DisneyWar

by James B. Stewart

  The only major division making money when Eisner and Wells arrived was theme parks, under the leadership of Richard Nunis, the only other member of management besides Walker and Miller to hold a board seat. Nunis and other parks executives gave Eisner and Wells walking tours of both Disneyland in Anaheim and Walt Disney World in Florida during their first weeks at the company. On the visit to Disney World, Eisner brought along Ovitz and his family for moral support. Afterward, Ovitz wrote Eisner an effusive thank-you note, stressing “how much we love your family and enjoy your friendship.”

  While Eisner had complete confidence in his ability to manage the movie and television business, he knew little about theme parks. Just as he had never seen a Disney animated film as a child, Eisner had never been taken to Disneyland. He’d been to Walt Disney World just once with his own children, though they’d been to Disneyland several times. Eisner knew that the shadow of Walt hovered over the theme parks more than any other division in the company. Disneyland had been Walt’s idea; he had pursued it even over Roy O.’s objections, and it mirrored Walt’s idea of a utopian escape from the real world that would appeal to adults as well as children. The parks were amazingly clean; “cast members,” so named by Walt, were clean-cut, friendly, and helpful, every aspect of their appearance and demeanor regulated by a detailed handbook; everything was beautiful but not quite real. Park employees for the most part exhibited an almost fanatical and genuine devotion to preserving Walt’s dream, an attitude cultivated in the intensive two-week orientation that included appearing in one of the parks as a character.

  No tradition was more hallowed than Walt’s habit of personally picking up any scrap of paper or refuse that he detected on his frequent visits to Disneyland. Walt was obsessed by cleanliness at the parks, and it was a tradition among executives to compete with one another to spot trash and pick it up. Now Eisner felt everyone was watching him. “God forbid,” he worried, “that I miss a candy wrapper.” The moment he saw some paper, he darted to it and bent over, then caught himself. His back was killing him. Eisner had developed severe back pain, which he attributed to stress at the prospect of being judged by park executives. Then he saw some more scraps. Considering that every step of his route had been preplanned, with crews having replaced wilted flowers, cut the grass, repaved sidewalks and painted facades, it looked suspiciously as if the trash had been planted. Was this a hazing of some sort? Eisner decided he just had to keep picking it up, no matter how intense the pain. As soon as the park visit was over, his back pain vanished.

  In planning Disneyland, Walt had assembled a handpicked creative team of animators, directors, writers, artists, and set designers from the studio that met secretly to plan a theme park and became known as Imagineers. Originally part of Walt’s WED Company, which had created such tensions with the Roy side of the family, they had been merged back into the company but still retained their own cultlike status, occupying their own warehouse in Glendale, where new attractions were developed in conditions of top secrecy. In stark contrast to the theme park “cast members,” Imagineers cultivated and flaunted eccentricity. While some looked like refugees from a 1950s sitcom, others had long hair, ponytails, facial hair, and earrings, in one case so many that the Imagineer’s earlobe was distended almost to his shoulder. Their leader was Marty Sklar, a former publicist for Walt, whose long tenure and close ties to the master gave him immense stature within Disney.

  With the Epcot theme park finished and $300 million over budget, the Imagineers had been targeted for extinction by the previous regime, and it was true that much of their work could be subcontracted more cheaply. When Eisner and Wells arrived, Sklar and his team were at work on a new water ride, in which guests would ride logs down a hurtling flume, culminating in a thrilling drop down a waterfall. Dick Nunis had asked for a water attraction, the kind of ride growing in popularity at amusement parks all over the country, but had balked at the proposed $80 million cost. But Eisner loved the scale model of the water chute, and urged Sklar and Nunis to go forward. “Frank and I often favored the more creative (and costly) solution to the problem,” Eisner later said, which coincided perfectly with the attitude of the Imagineers, who had long been criticized for ignoring budgets. Sklar showed Eisner the early models for Disneyland and Disney World, took him into the archives, and regaled him with stories of Walt’s and Roy’s often contentious relationship. Eisner was “blown away,” as he put it. The possibility of more theme parks was already in his mind. The Imagineers had saved their very existence.

