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Eisner Un-Moused?

He took Disney from the doldrums to the heart of the Dow, but with the loss of Michael Eisner's best lieutenants, the magic has evaporated from the Magic Kingdom.

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The Katzenberg-Eisner thing is so weird, so extreme, so on-the-sleeve, so futile and unnecessary and just not done, that it suddenly starts to make sense. And to think it is to know it: Michael Eisner's extraordinary reign at the Walt Disney Company is coming to an end.

He is the man in the maelstrom. Starting in 1984, he took Disney -- a company with a fading brand and sclerotic management (a nonplayer in the media and entertainment business) -- and turned it into the most powerful force in the industry, creating the model of the media merchandising-licensing-branding juggernaut. For his troubles, he became a billionaire as well as one of the most prominent chief executives in America (for ten years, in our family, we've been watching a tape of Mary Poppins introduced by Michael Eisner, who glides down the cable car at Disneyland and like a folksy Dad -- a Jewish Walt -- presents the Disney classic). Then, suddenly, after a heart bypass -- or because of the heart bypass (a leitmotif of his autobiography) -- or because of the death of his Rock of Gibraltar No. 2, Frank Wells, or because of that midget Jeffrey Katzenberg, or because when you've done it all and done it brilliantly, you can say fuck it, you'll do it your way if you want to do it your way, or because the media business itself just went crazy, it stopped working. It -- that executive ability to make it all more or less come out okay, or seem to -- shut down. The billion-dollar Eisner stopped being able to turn events in his or Disney's favor.

If you can even conceive of the most powerful man being powerless, then he is. Worse still: His rage makes him seem pitiable. This is tragic-figure stuff.

The Jeffrey Katzenberg mess in and of itself is so colossal, and so costly -- not just the billion real dollars Variety estimates Katzenberg's departure will cost Disney, and not just the incalculable value in corporate goodwill that has been squandered, but the cost to Eisner himself of looking like a fool, in fact, much beyond fool: Moushwitz Commandant and fool -- that it would mean the end of virtually any other chief executive of a public company. But Eisner's problem isn't just Jeffrey.

Everywhere, the company is adrift.

Two tiers of managers have been lost over the last several years (in addition to Wells and Katzenberg, there's president Michael Ovitz; CFOs Stephen Bollenbach and Richard Nanula; Steve Burke, the No. 2 at ABC; Peter Rummel, who ran Disney's hotels; Philippe Bourguignon at EuroDisney; Larry Murphy, who ran strategic planning; Geraldine Laybourne in cable television; and Jake Weinbaum, the company's interactive chief, who left a few weeks ago). Even though Tarzan has opened big, that's only served to highlight how expensive animation has become. By some estimates, animated movies almost doubled in cost since DreamWorks started bidding up the price of animators. So no matter how well Tarzan does, it will never be good enough. What's more, live action is in the soup; merchandising is off; videos' sales are down; the parks have reached the limits of growth. And ABC -- forget about it!

There have always been the good Michael and the bad Michael. The good Michael is the no-Hollywood-jive, drooping-sock Michael, the faithful-to-his-wife Michael, the decent, goofy, puppy-dog Michael. The Michael played by Tom Hanks.

And then there's the bad Michael: controlling, vindictive, dissembling Michael. The avaricious Disney-is-too-small- and-no-company-is-too- big-for-Michael Eisner Michael.

In contemporary Hollywood mythology -- a mythology partly authored by Eisner himself in his autobiography (written with Tony Schwartz) -- the unflappable and loyal Frank Wells, who died in a freak helicopter-skiing accident in 1994, acted as buffer, counselor, mother. He was the producer handling the tantrums and ego excesses of his difficult star. In Wells's production (it was Wells who brought Eisner to Disney), Eisner is genius, leader, statesman, one of those unique executives -- Gates, Henry Ford, Walt himself -- who personifies his company.

If Frank hadn't died . . . is the preface to almost every rumination on the part of Disney observers and insiders. If Frank Wells had lived, the thinking goes, Eisner and Katzenberg would not be in court. DreamWorks would not have started and ruined the economics of the all-important animation business (Katzenberg would have left Disney anyway, but would now be running an independent animation studio financed by Disney). Michael Ovitz would never have been hired -- and hence the huge and costly embarrassment of firing him would never have occurred. Most of the executives who have departed Disney over the past few years would have stayed. And Disney would not have bought ABC.

There is, however, another interpretation of the Wells myth, which, in essence, paints Wells as the great enabler. Because he let Eisner look like a statesman, a CEO of archetypal proportions, a Jack Welch type, everybody got fooled, including Eisner himself. He started believing he was actually a godlike corporate manager instead of the impulsive, immoderate, hands-on (as likely to be idiotic as brilliant, as likely to be dismissive and cruel as he is to be charming and charismatic) showbiz guy without basic knowledge of, or an innate head for, the fundamental details of running a massively disaggregated modern corporation. Eisner has, in other words, the classic attributes of the turnaround guy and entrepreneur.

