Meanwhile, the AOL guys were refining their story. A great American brand could not appear to be in the sex business. So what AOL focused on was getting the dirty-talk audience to buy things. From sex to commerce was the conversion it was attempting. (This is the conversion that cable television managed with infomercials in the mid-eighties.) Certainly, Time Warner believed in conversion (the people at AOL used the word community as a euphemism, but the people at Time Warner used the word for real—as though imagining little shops and churches and schools).
The result of this confusion or obfuscation about what AOL really does, as well as the ensuing cutbacks, recriminations, and dismissals that came with the AOLTW merger, meant that development in most areas at AOL stopped—for two years, virtually nothing!—just at the time when easy-to-use chat was breaking out all over the Web.
Everybody with any connection speed is locating and targeting and qualifying possible mates with great ease in well-designed, mall-like settings, while back at AOL, it’s still a creepy, anonymous, low-class world. (AOL’s weird censorship policies, in an increasingly tolerant world, somehow seem to add an extra measure of tawdriness.)
It’s a demographic nightmare: If you are still signing on to AOL to chat, there is, ipso facto, something wrong with you.
From the beginning of the merger, I thought this was going to be an interesting cultural problem. The AOL guys had always managed to keep the dialectic finely in play—encouraging dirty chat by encouraging family values. Profiles to foster “community” and multiple screen names for family use and parental controls to create clearly marked areas of menace (otherwise, it was hard to find this stuff) served its porn business as well as its family image.
But this is not something you would have explained to the Time Warner guys.
I’m pretty sure nobody from AOL ever sat down at a Time Warner boardroom table and spelled out the workings of the auto-eroticism business.
And count on it, the Time Warner people, those uptight guys, didn’t ask.
What’s more, I think the higher-up AOLers suddenly, given the opportunity, didn’t want to be in the sex business anymore either. They’d all made hundreds of millions—now they wanted to be respectable.
Classically, nobody was minding the store.
Now, AOL’s problems are always blamed on the AOL people—they were the flimflammers who got everybody into trouble. And they certainly were the flimflammers—playing a bit of bait-and-switch, cooking the books a bit.
But the Time Warner guys were not only the guys who got duped but the guys who couldn’t even see the real value of what they had: a monopoly on dirty chat. Possibly the greatest growth industry of the age.
Indeed, by the autumn of 2002, most of the core AOL executives had departed (save for Case himself, whose picture still appeared on the AOL opening screen, exhorting the faithful), leaving the Time Warner people, with all their inhibitions, in charge.
It is unlikely that the Time Warner guys had spent much time in the Long Island Swingers chat room in the Special Interests chat area, or given much thought to building a business to cater to those special interests—that is, pursuing the business that AOL created and until recently dominated.
Instead, the Time Warner guys, in some remarkable demonstration of human and corporate steadfastness, have announced that they are going to save AOL by transforming it into a business that sells Time Warner content. For a premium, you’ll be able to read People online! (Forgive me … ROTFL.)
Poor passive Steve Case, trying to hold on to his lousy job, was in the hapless position of having to defend and expound upon this strategy now, while elegant Ken Auletta gracefully took him apart and held him up to the great ridicule of the crowd.
11
MORE MICHAELS
AND MORE
DINNER
Pam Alexander maneuvered me into a seat at the banquet at the end of the first day next to Jim Wiatt, the head of William Morris.
I believe this was for my own good. Agents were one of the formal nexi of media power. The heads of the three major agencies—ICM, CAA, and William Morris—were like party whips. They knew where the votes were. Or, like Michael Ovitz—and before Ovitz, Lew Wasserman—they were in a position to become party leaders and ultimate kingmakers. So to have a relationship with one or more agency heads was to have access and insight into the true operation of celebrityhood and pop culture and entertainment commerce in America.
Indeed, media conglomerates would surely come and go, media moguls would rise and fall, but talent agencies would always be making money.
I should reach out to Wiatt, I thought. I had tried in the past. But I always found him too literal. And too suspicious. And too scary. Unlike Ovitz, who had many moves and a vast range of charm, Jim Wiatt seemed unsubtle and unreconstructed. He held power; that’s what you were aware of. When he dispensed it, it wasn’t in dollops and increments.
He didn’t give out information either. The Ovitz way, and, indeed, the general method of media power people, is to be able to spin a hierarchy of information. To know what you need to give to someone to keep them interested but at the same time to reveal as little as possible. This is the gossip chain. Gossip that offers mere titillation at the bottom; gossip that you can turn into big money at the top.
