DisneyWar

by James B. Stewart

Oblivious to Eisner’s mounting suspicions and concerns, Ovitz plunged into his new responsibilities, confident that by sheer dint of hard work and enthusiasm he could carve out a role for himself despite the overt hostility of people like Litvack and Bollenbach, and the passive resistance of Roth. Ovitz surpassed even Katzenberg’s legendary work habits, arriving early, spending twelve hours at the office each day, including Saturdays and Sundays. And like Katzenberg, he always seemed to be doing two or three things at once, frequently interrupting meetings to use his cell phone, arriving late or leaving early, canceling appointments at the last minute. This was pretty much business as usual in the Hollywood of CAA, but at Disney, where suspicion and resentment of Ovitz were already rife, every slight was tallied, and most were reported to Eisner.

  In one incident, Ovitz managed to alienate both Bob Iger and Steve Bornstein, the head of ESPN. He’d told Iger he wanted to know everything about ESPN, and asked to meet Bornstein. Iger told Bornstein to work up a detailed presentation on the sports channel, which Bornstein had built into a hugely profitable franchise. When Ovitz arrived at Iger’s office in New York for the meeting, he asked, “What is this? What’s this meeting?”

  Iger reminded him that he’d requested it. Ovitz looked at his watch. “I see it’s on the schedule for two hours. I only have fifteen minutes. Let’s start, see how far we get, and then I can read the rest of the presentation.”

  Bornstein started his PowerPoint presentation. Five minutes into it, Ovitz excused himself to answer a call on his cell phone. “That was Tom Cruise,” he said when he returned. “I’m afraid I can’t do this now. Give me the deck and I’ll read it, then I’ll call with any questions.”

  Ovitz left. Iger, Bornstein, and his staff were stunned. They’d spent weeks getting ready. Bornstein never heard back from Ovitz.

  Ovitz also had a habit of sitting next to Eisner at meetings and whispering in his ear—a gesture that was meant to underscore his intimacy with Eisner but one that infuriated others. Eisner later testified that it “drove him crazy,” and that he asked Ovitz to stop doing it.

  While Ovitz’s exact responsibilities remained unclear, he scheduled weekly meetings with strategic planning and Imagineering. He also began planning an ambitious series of trips to Japan, to China, and to Europe, capitalizing on the close relationships he’d forged in the Sony and Matsushita deals, seeking to expand Disney’s international business. He also took the time to write personal responses to the thousands of people who wrote to Disney each week, something he felt Eisner had neglected. Such personal touches were essential in the agency world. In keeping with his notion of partnership, he copied Eisner on every letter, every memo, and had one of his assistants give Eisner a copy of his schedule each day. He knew how upset Eisner had become at the idea that Katzenberg was doing things behind his back.

  And, of course, despite the fiasco of his early negotiations with television producer Brad Grey, Ovitz kept trying to do deals. Indeed, he had kept trying to negotiate a deal with Grey, but when Grey eventually met with Eisner himself, it was clear Eisner wasn’t interested, and Grey did a deal with Universal instead. As Ovitz later testified, Eisner “didn’t like the idea” of doing a deal with Grey. “He thought that television shows needed to be developed in-house.”

  After that, Ovitz was careful to go over with Eisner a list of other creative talent he hoped to bring to Disney—many of them his former clients, such as director Martin Scorsese, actors Sean Connery and Robin Williams; novelists Michael Crichton and Stephen King; and producers Frank Marshall and Kathleen Kennedy. Ovitz scheduled numerous meetings, introduced them to other Disney executives, and gave them tours of the studio. Many did enter into deals with Disney, but in most cases only after Joe Roth approved them.

  There were areas of the company where Eisner had willingly ceded responsibility (and blame) to Ovitz—Hollywood Records and Hyperion Publishing, both businesses that lost money and held little intrinsic interest for Eisner. They were the areas he’d tried to hand off to Katzenberg after Wells died. It didn’t take Ovitz long to realize that neither business was large enough to be consistently profitable, which meant they had to grow, either by acquiring more talent or, more likely, by buying other companies. Disney had plenty of cash and borrowing power to make acquisitions.

