. Between 1984 and 1994, Disney’s annual profits quadrupled, and its stock price increased 1,300 percent.
Michael went out of his way during those years to be solicitous with Roy and show him deference and respect. This wasn’t easy to do. Roy could be very difficult at times. He viewed himself as the keeper of the Disney legacy. He lived and breathed and bled Disney, operating as if any break from tradition was a violation of some sacred pact he’d made with Walt himself (who supposedly never showed his nephew much respect). Roy tended to revere the past instead of respecting it, and as a result he had a difficult time tolerating change of any sort. He hated Michael’s acquisition of Capital Cities/ABC, because it meant introducing non-Disney brands into the company’s bloodstream. On a lesser but maybe more illustrative note, he got very angry one Christmas season when we decided to sell pure white Mickey Mouse plush dolls in our Disney stores. “Mickey is only these colors, black and white and red and yellow, and that’s it!” Roy raged in emails to Michael and me. He wanted the “albino Mickeys,” as he called them, taken from the shelves, which we didn’t do, but it was a huge distraction.
He also had a drinking problem. We never discussed it at Disney while he was alive, but years later one of his kids spoke openly with me about the problems his parents had with alcohol. Roy and his wif
e, Patti, could get angry after a few drinks, often resulting in vicious late-night emails (I was on the receiving end of several), focused on mistakes he believed we were making as stewards of the Disney legacy.
As the challenges we were facing grew, Roy became more openly critical of Michael, eventually fully turning on him. In 2002, Roy and Stanley sent a letter to the board demanding that Michael address their concerns, which were numerous: the anemic ratings at ABC; the animus with Steve Jobs and Pixar; disagreements over theme-park strategy; and troubles with what they believed was Michael’s problematic micromanaging. Their letter was so specific in its grievances that we had no choice but to take it seriously. It resulted in a full management presentation to the board, addressing each issue and how they would be remedied.
It didn’t seem to matter. Roy and Stanley spent the better part of a year actively trying to convince the board to oust him, and in the fall of 2003, Michael finally hit his limit with them. Michael’s strategy was to turn to the company’s governance guidelines regarding board member tenure, which stipulated that board members had to retire at age seventy-two. The rule had never been applied but Roy was challenging Michael in such extreme ways that he decided to invoke the clause. Rather than telling Roy himself, though, Michael had the chairman of the board’s nominating committee inform him that he would not be allowed to stand for reelection and would be retired as of the next shareholders meeting in March 2004.
Our next board meeting was scheduled in New York on the Tuesday after Thanksgiving. On Sunday afternoon, Willow and I were on our way to a museum and had plans for a dinner date that evening, when Michael’s assistant summoned me to an emergency meeting at Michael’s apartment in the Pierre Hotel on East Sixty-first Street. When I arrived, Michael was holding a letter from Roy and Stanley that had been slipped under his door.
He handed it to me and I began to read. Roy stated in the letter that he and Stanley were resigning from the board. He then went on a blistering, three-page critique of Michael’s stewardship of the company. The first ten years had been a success, he acknowledged, but the latter years had been defined by seven distinct failures, which Roy laid out point by point:
1) a failure to bring ABC Prime Time back from its ratings abyss; 2) the “consistent micro-management of everyone around you with the resulting loss of morale throughout this company”; 3) a lack of adequate investment in theme parks—building “on the cheap”—that has depressed park attendance; 4) “the perception by all of our stakeholders…that the company is rapacious, soulless, and always looking for the ‘quick buck’ rather than long-term value, which is leading to a loss of public trust”; 5) a creative brain drain from the company due to mismanagement and low morale; 6) a failure to build good relationships with Disney’s partners, particularly Pixar; and 7) “your consistent refusal to establish a clear succession plan.”
Roy concluded by writing: “Michael, it is my sincere belief that it is you that should be leaving and not me. Accordingly, I once again call for your resignation and retirement.”
There was validity to some of Roy’s complaints, but many of them were out of context. It didn’t matter. We all knew we were on a very rough road now, and we began to strategize for the inevitable public relations nightmare.
The letter was only the beginning. Roy and Stanley soon launched what they called the “Save Disney” campaign. For the next three months, leading up to the annual shareholders meeting in Philadelphia in March 2004, they publicly criticized Michael at every opportunity. They worked to get other members of the board to turn against him. They set up a “Save Disney” website and they aggressively lobbied Disney shareholders to cast a “withhold” vote at the upcoming meeting and dump him from the board. (If you own stock in the company, you receive a proxy, and every year you can cast a vote in favor of individual board members or you can “withhold” your vote of support, which is the equivalent of a no vote.)
