How Eisner Saved the Magic Kingdom


By Ronald Grover An initial meeting with Michael Eisner can be instant seduction. It was that way for me when I first met him 15 years ago. We were having breakfast at the Bel-Air Hotel, a ritzy Los Angeles stopover for stars and big-money execs. It's not far from where Eisner, his wife, Jane, and their three sons lived. Eisner arrived late for that first meeting (which I would later learn was his custom), hair still wet (we both had plenty more of it back then), explaining that he had worked with one of his sons that morning on a school project.

It was clear to me that he was a family guy, and he seemed ideally suited to run the company to which Americans entrusted their children's entertainment. And for much of his early years at Disney (DIS), he did that with a flair that might have made old Walt proud.

But as he leaves his job as CEO of the Mouse House on Oct. 1, ending a 21-year tenure -- sometimes successful, often stormy -- as Hollywood's most recognized mogul, it's hard to remember him as the self-deprecating dad he was back then. Instead, there's the embattled CEO who infuriated shareholders some 18 months ago in Philadelphia, when 45% of them voted against him remaining chairman of the company he had headed since 1984. Lost on the protesters who rallied with dissident former board member Roy Disney on that chilly March day was the memory of the Michael Eisner who had saved an American institution.

DREAM TEAM. In 1984, Eisner, who had been unceremoniously dumped as president of Paramount Pictures, was asked to revive a company that was a shadow of the one Walt built on princesses and parks. Disney wasn't making movies worth watching, and while its theme parks still glistened, earnings had fallen to $94 million a year, from $135 million four years earlier. Raiders were descending on the Magic Kingdom, eager to sell off Disneyland and fill Orlando with condos.

Today, Disney is a giant, and last year it earned $2.3 billion, on revenues of $30.7 billion. On Eisner's watch, the outfit opened theme parks in Paris and Hong Kong, expanded its parks in Orlando and Anaheim, and once again made movies that folks wanted to see. Disney revived its near-moribund animation studio, bought a TV network, and became the most powerful company in sports programming, thanks to ESPN.

Eisner didn't do it alone. He was part of a Hollywood Dream Team. There was former Warner Bros. (TWX) President Frank Wells, a craggy, sometimes absent-minded lawyer who could doze off during a lengthy discussion but was the glue that held the Mouse House together. Studio chief Jeffrey Katzenberg helped Eisner resurrect the company's animation unit with the tirelessness of a man who slept only five hours a night and famously told employees that "if you don't want to work Saturdays, don't bother coming in on Sunday." Gary Wilson came from Marriott (MAR) and brilliantly financed Disney's film and theme-park expansion.

FAIRY TALE SOURS. Through it all, Eisner was the personification of the Disney brand, right down to the Mickey tie he wore. He was known for his folksy letters to shareholders, written from his family farm in Vermont or while watching his son practice hockey.

But every letter hit on the same theme: Disney was a creative company. And Eisner was clearly its creative leader, working tirelessly to make the company's films, TV shows, and theme-park rides the best they could be. He got sick, he once told me, from riding the newly designed Splash Mountain ride at Disneyland so often.

Life isn't a Disney fairy tale, and the Eisner sheen didn't last. The animated flicks started flopping in the late '90s, ABC struggled, and terrorism and economic woes took their toll on parks here and in Paris. Top executives started leaving the company in droves. And Eisner was seen less as Disney's knight in shining armor and more as Grumpy, caustic to those with whom he disagreed and deceptive even with people who regarded him as a friend.

MIDGET IRE. Those who know Eisner well say he was never the same after Frank Wells's 1994 death in a helicopter crash. Without Wells, who often acted the part of the peacemaker, the company's sometimes high-maintenance execs began to bicker.

And Eisner never seemed to get over his pillorying by the press after Katzenberg's departure. That saga played out in the media like a Shakespearean tragedy, right up to when Katzenberg successfully sued in 1999 for the money he said Disney cheated him out of.

"I was the cheerleader, he was the tip of the pom-pom," Eisner told his ghostwriter, Tony Schwartz, according to Schwartz's notes read at the trial. It also came out at the trial that Eisner said "I think I hate the little midget" to Schwartz, referring to the diminutive Katzenberg.

That was the height of Eisner's darkest period. Through much of his final decade at Disney, the CEO was under siege for a series of corporate failures that seemed to be magnified because of his celebrity and Disney's larger-than-life place in Americana. When Disney made R-rated movies, the Religious Right protested. It made the same mistake as other media concerns -- investing too early in the Internet -- but Disney's $820 million write-off for its Go network in 2001 became the talk of Hollywood.

BATTLE-WEARY. It was Eisner who bore the brunt of criticism for the company's 1996 acquisition of Cap Cities ABC when the network's ratings tanked. In truth, it may have been the best $19 billion he ever spent. With ABC, Disney got the money-making ESPN, which last year generated nearly $1 billion in cash flow. Now that ABC has revived, thanks to primetime hits Desperate Housewives and Lost, the deal looks even better.

Still, there's no getting around the numbers. Disney's stock price, despite a nice runup earlier this year, is still around where it was in 1997. When Comcast (CMCSA) made a run at Disney in 2004, Eisner had the look of a defeated executive. "I have had better days," a bleary-eyed Eisner told several of us reporters at an analysts' conference in Orlando the morning the Comcast offer was announced.

In time, Disney beat back Comcast, but it hardly mattered. A few weeks earlier, shareholders had rebuffed Eisner at the company's annual meeting (ironically in Comcast's home city of Philadelphia), withholding so many votes that it was clear support for his chairmanship had waned. (A drained Eisner forgot to announce the final tally, bringing even more attention to the embarrassing vote.) Later that night, the Disney board stripped him of the chairman title, and a few months later, he announced that he would step down in a year.

ON THE MEND. Like many reporters, I had mostly lost touch with Michael Eisner in recent years. "Good riddance to tonsils," he very generously wrote in a get-well card after my 1997 tonsillectomy.

But in the most recent interview we did, three years ago, he was cold and distant. Gone was the boyish exec at the Bel-Air Hotel who talked of his family and joked easily. He sat stiffly in a chair in his office at the Team Disney building and was in defense mode. He reminded me that Disney had spent billions to rebuild its theme parks and launch a cruise line and that was why earnings were depressed.

"This is a company built on some of the strongest brands anywhere, and we will show everyone that again," he told me then. True enough. The company again looks strong. ABC is on a roll. Folks are lining up outside the theme parks. Overall, earnings are up by 24% through the first nine months of its fiscal year. Eisner is turning over a company on the mend to Bob Iger, his hand-picked successor.

The company isn't planning a large send-off for Eisner. He's expected to write a simple farewell note to Disney employees. It's a shame: The man who rebuilt Walt's company will be remembered more for his controversies than for saving an American institution.

Grover is Los Angeles bureau chief for BusinessWeek


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