Certainly his successes -- at ABC in the sixties, at Paramount in the seventies, and at Disney in the eighties -- all had to do with taking dispirited also-ran enterprises and rolling up his sleeves (at ailing Paramount he got Santa Monica restaurateur Michael McCarty to help him make lists of the Hollywood power elite he wanted to invite to his house for dinner; he picked up films by Warren Beatty and Jack Nicholson and gave them offices on the Paramount lot so people would see them arriving every day). He continues to believe, says a former Disney division head, that "anything he becomes personally involved in he betters."

In the mid-eighties, says another of the senior executives who left the company, "the Disney brand was a deflated balloon or empty vessel, and everywhere we turned we could fill it up with something."

"The Disney brand was an asset that nobody had turbocharged in a long time. You would really have to be a horse's ass not to make the Disney stores work, or Disney home videos, or Disney publishing," says another.

But brands are not infinitely renewable resources.

The innocence and novelty wear off. Disney crapola inevitably becomes less interesting than other crapola. When you get to 500 Disney stores, it's not so easy to envision 500 or even 100 more or even 10 more. If your synergistic food chain is built on incredibly expensive animated feature films generating theme-park attractions, live-theater events, video sales, plush toys, publishing properties, and on and on, you're screwed if your animated movie isn't boffo. For a halcyon period from the mid-eighties through the mid-nineties, Disney owned the attention of families with young children. But this afternoon, my 7-year-old is passing up Tarzan for a fourth trip to Star Wars.

Not growing is, however, not a possible corporate scenario.

So Michael Eisner bought ABC (there is a part of Eisner that has always remained a sixties network guy -- his confidence is the confidence of a man who grew up in one of the great easy-money games of all time).

You might be able to justify the $19 billion purchase of ABC, because it included the lucrative cable properties ESPN and Lifetime. But Disney got a network too -- it yoked itself to one of the world's most highly visible businesses, one with dwindling market share, exploding costs, and a rapidly deconstructing paradigm. It was, in the most classic sense, a sucker's deal. Eisner thought he had bought the most powerful component of the media business -- one of the three major networks -- only to find he had acquired an anachronism (like going long on the American auto industry in 1973) that would sap Disney's energy resources and reputation.

It is against this background -- the limits of growth, the whiff of corporate mortality -- that Eisner, frustrated and furious, tries to reach out and throttle the little midget.

And walks into a trap.

Eisner has lots of serious enemies. In a town of serious enemies, Michael's are more serious. Michael, people say, just cannot be trusted. (This is notable -- and preposterous -- because no one in Hollywood can be trusted.)

So the trap is set and in he walks. It is supposed to be the Disney machine against the midget Katzenberg, but it turns out as much to be Hollywood -- in the form of Geffen and Spielberg among others -- against Eisner. "The whole town is rooting for Jeffrey," says one Hollywood producer who has worked with both Eisner and Katzenberg (and who hasn't?). Shortly before the trial opened, the trades were filled with display ads of the we-love-you-Jeffrey variety -- Katzenberg had just, coincidentally, been given an award by the American Jewish Committee.

"Jeffrey," says a Disney insider, "holds all the cards, and because Disney has already paid him $100 million as part of the settlement, he is playing with the house money."

In other words, Jeffrey can take a million dollars of Disney's money and pay lawyers to inflict an incalculable value of humiliation on Michael.

Indeed, there is only one issue left, and it is by far the largest issue. How did Michael Eisner get into this mess? And its corollary: What doubts does the fact that he got into this mess raise about his ability to continue managing, even his interest in managing, the Disney Company?

Oh yes, and how do Disney's shareholders get rid of him? There is an "impossible," "will never happen," "when hell freezes over" knee-jerk response in Hollywood to the notion that Michael Eisner could ever be fired. "Michael has lots of time to recover from his spiral," said one former Eisner colleague. But, in fact, if you date the spiral from Frank Wells's death, it's been going on for five years. There may not be a bottom. The company's two most influential shareholders are Sid Bass and Warren Buffett. Neither is the bloody-boardroom-brawl type; they are men-of-weighty-counsel types. You can be sure the discussion they've undoubtedly initiated is about how to preserve the equity the company has built up in Michael Eisner and how to deal with the present Eisner liabilities. Surely, what they are saying is that Michael needs a strong No. 2 who is ready to become his successor. An able manager who can immediately assume many of Michael's burdens.

For health reasons, of course.


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