While this was going on, the long-simmering animosity between Michael and Steve Jobs finally boiled over. Disney was trying to extend its five-picture partnership deal with Pixar, but Steve put a new deal on the table that was impossible to accept. Pixar would control production and retain all sequel rights, and Disney would be reduced to a distribution partner. Michael refused; Steve wouldn’t budge on any counterproposals. In the middle of the prolonged negotiations, an internal memo that Michael wrote to the board before the release of Finding Nemo got leaked to the press. In the memo, Michael said that he wasn’t impressed by the early cuts he’d seen, and that Pixar would get a “reality check” on what he believed was their unearned arrogance. If Nemo didn’t do well, he suggested, that wouldn’t necessarily be bad, since Disney would have more leverage in the negotiations.
There was nothing Steve was more averse to than someone trying to use leverage over him. If you tried to do that, he went nuts. Michael, too, was averse to anything he perceived as bullying of him or the company, and the combination of the two of them made an already challenging negotiating process nearly impossible. At some point, Steve referred to Disney Animation’s string of “embarrassing duds,” and then in January 2004, he made a very public, in-your-face announcement that he would never deal with Disney again. “After ten months of trying to strike a deal, we’re moving on,” he said. “It’s a shame Disney won’t be participating in Pixar’s future successes.” Michael responded by saying it didn’t matter, we could make all of the sequels we wanted of the Pixar films we’d released and there was nothing they could do about it. Then Roy and Stanley got involved and issued a statement of their own, saying, “More than a year ago, we warned the Disney board that we believed Michael Eisner was mismanaging the Pixar partnership and expressed our concern that the relationship was in jeopardy,” adding fuel to their argument that Michael had lost control of the company.
In fact, Michael had been right to reject Steve’s terms. It would have been fiscally irresponsible to accept the deal Steve proposed. The cost to Disney was too high and the benefits were too low. But the public perception, which was amplified by all of the coverage of the busted negotiations and the rift with Steve Jobs, was that Michael had screwed up badly, and it was a blow to him.
Two weeks later, we convened an investors conference in Orlando. The plan was to reassure industry analysts about the future of the company and counter all of the recent damage. Our first-quarter earnings reports were to be released that day, and the numbers were good. Finding Nemo and Pirates of the Caribbean, which had come out in May and June the previous year, were both massive hits, and overall our revenue was up 19 percent. It was the first blue sky we’d seen in a while, and we were looking forward to making the case that we were back on track.
Things didn’t pan out that way. On a cloudy, cool Florida morning, I left my hotel room at around 7:00 A.M. and was on my way to the conference when I received a call from Zenia Mucha, our chief communications officer. Zenia often makes her points emphatically; in this case emphatic was an understatement. “Comcast has gone hostile!” she hollered into the phone. “Get to Michael’s suite now!”
Comcast was the largest cable provider in the country, but Brian Roberts, their CEO, knew that owning Disney would transform them. It would allow them to marry Disney’s content with their vast cable distribution network, which would be a potent combination. (They were especially interested in ESPN, which at the time was the highest-priced channel in cable TV.)
A few days earlier, Brian had called Michael and made an offer to buy Disney. Michael told him he wasn’t going to engage in negotiations, but if he wanted to make an official offer, the board would be obligated to consider it. “But we’re not for sale,” Michael said. The rejection resulted in a hostile, unsolicited public offer to the Disney board and its shareholders to acquire Disney for $64 billion, to be paid in Comcast stock. (For every share of Disney stock they owned, shareholders would get .78 a share of Comcast stock.)
When I walked into Michael’s suite, the first thing I heard were the voices of Brian Roberts and Steve Burke, Comcast’s president, giving a live interview on CNBC. I knew Steve well. He had worked for me for two years, from 1996 to 1998, and had been with Disney for ten years before that, most recently at Disneyland Paris. When Michael replaced him there and brought him back to New York, Steve came to work for me at ABC. He’s the eldest son of my old boss, Dan Burke, whom I deeply respected and loved, and while he didn’t have Dan’s natural warmth, Steve was smart and funny and a fast learner. I taught him a lot about the TV and radio businesses, and he taught me a lot about navigating the ins and outs of Disney.
In 1998, I badly needed someone to take over ABC and free me up to do the other aspects of my job, and I told Steve I was planning to promote him to president of the network. He said that he didn’t want to move to L.A. (Michael was planning to move all of ABC to L.A. at the time), and shortly after that, he told us he was leaving Disney for Comcast. I’d invested so much in him, and we’d grown close over those two years, that it felt like a knife in my back. Now here he was on television, twisting it further. When asked what he would do to fix the network, Steve replied, “Bring in better people to run it.”
Zenia and Alan Braverman, our general counsel, and Peter Murphy, the head of Strategic Planning, were already there in Michael’s suite when I arrived, staring at the TV. We were all caught completely off guard by the takeover bid, and immediately scrambled to formulate a response. We needed to put out a public statement, but first we had to find out where the board stood. At the same time we were trying to figure out what made Brian so certain Disney would sell in the first place? Soon it became apparent that someone, either inside the board or close to it, must have told him that Michael was vulnerable and Disney in such bad shape that if he made an offer, the board would go for it. It would give the board a less confrontational way to get rid of Michael. (Years later, Brian confirmed to me that an intermediary, claiming to represent a board member, encouraged him to bid.)