  Ovitz pointed out to Eisner that in publishing there were just four “mega authors,” as he put it—Michael Crichton, Stephen King, Tom Clancy, and John Grisham—and two of them had been Ovitz’s clients. “In the publishing world,” Ovitz explained, “new authors go where the big authors are.” Ovitz negotiated with Tom Clancy, brought him in for a tour of the studio, and persuaded him to move to Hyperion. But Eisner balked at the advance Ovitz negotiated, though it turned out to be half what Clancy got when he moved to Putnam. Stephen King had a deal for miniseries with NBC; Ovitz wanted to offer him a joint publishing-TV deal at Disney. Eisner never gave him the authority to go ahead. When MCA/Universal put Putnam on the block, Ovitz met with Putnam’s chief executive, Phyllis Grann, and negotiated a price of $350 million to acquire the publishing company. The deal would have brought Clancy and at least twelve other best-selling authors to Disney, and in Ovitz’s view, would have put Hyperion Publishing on the map. Eisner vetoed the deal. (Putnam was subsequently sold to Pearson of England for $336 million.)

  Similarly, Ovitz came up with several proposals to expand Hollywood Records, a business he knew well. He had represented Michael Jackson, Barbra Streisand, and Prince for years at CAA, and as he later explained, there was “zero” chance he’d move them to Hollywood Records, which lacked the worldwide distribution and the clout with radio stations that came from releasing hundreds of titles a year. Hollywood Records had no blockbuster acts, and as a result, no clout. Like authors, Ovitz argued, recording artists were “migratory birds” who went where the top stars were. Ovitz felt his only hope was to offer recording stars the kind of television and film options that Disney could offer. “We’ve got to book a mega act,” he argued to Eisner, and Eisner agreed, or at least that was Ovitz’s impression.

  Ovitz had represented the Jackson family, including both Michael and Janet, for twenty-five years. He knew that Janet Jackson, then the world’s number one selling recording artist, was restless at Virgin Records and was considering a change. Because of his close ties to the family, he was able to negotiate a deal that would have brought Janet Jackson to Hollywood Records in a seven-record deal for $75 million. But when Ovitz brought the deal to Eisner for approval, he rejected it out of hand. “We’ll grow our own acts,” he said.

  “You can’t just ‘grow’ a major music act,” Ovitz insisted. “You’ve never grown a major act,” he pointed out, which seemed to annoy Eisner. Ovitz couldn’t even return to Jackson with a lower offer. Instead she signed a new four-album, $80 million deal with Virgin, nearly twice as much as Ovitz had negotiated for Disney.

  Ovitz’s credibility as a deal-maker collapsed as word of the Jackson negotiations spread through the close-knit recording industry. Nor would Eisner allow Ovitz to replace the head of Hollywood Records, despite acknowledging the studio’s weak performance and problems with the division head’s “work ethics” and other personal issues. He said he expected Ovitz to fix the problems without signing new talent or changing management.

  Confronted with these failures, Ovitz began negotiating a $3 billion joint venture that would have merged the Hollywood and Sony labels. Sony president Nobuyuki Idei “has always been obsessed with Walt Disney,” Ovitz explained, pointing out to Eisner that Idei’s daughter had written her Japanese university dissertation on Mickey Mouse. Sony was interested in Disney’s children’s label—the only part of Hollywood records with any significant market share—and in return, Disney “would have been a competitor with an amazing catalogue representing some of the biggest artists around.” Ovitz also thought the deal would enable Disney to book its recording acts into the theme parks and other venues, as well as give Disney an entrée into Sony’s b
udding video game business—exactly the kind of synergies so often extolled by Eisner.

  Ovitz sent Eisner a U.S. News & World Report article about the record business to help make his case, and Eisner replied with a memo disparaging the whole idea of the Sony venture. “I read the article you sent me,” he wrote. “Maybe I am just reading it the way I want to, but it seems to shout out to me that the concept of building our own record company is possible. It may be more prudent than paying $5–10 billion at this time to us. What really struck me was the following sentence: ‘Of this year’s five best-selling albums, only one comes from an artist who had a recording contract five years ago.’ This tells me the business is moving more and more to new artists and is somewhat less dependent on existing librar[ies]. This isn’t to say a library wouldn’t be wonderful, but at what cost? If we can find the acts…and if we can market to the [Walkman]-toting Generation Xers…I think we can make our record company a success while we wait for an acquisition we can digest.”