  In contrast to his excitement over the Imagineers’ projects, Eisner was dismayed when he saw plans for two new hotels scheduled to be built on Disney World property. He thought they were the ugliest buildings he’d ever seen. They were cheap, bland, boxy slabs, just as bad as the already-built Contemporary Resort, a forbidding concrete pyramid that looked anything but contemporary. Determined not to get any further into the hotel business itself, the previous regime had contracted out construction and ownership of the hotels to New York–based developer John Tishman. “We have to get out of this deal,” Eisner told Wells.

  The next day Eisner and Jane were shopping at Knoll International in the Pacific Design Center for furniture for his new office at Disney. His salesman, who was well dressed and spoke knowledgeably about architecture and furniture design, impressed him. Eisner turned to his wife. “I’m hiring him to protect me from bad architecture and design,” he said impulsively. And he did, even after learning the salesman had dropped out of college and run away from home at seventeen to go to Israel. Art Levitt Jr. became Eisner’s personal assistant. Only later did he learn that Levitt was the son of the chairman of the American Stock Exchange and future Securities and Exchange Commission chairman. Levitt’s mother called Eisner. “I just want to thank you,” she said. “We’ve been so worried about Art.”

  Eisner wasn’t sure just where he’d developed such a keen interest in architecture, but it appealed to his imagination and artistic sensibilities. His parents had hired noted architect Robert Stern to design their new apartment when they “downsized” by selling the Park Avenue co-op where Michael and his sister had grown up. His parents were also friends of the noted contemporary art collectors Victor and Sally Ganz, and the Ganzes had treated Eisner to a whirlwind tour of classical architecture during a visit to Rome when he was eighteen. He often stopped to admire two Manhattan classics of modernism, Mies van der Rohe’s Seagram Building and Eero Saarinen’s CBS Building, commissioned by legendary media executive Bill Paley. Just two weeks after arriving at the company, Eisner convened a meeting with Marty Sklar, and Wing Chao, Disney’s resident architect, as well as Kinsey, who was in charge of developing a master plan for the studio lot, which called for a new hotel on a small parcel along Riverside Drive in Burbank. “Let’s make this a Mickey Mouse hotel,” Eisner suggested.

  “You mean the name, the Mickey Mouse Hotel?” Sklar asked.

  “No,” Eisner replied. “Make it in the shape of Mickey, with rooms in the legs.”

  “Like the Colossus of Rhodes?” Chao asked.

  “Yeah,” Eisner said. “Straddling the street. That’s what I’m talking about.”

  At first no one reacted. Had Eisner gone off the deep end? Then Chao pointed out that it would be difficult to run elevators up Mickey’s outstretched legs. No hotel ever got built in Burbank, and they were never quite sure how serious Eisner was. But he had certainly succeeded in breaking the creative ice. No idea seemed too outrageous. Kinsey was impressed. He could see that Eisner and Wells were like right and left arms, one creative, impulsive, irreverent; the other measured, practical, decisive.

  At the behest of the Basses and Al Checchi, a former executive at Marriott Corporation who moved to California both to advise Eisner and report to the Basses, Eisner met with Bill Marriott, the corporation’s chairman, to discuss a partnership that would supplant the Tishman arrangement. Disney would retain ownership of new hotels, but Marriott would build and operate the
m in a joint venture. The idea made sense, given Disney’s scant experience managing hotels, but when Eisner visited Marriott’s design center, his spirits sank. Marriott’s hotel designs were little better than Tishman’s. Eisner couldn’t imagine Marriott agreeing to anything even remotely like a Mickey Mouse Hotel.

  Marriott’s chief financial officer, Gary Wilson, also impressed Eisner, much as he’d been attracted almost immediately to Art Levitt. In the midst of what seemed a conservative corporate culture, Wilson stood out, with his impeccably tailored suits, monogrammed shirts, and pocket handkerchiefs. In his early forties, Wilson was refreshingly direct and self-confident, and showed both a mastery of financial details and a lively imagination.

