by John M. Curtis
(310) 204-8700

Copyright February 1, 2004
All Rights Reserved.

isgruntled ducks formerly with Disney's board keep on quacking at chairman Michael D. Eisner, hoping to force the embattled CEO into early retirement. Ex-board members Roy E. Disney and Stanley P. Gold—partners in Burbank's Shamrock Holdings—renewed calls for Eisner's resignation, following Pixar Entertainment's decision to not renew its contract. Pixar, an animation heavyweight headed by former Apple Computer CEO Steve Jobs, was responsible for a string of joint blockbusters with Disney, including “Toy Story,” A Bug's Life,” “Toy Story 2,” “Monsters Inc.,” and its record breaking “Finding Nemo.” Roy Disney used the bad news as proof of Eisner's mismanagement, rather than a classic coming of age story. Having matured into a independent studio powerhouse, Pixar can holds its own with Hollywood's elite animation industry.

      Since their first collaborative effort with “Toy Story” where Disney received 90%, Pixar has split the profits, paying an additional 12.5% for distribution. For several months, Jobs drove hard bargain trying to retain the lion's share of Pixar's profits. When word surfaced that negotiations broke off, Roy Disney seized efforts to oust Eisner, asking board members to not renew his contract. “This will give Roy Disney and other some more ammunition, which is something they desperately seem to need,” said investor Herbert Denton, president of New York investment firm Providence Capital Partners Inc., calling attention to the fact that Eisner still controls his handpicked board. With Disney's earnings up and share prices rising with the rest of the DOW, board members are reluctant to rock the boat. What Roy doesn't quite get is that big fish swallow little fish—not the other way around.

      Getting too big for his britches, Jobs pushed his luck, trying to make Disney a minor partner in joint ventures. Had Eisner taken Jobs' last offer, there would have been legitimate grounds for a mutiny. Jobs only offered to pay its 12.5% distribution fee, cutting off 50% of Disney's profits. While Pixar has gifted animators—many former Disney employees—they received brand name recognition joining Hollywood's legendary animation studio. Disney afforded Pixar instant licensing, marketing and merchandizing through its theme parks and other retailing venues. Roy Disney and Stanley Gold warned the board about the “fragile” situation with Pixar to whom they attributed most of Disney's recent successes. What they failed to mention was that Jobs tried to call the shots and out negotiate Disney. Eisner simply rejected Jobs' arrogant—and unprofitable—proposal.

      Known for his public spats with his former studio boss Jeffrey Katzenberg, Eisner rightly earned his swashbuckling reputation. But since his public feud with Katzenberg, Eisner has managed to keep his private business under wraps. Back then, he deserved criticism for his ill-advised public remarks and the costly boondoggle hiring Hollywood super-agent Michael Ovitz. This time around, it's Roy Disney and Stanley Gold in a blood feud, blaming Eisner for everything but the kitchen sink. “Our point is that if he had cultivated this relationship for the past five years you would never have gotten to where you are now,” said Disney, showing incredible naivety and proving they're both out of the loop. Disney and Gold know that Eisner won't be coerced into giving away the store. Jobs' offer was a nonstarter from the get-go, taking Pixar to the next level with Hollywood's big boys.

      Over the past four years, Disney's stock was battered along with other publicly traded media companies. Time-Warner watched its stock drop 90% to under $10. Like the rest of the market, Disney's earnings and share prices are on the rise, bad news for disgruntled board members. Instead of blaming Eisner for letting the “big fish” get away, Disney and Gold should recall that before Pixar, Disney was Hollywood's undisputed king of animation. Without Pixar, Disney Studios still has the talent and resources to compete with any animation studio. Instead of throwing the baby out with the bathwater, Jobs, not Eisner, should get real and go back to table in good faith. Other studios—including Fox and Warner Bros.—don't have Disney's synergy with its instant brand name and marketing channels. Jobs' wish to retain all licensing rights and profits seems unrealistic.

      Disgruntled ex-board members need to get a life and stop meddling in Disney's internal affairs. Pixar's recent proposal does nothing for Disney's bottom line, actually hurting the company by fostering a dependency on outside talent. Eisner's on the right track giving Jobs his walking papers, though Jobs gives the impression he's calling the shots. No matter what Pixar's success, Eisner was correct rejecting a proposal that robs Disney's profits, shifts away creative control and hands Pixar the rope with which to hogtie one of the planet's best brand names. No other studio comes close to offering Pixar the talent, resources, marketing channels and promotional opportunities to sell successful animation. Before it's too late, Jobs should come to his senses and negotiate a workable deal. Roy Disney and Stanley Gold need to contain their egos, control their jealousy and let Eisner do his job.

About the Author

John M. Curtis writes politically neutral commentary analyzing spin in national and global news. He's editor of OnlineColumnist.com and author of Dodging The Bullet and Operation Charisma.

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