  As Ovitz later put it, “Michael didn’t want to spend money for artists even if I could get them for a discount, and he didn’t want to do any kind of merger or acquisition.” He wanted to build from within, adding at one point that “if we could steal a company that would be even better because I don’t want to pay for it.”

  Perhaps Ovitz’s most visionary idea was for a “downtown Disney” venture that would have brought a National Football League franchise to a new sports arena and entertainment complex in downtown Los Angeles. He got the idea at a meeting with Imagineers, who were talking about trying to bring a “Downtown Disney” attraction to Anaheim, similar to the one in Disney World, which features adult-oriented restaurants, theaters, and other entertainment. At the same time, Eisner had been talking about a studio tour in California to rival Universal’s; Ovitz had even seen mock-ups of a monorail that would connect Anaheim and Burbank, but it seemed wildly expensive and impractical. Out of this hodgepodge of ideas Ovitz hatched the idea to “take control of that whole plot of land where the Coliseum and the Sports Arena is, gate it and turn it into a sports-based attraction and then you would have ESPN that you could tie in, and you could tie in Disney characters,” as he described it. “We could put all kinds of entertainment down there but make it a safe kind of Disney experience for the family and build it around sports.” The Imagineers did drawings and a model, “a phenomenal design for downtown. It would have stimulated hundreds and hundreds of jobs. It would have revitalized that whole area.”

  Eisner was initially enthusiastic, or again so Ovitz thought. He began meeting with NFL representatives and owners of various teams, including the Seattle Seahawks and the Carolina Panthers. The NFL was enthusiastic, as was the L.A. City Council. But Litvack was opposed to the idea and then Eisner “for some reason turned off to the downtown Disney idea.”

  Besides overseeing the recording and publishing businesses, Ovitz assumed he would be in charge of ABC once Disney’s acquisition closed the following January. He scheduled weekly meetings with Bob Iger, Ted Harbert, who was in charge of programming, and other top ABC officials. He flew to New York every week, usually on Sunday evening. He spoke to Iger by phone every day. Disney’s acquisition of ABC was the main reason he’d come to Disney.

  Early in the fall of 1995, Iger, accompanied by Litvack, Bollenbach, and Larry Murphy, spent a week in New York conducting an exhaustive review of ABC’s businesses. They took over a large conference room and each division head made presentations. When it was over, the Disney group’s main recommendations were to sell the newspaper group (Cap Cities owned the Kansas City Star and other newspapers, as well as Fairchild Publications, publisher of Women’s Wear Daily) and either to sell the radio division or make a large radio acquisition. Ovitz was aware that the radio business was undergoing rapid consolidation as advertisers sought national audiences; several deals were in the works that would have relegated the ABC stations from the second largest in the country to ninth or tenth. The proceeds from the sale of the newspapers could be used to buy more radio, or reduce debt.

  When the group returned to Los Angeles, Ovitz presented the recommendations to Eisner. Eisner scoffed at the ideas. He went around the table, asking each executive—Bollenbach, Litvack, Murphy—what he thought. All agreed with him, saying selling any of the assets would be a mistake. Ovitz was floored. “Guys,” he finally said, “we just spent five hours on the plane discussing this and agreeing on this.” There was silence. Ovitz felt everyone in the room looked at him like he was crazy.

  Though Eisner showed little interest in many of the ABC assets (including ESPN, according to Bornstein), he began intervening in nearly every decision at the ABC television network, reading scripts and reviewing pilots. Everyone at ABC conceded Eisner’s legendary success as a programming executive; still, it was disconcerting to hear frequent references to the days of “Laverne & Shirley” and “Happy Days,” which were ancient history by network TV standards. People were afraid to say anything to Eisner, so Iger bore the brunt of the complaints. Finally Iger spoke up. “It just doesn’t work like that anymore,” he said after yet another reference to “Laverne & Shirley.” Eisner said nothing, but later complained to Ovitz about it, reminding him yet again that he wanted to find a replacement for Iger.

  The combination of intense scrutiny from strategic-planning executives (known to other divisions within Disney as “the goon squad”), whom Iger considered arrogant and insensitive, and Eisner’s sudden intrusion into the planning process, left Iger dismayed, so much so that he intimated to Ovitz that he was thinking of quitting. Though Ovitz knew of Eisner’s ambivalence toward Iger—Eisner “did not feel Mr. Iger was the right executive for ABC,” Ovitz later testified—he thought it essential that Iger stay on, both because he was competent and hardworking and because it was important for continuity at the network.