  Wilson also knew the old Disney culture. He and Bill Marriott had gone to Burbank to discuss a hotel deal with Card Walker, but were actually assessing Disney as a possible takeover target for Marriott. Even though Disney’s own hotels—the Disneyland Hotel in Anaheim and Contemporary and Polynesian resorts in Orlando—were booked to capacity and profitable, Walker had brushed aside their suggestion that Disney might want to build and operate more hotels. “Disney is not in the hotel business,” Walker maintained. “It’s in the park business.”

  “Why is that?” Marriott asked.

  Walker seemed surprised by the question. “That’s the way we do things,” he said.

  Wilson had concluded that Disney was ripe for a takeover, though Marriott’s board ultimately decided that Disney was too big for Marriott to digest, and so no offer was made. Wilson disagreed. He and his staff had done some projections showing the dramatic effect on the bottom line of simply raising admission prices and expanding hotel capacity.

  Sid Bass had made the same point when Eisner flew to meet him in Fort Worth during his first week as chief executive. On the flight, Eisner insisted that Mike Bagnall, Disney’s chief financial officer, take him line by line through Disney’s last annual report and balance sheet. Eisner peppered him with questions, some of them embarrassingly elementary. Bagnall didn’t actually say so, but it looked to him as if the new chief executive was an idiot. Eisner thought Bagnall could have been a little more deferential.

  When they arrived at the meeting, Bass was surrounded by some of his top advisers, including Checchi and Richard Rainwater, a partner of the Basses and their chief financial adviser. After brief introductions, Sid Bass turned to Eisner. “So how do you see the company?”

  Eisner spoke extemporaneously, using a black marker to write down some of his points. He reiterated his belief in the need for creative leadership, and stressed the company’s potential to ramp up film and television production, especially TV, where the profits for syndication could be huge. These were businesses he knew well from Paramount, including ways to finance films that shifted most of the financial risk onto outside investors looking for tax deductions. He also stressed the importance of new secondary markets for theatrical films, especially home video and cable television. These markets alone, he argued, should boost the value of the Disney library of animated classics to about $200 million. And, as in the past, he felt that new Disney films would be a fertile source for new theme park attractions.

  Bass and his advisers left the room for about a half-hour. When they returned, they urged Eisner and Wells to raise the admission price to the theme parks, which Bass said was “ridiculously low,” and do more to develop the vast acreage Disney owned around Disney World. Disney ran only three hotels, one in California and two in Florida, which were nearly always fully occupied. Scores of other hotels had sprung up around Disney World to accommodate the approximately 10 million visitors per year streaming to Orlando. There was no reason Disney shouldn’t capitalize on the park’s success by developing more hotels on its property.

  Later, Eisner had dinner at Bass’s house, which was filled with modern art. Though Eisner himself knew little about the subject, he knew that Bass was on the board of New York’s Museum of Modern Art with Ovitz, and before the trip Ovitz had spent hours lecturing Eisner on modern art in general and Bass’s taste in particular. Bass was impressed when Eisner recognized and complimented him on a piece of sculpture by Robert Irwin, an obscure California artist that Ovitz had told him Bass collected.

  Despite Eisner’s reservations about Marriott’s lack of creativity, a joint hotel deal seemed to make sense, and negotiations went ahead. The Basses and Checchi strongly encouraged it. Frank Wells met with Judson Green, a young theme park executive in Orlando, took a cocktail napkin and jotted down terms of a deal with Marriott he wanted Green to negotiate. “Don’t drop the ball,” he said in parting.

  A few weeks later, Chao showed Eisner and Wells some model rooms he and a group of Imagineers had designed for the Grand Floridian, one of the new hotels to be built by Tishman. The hotel was designed with a frilly, fanciful Victorian theme, far more creative than anything Eisner had seen on his visit to Marriott. It confirmed what Eisner was thinking, which was that hotels could be entertainment as much as lodging—the same kind of themed attractions that the parks themselves offered. So sure was he of the concept that Eisner decided then and there that Disney could create its own real estate development subsidiary, make all the creative decisions, and jettison both the proposed Marriott deal and the Tishman partnership. “We’re going to hire the best people in the industry,” Eisner insisted in a burst of excitement. “We’ll make mistakes along the way, but they’ll be our mistakes and we’ll learn from them.” Wells readily agreed.