Jim Wiatt must gossip—there would be no way to survive in the media business if you didn’t, and no reason to be in the media business if you didn’t want to. But there didn’t seem to be a lot of subtlety in his hierarchies. I was outside, so therefore he was locked up.
I was the press; he wasn’t talking—except in chamber of commerce—type bromides.
Still, you work your sources.
From Jim Wiatt, I wanted the Michael Eisner story. While there were other Disney people here, Eisner wasn’t. He couldn’t be. He wouldn’t, and couldn’t, expose himself—everybody knew that.
It was the ongoing weird act of the media business. Michael Eisner was a sort of corporate Michael Jackson. He had held on to Disney even though everybody knew everything had long since become too troubled, and problematic, and embarrassing for him to continue running Disney—or even for Disney to continue. (The question of who might buy Disney was always a subtext to media merger-and-acquisition gossip.)
Indeed, it was his holding on, rather than his dysfunction, that had somehow come to define the state of the business.
Michael Eisner was Franco.
When, by the late nineties, it appeared that nothing could get worse at Disney—fleeing executives, share-price collapse (and this was during the boom), dismal results at ABC, and a CEO involved in a bitter, costly, and very public lawsuit with a former subordinate—Jeffrey Katzenberg, since decamped to DreamWorks—I wrote what could not have been more obvious: Michael Eisner’s extraordinary reign at Disney was coming to an end.
Well, not long ago, some media bigs I knew were out for a little retreat at Herb Allen’s place in Sun Valley and, over drinks, put together a friendly pool about whether Michael would last the year.
When I dismissed Eisner, I not only got it wrong but missed the story; likewise, the media bigs in Sun Valley betting against Michael were falling into the same trap.
The point we missed is that Michael Eisner had perfected the art of survival—nobody was going to make him go anywhere.
It may have just been a matter of management priorities: Do you focus on share price, market reach, product quality, kicking ass, or, just as strategically, your own entrenchment?
A key mogul challenge is to create a company that can’t get rid of him, in which he can survive any mistake he makes (and if what he cares about first and foremost is his own continued existence, he’s going to make a lot of mistakes), in which he is guaranteed to be the last living cockroach.
Of course, this is not so easy to do. Even in the now-done age of the exalted CEO, we live in a highly disposable corporate culture. When the tide turns against you, you’re usually finished. Shareholders, like team owners, are
very fickle.
There is, however, the mogul exception. It’s similar to the French “cultural exception.” Market forces alone are not allowed to rule. By general consensus, we have agreed to subsidize the unique institution of the media mogul. By which I mean not mere manager-moguls (like Jean-Marie Messier or Thomas Middelhoff or Bob Pittman) but a true creator-of-worlds mogul, with vast control of his (theoretically) public company.
The Eisner accomplishment, and the insuperable bulwark his disgruntled shareholders were up against, was that he transformed himself from a mere manager into a being virtually synonymous with Disney itself.
He may be the only mere manager ever to have successfully elevated himself from hireling to fully vested mogul (unlike Mel Karmazin at Viacom, who has been on the losing side of such an effort). What’s more, with some screwball irony, Michael Eisner was hired at Disney in 1984 precisely because he was a nonmogul, a non-voting-class owner-operator, an outsider who would do the bidding of shareholders against entrenched interests.
But what happened is that he consumed the company from within. He ingested it—and it became him.
To understand the extent of his grasp, you have to look to the larger mess. That is, since the acquisition of ABC in 1995, or since the death of Eisner’s number two, Frank Wells, in 1994, or since the departure of Jeffrey Katzenberg six months later—everybody has a favorite precipitating event—Disney had become weirder and weirder, more and more dysfunctional, a bizarrely isolated place.
Even during the good years—when Eisner, Wells, and Katzenberg remarketed the Disney assets (helpfully, the video revolution was at hand) and relaunched the animation studios (coincident with a boom in family entertainment)—there was what people call “the Michael thing.”
There was always the good Michael and the bad Michael. The good Michael was 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.
Starting in 1984, the good Michael 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 fifteen years, in my family, we’ve been watching a tape of Mary Poppins in which Michael Eisner glides down the cable car at Disneyland and like a folksy Dad—a Jewish Walt—and introduces the Disney classic).