  Ovitz flew to New York early on a Sunday, and went straight from the airport to meet with Iger and Willow Bay at the restaurant of the Hotel Plaza Athénée.*

  “I can’t take this,” Iger said. “I’m supposed to run ABC, but I have no authority.” He complained that Eisner was “stuck in the ‘Laverne & Shirley’ era.” Ovitz could empathize, but instead, in his words, he tried to “sell” Iger on the idea of staying. “Mr. Iger sat and told me how difficult it was for him to work with Mr. Eisner because Mr. Eisner was micromanaging him and he wasn’t used to that,” Ovitz later testified. “I spent three hours explaining to him Michael’s intentions, explaining to him how brilliant Michael is creatively…and that he had great experience in the network area and that Bob should just run with it; it will take some time.” (Iger maintains he didn’t complain about Eisner.)

  Later, Ovitz described the dinner to Eisner, and while he was careful not to betray Iger’s confidence, he said he was worried Iger might quit, and that it might be nice for Eisner to give him a gift, some recognition of how hard he was working.

  “Why?” Eisner asked. “He’s got a contract. He’s not going anywhere.”

  “Don’t you want him to be comfortable, happy in his job?” Ovitz asked. Eisner seemed to ponder the notion for a moment.

  “Not really,” he said.

  But Ovitz didn’t give up on the idea. He had noticed that Iger had admired one of his watches (Ovitz collected them), so he asked Eisner if he could give Iger a watch. Eisner resisted, but Ovitz wore him down and finally he gave in. Ovitz picked out a stainless-steel Breguet Aéronavale, which one of his assistants was able to buy wholesale for about $3,500.

  At a Disney/ABC management retreat in Phoenix, Ovitz asked Iger to meet him and Eisner in Ovitz’s suite at the hotel after a long day of meetings. “We’d like to give you a present for being such a great soldier in helping to merge the two companies,” Ovitz said. Iger thought Eisner looked extremely uncomfortable. Ovitz handed Iger a box, and he opened it.

  Iger was nearly speechless. He did love watches, and he especially liked the Breguet. On the other hand, he didn’t need a watch
and could afford to buy one himself. He was just doing his job, for which he was well paid. Eisner looked embarrassed. Iger managed a thank you, and left as quickly as he could.

  Iger and Willow Bay were married on October 7, 1995, in a ceremony in Bridgehampton, Long Island, attended by television royalty: Oprah Winfrey, Barbara Walters, Diane Sawyer, Peter Jennings, Tom Murphy—and Jeffrey Katzenberg, who had negotiated a DreamWorks deal with Iger. Both Eisner and Ovitz were invited and planned to attend. One of Eisner’s secretaries asked for a copy of the list of guests who had accepted. Katzenberg’s name was on it. Eisner canceled. “Cover it for me, won’t you?” he asked Ovitz.

  At the wedding reception, Ovitz discussed with Katzenberg his still-unresolved dispute with Eisner about his bonus. Ovitz had resolved many seemingly intractable disputes in his career as an agent, and he was convinced that prolonging them or, worse, letting them get into court, was disastrous for both sides. “I think I can resolve this in two weeks,” he confidently told Katzenberg.

  Not long after Ovitz’s arrival at Disney, Katzenberg had begun to staff his new animation department at DreamWorks. As the animators had predicted, he set his sights on numerous Disney animators he’d worked with, including artists Andreas Deja (who had drawn Scar in The Lion King) and Glen Keane (who’d drawn much of The Little Mermaid) as well as directors Ron Clements and John Musker. Most of the Disney animators had not been enamored of Katzenberg, but they now credited him with creating a golden age of Disney animation, and, of course, they responded to the incentive of money. For years, Disney animators had worked for modest salaries. Very few made more than $100,000, which was one reason they resented the huge money Katzenberg had been earning from their work. And now Katzenberg was talking about doubling, tripling their salaries—in a few cases, even talking about deals in the seven-figure range. Suddenly animators were rushing to hire agents, lawyers, and business managers. In this sense, Katzenberg’s departure had a direct economic impact on Disney. Even before DreamWorks had created a single animated feature, it had driven up Disney’s cost structure by millions of dollars.