  In getting the best people, Eisner was determined to fire Bagnall as chief financial officer and lure Wilson away from Marriott. After their first meeting with Wilson, Eisner had pulled Wells aside. “This is the guy we should hire,” he said. Wilson was intrigued by the possibilities he’d seen at Disney, but chief financial officer was a lateral move, and his goal was to become a chief executive. Eisner persisted. He was so eager to get him that he offered Wilson lavish financial incentives and a seat on the Disney board. Then, when Wilson flew out to meet with Eisner and Wells, Wells volunteered that he only expected to stay at the company for five years before quitting to resume his quest to climb the highest peak on every continent. Wells mentioned that he also harbored political ambitions, and might decide to run for office. Eisner stressed that if Wells stepped down, Wilson would be his logical successor. The prospect of succeeding Wells as president clinched the deal, and Wilson joined Disney in September 1984 as America’s highest-paid CFO.

  Wilson wasted no time in raising admission prices at the theme parks, over the objections of some of the longtime employees. The increases had little impact on the number of visitors to the parks. Indeed, the only thing that surprised him was how much guests were willing to pay. Hundreds of millions of additional dollars dropped to the bottom line. As Eisner told New York Times reporter Aljean Harmetz, “Such a bounty has fallen into my lap. Every day a new asset falls out of the sky.”

  Wilson hired another Marriott executive, Larry Murphy, to create a strategic-planning department, and for the first time, they began requiring the divisions to produce five-year plans. Wilson was determined to transform Disney into a “growth” company in the eyes of Wall Street, which meant aiming for a 20 percent growth in earnings and a 20 percent gain in the stock price every year. He dubbed this the 20/20 plan.

  Wilson’s arrival helped soothe Checchi, the Bass adviser who’d worked with Marriott, who was strongly opposed to Disney getting into the hotel business on its own. He thought Disney needed an experienced partner like Marriott, and argued that high-end architecture was too expensive and did nothing to boost revenues. It was also elitist, fundamentally at odds with Disney’s populist appeal. But Eisner stubbornly dug in.

  “If we’re going to imprint our stamp on the world,” Eisner wrote in a memo to Wells, “if we’re going to do something more than help people have a good time with Mickey Mouse, if we are going to make aesthetic choices, then we’ve got to upgrade the level of our architecture and try to leave something behind fo
r others. This is going to be highly charged politically inside the company. There is definitely going to be a problem trying to make some of our executives understand that we’re not going to be just concerned about the bottom line, we’re not going to do schlocky architecture, and we are going to try to make a statement—to make some history. There are some who feel it’s going to cost us additional money. I don’t think it has to, but even if it costs a few dollars more, I think it’s well worth it.”

  By the end of the year, the deal negotiated by Green with Marriott was ready to be signed. But then Wilson weighed in, agreeing with Eisner and Wells that they should walk away from it. It fell to Wells to communicate this news, both inside the company and to Marriott and Tishman. On a visit to Orlando, he approached Green, the chief negotiator, and suggested they take a walk through the park. “We’re going to pull the plug,” he said. “Michael and I think we can create more value. We don’t need Marriott.” Wells realized that Green was disappointed after devoting almost a year to the project. “There will be plenty more great deals,” he said, putting his arm around the young executive. “This just wasn’t meant to be.”

  Tishman responded to Disney’s decision by filing a $300 million suit against Disney for breach of contract and asking for an additional $1 billion in punitive damages. Since Disney was on shaky legal ground—it seemed a clear-cut breach of contract—it fell to Green to negotiate a complex hotel deal as the basis for a settlement of the case, in which Disney agreed that Tishman would still own two new hotels and offered him a choice site adjacent to Epcot. Tishman could also set the construction budget as long as Disney determined the design and service standards, an inherent contradiction, but one that left ultimate control with Eisner.

  Eisner finally had the chance to indulge his passion for architecture. He asked Michael Graves and Robert Venturi, two prominent architects recommended by Victor Ganz, if they could work together on the project. “Isn’t that a little bit like putting Steven Spielberg and George Lucas together?” Graves asked when Eisner called.