But at the same time, though it was mostly hidden from view while the company was doing well, there was 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 loyal and unflappable Frank Wells, before his death in a freak helicopter-skiing accident, acted as buffer, counselor, mother. He was the producer handling the tantrums and ego excesses of Eisner, his difficult star. In Wells’s production (it was, in fact, Wells who brought Eisner to Disney), Eisner is genius, leader, statesman, one of those unique executives—Gates, Henry Ford, Walt himself—who personify their companies.
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 would not have had his fight with Katzenberg. DreamWorks would not have started and ruined the economics of the all-important animation business by paying animators vastly more money. (In this model, Katzenberg might have left anyway, but would now be running an independent animation studio financed by Disney.) Michael Ovitz would never have been hired as the next heir apparent—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, not least of all, 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 an 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 this scenario, the classic attributes of the turnaround guy and entrepreneur—who should be kept away, as far as possible away, from running the whole shebang.
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, for instance, he picked up films by Warren Beatty and Jack Nicholson and gave them offices on the Paramount lot just so people would see them arriving every day.) Accordingly, he continues to believe that anything he becomes personally involved in gets better because of his involvement.
In the mid-eighties, the Disney brand was something like an abandoned mine that, with new technology, could still yield up a bit more gold. But brands are not infinitely renewable resources.
The innocence and novelty wear off. Disney crapola inevitably becomes less interesting than other, newer crapola. When you get to 500 Disney stores, it’s not so easy to envision 500 more 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. And boffo was no longer what Disney produced.
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 this $19 billion purchase, 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 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, in 1999, frustrated and furious, tries to reach out and throttle Katzenberg, the little midget, who was, annoyingly, trying to claim more space, more notoriety, more brand identification (Katzenberg, after all, was Mr. Animation, which was what Walt was), than Eisner could temperamentally ever let him claim.
The Katzenberg-Eisner thing was so weird, so extreme, so on-the-sleeve, so futile and unnecessary and just not done (among the most intractable business rules: the one thing that a CEO must never do is engage in a public fight with a subordinate) that it made sense only as a form of corporate suicide. It was not just the billion real dollars Variety estimated Katzenberg’s departure would cost Disney and not just the incalculable value in corporate goodwill that was squandered, but the cost to Eisner himself of looking like a fool, or, much worse, Moushwitz Commandant and fool. The bad Michael—the raging, maniacal, stubborn, vindictive, for all practical purposes sociopathic Michael—went public, and didn’t care who saw.
What’s more, as would soon become evident, it was a trap.
In a town of serious enemies, Eisner’s were more serious. Michael, people would say, just cannot be trusted. (This is notable—and preposterous—because no one in Hollywood can be trusted.) It is not just
the thirty years of double dealing (everybody in Hollywood double deals). It is the sense that only Michael Eisner, over thirty years, had not had his comeuppance.
The fight with Katzenberg was supposed to be the Disney machine against the midget Katzenberg, but it turned out as much to be Hollywood—in the form of the mighty David Geffen and Steven Spielberg, among others—against Eisner.
The whole town was rooting for Jeffrey. 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.
What’s more, Disney had already paid Katzenberg $100 million as part of his settlement. In other words, Katzenberg had 100 million dollars of Disney’s money with which to pay lawyers to inflict incalculable humiliation on Michael.
This was pain and humiliation that Michael invited on himself; he wasn’t just sadistic (which he surely was), but deeply masochistic, too.
All conversations about Disney, and, for that matter, many other merely idle conversations in Hollywood, end up being about the psychopathology of Michael Eisner. He’s the opposite of the powerful emperor whose nakedness nobody wants to acknowledge—rather, he’s constantly, and savagely, picked apart.
It’s near impossible to convey the way people talk about Michael (almost everybody in Hollywood calls him Michael, oddly, with a deep intimacy)—the quality of the invective, the depth of the bitterness. It is not just the thirty years of perceived betrayals, but that he’s stayed in power so long, and against so many unlikely odds, that nobody can imagine a world without him—it’s this frustration of being stuck with him that’s so infuriating to so many people. He’s ingrained, omnipresent. He’s just a standard of evil (and when you’re the standard of evil in Hollywood, that is really something). The discussion is so extreme that it may partly explain why he stays: There is no place for him to go. Without his position and power, he would be ripped apart by the crowd—like Michael Ovitz.
Autumn of the Moguls Page 21
