Number
28
Walt Disney Company
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The story of the Walt Disney Company is certainly one of impressive corporate and technological achievement. But at its heart, it is really a tale of two men. One gave the business life, the other steered it in promising new directions. One was blessed with uncanny imagination, the other with uncommon vision. One leaned on Steamboat Willie; the other, Millionaire Regis.
Walt Disney. Michael Eisner. Any corporation laying claim to just one of these formidable figures would be worthy of attention. Having both elevated this firm into rarefied air, which it has used to amass substantial stakes in virtually all of today’s hot entertainment venues: live-action and animated films, network and cable TV, music and video, books and magazines, theme parks, sports teams, licensed merchandise, Internet portals, electronic games, computer software—the list goes on. Disney built the foundation, Eisner engineered the expansion. And the influence has always been felt far and wide.
Walt Disney Studios opened in 1923 as an animation studio. The studio pioneered commercial applications of the art form (and has been its most successful practitioner ever since). Disney has continually expanded in more recent years and is now the second-largest media conglomerate in the world. The beat continues, despite occasional missteps that fleetingly tarnish its paternal image and temporarily dull its Wall Street luster. For example, during the past few years, Disney was forced to hand out very public multimillion-dollar settlements to a couple of high-profile former executives. At the same time, it was actively using the 1996 acquisition of Capital Cities/ABC to cement its place as the top production and distribution company in the business. Regis Philbin’s Who Wants to be a Millionaire has benefited its owner far more than the host or any of its contestants.
On occasion, the firm itself can surely prove as interesting as the stories that it peddles. Overall, though, Disney remains a tale of two men—a strikingly similar yet distinctly different duo that, together in spirit but quite separate in reality, has combined over the past eight decades to build the most consistently dominant company in its field.
Walter Elias Disney kicked off his career as a professional artist at the age of seven when he first offered his drawings for sale to neighbors in Marceline, Mo. He launched his legend as a visionary some 15 years later when in 1923 he left for Los Angeles with just $40 and his art supplies. On the West Coast, he and older brother Roy borrowed $500 from an uncle and opened their own animation studio. Walt concentrated on the drawing and Roy handled the finances. Within a few short years they had created Mickey Mouse (who is still the world’s most famous cartoon character) along with a film to introduce him. When Steamboat Willie debuted in 1928 as the first fully synchronized sound cartoon, Mickey’s falsetto was provided by Walt himself.
Innovations continually sprang from Disney’s bountiful imagination and his unwavering willingness to take risks. He was the first to use Technicolor in animation. He also invented a system that added stunning three-dimensional depth to his drawings. His first feature film to utilize these advances, the revolutionary Snow White and the Seven Dwarfs, was also Hollywood’s first full-length animated musical. It cost an astonishing $1.5 million to produce (roughly one-third of rival Columbia Pictures’ entire budget for that year). But the movie paid its creators back handsomely with huge box-office receipts and widespread public acclaim. Disney used proceeds to build a new state-of-the-art animation studio in Burbank, and a remarkable series followed that was both stylistically revolutionary and commercially popular. Pinocchio, Bambi, Cinderella, and Peter Pan are among those instant classics that remain popular to this day.
But Disney was not content. His drive to develop even more trailblazing forms of family entertainment took him first to live action films such as Treasure Island, 20,000 Leagues Under the Sea, and Davy Crockett, and then to youth-oriented comedies such as The Shaggy Dog, The Absent-Minded Professor, and The Parent Trap. In 1954, he moved to the fledgling medium of television, where he initially presented The Mickey Mouse Club and Zorro. He later hosted one of the first weekly shows not broadcast in standard black-and-white, the aptly named Wonderful World of Color. In 1955, he opened Disneyland in Anaheim, Calif., and this real-life magic kingdom immediately lifted his name and empire to previously unimaginable heights. It also unwittingly launched the ongoing theme park craze—which took a giant step forward in 1971 when his successors introduced Florida’s Walt Disney World, which is still being tinkered with by them and others in various forms—from Paris to Tokyo to Las Vegas.
In 1965, Walt Disney turned his attention to the problems of urban life in America. He personally began directing the design of his “Experimental Prototype Community of Tomorrow,” or EPCOT, which would serve as “a living showcase for the creativity of American industry.” He directed the purchase of 43 square miles of orange groves, scrub, wetlands, and vegetable farms—an area twice the size of Manhattan. It was only known as the “Florida Project” up to Disney’s death. (The Walt Disney World complex opened in 1971 and his EPCOT center followed 11 years later, although the focus of the entire project had obviously shifted since its initial planning.)
The land purchases that led to the project were made by a quiet anonymous buyer who was almost finished snatching up more than 30,000 acres in scattered parcels when his association with the Walt Disney Company leaked out. The state of Florida, which was boggled at the thought of turning the sleepy Orlando area into a tourist mecca, eventually sanctioned the site as its own independent government with the power to build roads, operate sewage and water-treatment plants, run police and fire stations, administer planning and zoning, and so forth. This kept Orlando or any other municipality from obtaining precious income or property taxes, and also permitted Disney to float bonds and tax itself. It could even deduct some of its capital expenditures from its corporate income tax, rather than amortizing them. Surprisingly, all this was legal.
As a businessman, Disney also was an original. Disney was a man who publicly carried the image of a genial uncle, but was never satisfied with anything but the best from his growing workforce. To deliver the extraordinarily high level of customer service that he demanded throughout his organization, he implemented extensive training programs and strict employee guidelines. This drive for perceived perfection occasionally brought public ridicule—as when facial hair was totally banned from all male theme park workers. But it also helped establish the Disney brand as a purveyor of dependable products that parents could invariably trust and kids would consistently enjoy.
When Disney died of cancer in 1966, his efforts had garnered 48 Oscars, seven Emmys, thousands of other accolades, and unlimited global recognition. His two theme parks became the most popular attractions of their kind in the world, drawing millions each year who came to play out their fantasies and snatch up licensed merchandise emblazoned with Mickey and his animated cronies. But the company languished creatively. Films released over the next several years included artistically nondescript and commercially inept fare such as The Barefoot Executive and Donald Duck’s Fun Festival. Uncle Walt’s presence hovered over everything, but there was no spark, no vision. Until, that is, Michael Eisner came aboard.
Eisner was born to an affluent family in Mt. Kisco, N.Y., and went from prestigious private schools to Denison University in Ohio. Graduating with degrees in English and theater two years before Walt’s death, he moved briefly to Paris with the hope of becoming a writer. He returned after just 10 days, though, and took a job as an NBC clerk in New York. Subsequent stints at CBS and ABC tagged him as a hot young entertainment executive. And in 1976 the 34 year old was named president of Paramount Pictures. Eight years later he had elevated that studio from last place to first among the majors. When the ailing Walt Disney Company came calling, Eisner accepted its offer to become chairman and CEO.
Working closely with studio chairman Jeffrey Katzenberg, Eisner took immediate aim at Disney’s film product. He started by developing mainstream comedies with stars like Bette Midler and Richard Dreyfuss, who weren’t top box-office draws at the time. When these tightly budgeted movies proved profitable, Eisner opened new divisions such as Touchstone and Hollywood Pictures to produce more titles for older audiences. In recent years Touchstone’s releases have included Armageddon and Bicentennial Man; Hollywood Pictures’ credits include The Joy Luck Club and Mr. Holland’s Opus.
Eisner, who revered Walt Disney and saw a bit of the founder in himself, targeted video as the next big thing and reached into the company vault for material to exploit it. The subsequent re-release of classic animated Disney features, handled with the PR savvy of any major theatrical premier, have been a financial windfall for the company as well as video outlets. Eisner also began introducing a major new feature-length animated film like The Lion King and Tarzan each year, and all have become instant cultural touchstones as well as considerable financial bonanzas.
Focusing on details as big as a movie soundtrack and as small as the carpeting in a new hotel, Eisner personifies the modern Walt Disney Company just as surely as Walt epitomized it in earlier days. He brought an updated version of the old Wonderful World of Color back to TV in its familiar Sunday night time slot, and even assumed hosting duties in the manner of his predecessor. He also followed the founder’s lead by focusing his personal attention on Walt’s beloved theme parks, ordering massive upgrades on the now-aging mainstays and designing a new one that opened in France in 1992. Initially dubbed EuroDisney, this seemed a spectacular fiasco at the start. Eisner refined the park and renamed it Disneyland Paris three years later, however, and it has since turned a profit while silencing most critics.
The company has not skated through Eisner’s tenure totally unscathed, of course. Its attempt to open a $650 million “U.S. history theme park” in Virginia was slammed by preser vations. The project was abandoned by Disney after a costly legal and public relations war. Former colleague and close friend Katzenberg left in a public snit that hurt Eisner and lowered Disney’s status among consumers and investors. Partly in response, the company’s stock was a noticeable no-show during the late 1990s’ bull market.
Also, an impasse over transmission rights between Time Warner Inc. and Disney caused 11 Disney-owned ABC affiliates to be dropped from the Time Warner Cable system during the May 2000 sweeps period. Approximately 3.5 million homes in the United States lost their ABC signal for a day and a half. Time Warner and ABC were trying to reach a new national transmission deal after their original deal expired December 31, 1999. Because of the 1992 Cable TV Act passed by Congress, ABC and other over-the-air networks have the right to demand compensation from cable providers in exchange for their programming. ABC wanted Time Warner to put some of its networks—The Disney Channel, the soap-opera channel SoapNet, and Toon Disney—on basic cable instead of premium pay-cable. ABC also asked Time Warner to pay rates for programming similar to those it paid its own networks, such as CNN. Each side blamed the other for the impasse, although the Federal Communications Commission ultimately determined that Time Warner was to blame. Time Warner put Disney back on the system quickly as the two sides tried to work out their differences. But Disney and others opposed to Time Warner’s acquisition by America Online began citing the dispute as an example of monopolistic behavior. Antitrust officials’ recent approval of the AOL-Time Warner merger specifically prohibits the cable operator from interfering with content from unaffiliated companies (such as Disney) whose material passes through its system.
But the successes have been far more numerous: groundbreaking computeranimated family films including Toy Story, A Bug’s Life, and Dinosaur; television ratings leadership through its ABC network and cable channels like ESPN; affiliation with the Miramax studio and its stylish adult fare such as The Cider House Rules and Shakespeare in Love; launches of a national radio network for kids and a crafts-and-travel magazine for their parents; creation of an Internet unit that amalgamates all of the above.
Disney’s litany of major hits remains as substantial as ever. Yet its story is still really the story of two men—one who dreamed it up, and one who upped the dream.