DisneyWar by James Stewart

Summary
  1. The incredible story of the Eisner era – it’s successes and debacles
Key Takeaways
  1. Walt Disney’s nephew Roy Disney and the CEO at the time, Michael Eisner, did not get along. Eisner was a very controlling and difficult CEO to get along with and he eventually decided to get Roy off the Board. Ironically, Roy was the one who removed the CEO before Eisner in order to bring Eisner on board
  2. In 1984, Walt Disney’s nephew Roy lead a coup to oust Ron Miller who was Walt Disney’s son-in-law. This is when Michael Eisner took over as chairman and CEO. Eisner had a little knowledge of Disney but since the company was under threat of take over and it’s creative output was so low his skills were necessary. He was responsible for an incredible string of successes at Paramount and brought with him some of the senior executives such as Jeffrey Katzenberg. It was thought that Eisner’s creativity and charisma would be perfect to help turn Disney around. He was very charismatic man and a great storyteller
  3. Disney operates differently than other studios in that they have their own in-house team to make all the movies instead of hiring and firing people once a movie is done
  4. Disney’s incredible attention to detail and quality live on today even going so far as having exacting standards and extensive training for the costume characters at Disney World
  5. Walt can be characterized as resilient, restless optimistic, creative and a visionary
  6. Eisner had a very different upbringing from Walt – he was Jewish, raised in a wealthy family in the heart of NYC where Walt was in a very typical Midwestern family who struggled with money at times and he of course idealized the countryside. Eisner was a literature major and playwright in college and this helped him oversee the production of some major cultural hits during his time at Paramount such as Footloose and Saturday Night Fever
  7. Eisner was a very frugal CEO who fired a lot of old Disney employees and established a culture of survival of the fittest. His replacement of fired Disney employees with Paramount employees was also somewhat controversial
  8. Eisner saw himself as Walt Disney’s heir apparent and made that very clear when he became the face of the TV show The Wonderful World of Disney
  9. Eisner had a great vision and a sense for what would be culturally popular and important and wasn’t afraid to pay up when he saw these rare opportunities such as with Indiana Jones
  10. Euro Land Disney was a major effort for Eisner and the Imagineers but ended up being a humongous flop. Although the park opened on time, it was billions of dollars over budget and they had misunderstood the difference between American and European spending habits and customs. Since Europeans have more vacation, they spend less per trip than Americans which hurt Euro Land DIsney
  11. For a long time and maybe even a little bit today, Disney was mired in what people would call the “what would Walt do syndrome”
  12. Eisner lead the development of Disney-run retail stores across the most prominent shopping areas in the country and immediately began setting records for sales per square foot
  13. Selling and mass marketing home videos was a controversial idea as they thought it might cheapen the experience of going to the theater and they were also counting on showing the movies on their television programs to attract viewers. The first release was priced at $80 so that only rental companies could afford to buy a lot. This experiment was a tremendous success and the next release was priced at $30 but also included network advertising within the home video with the hopes of changing consumer habits. Home-video soon became Disney’s biggest profit center apart from theme parks
  14. Eisner, Wells and Katzenberg were responsible for the most impressive corporate media turn around in history. The three main areas that helped balloon Disney’s profits were raising the prices for tickets to the theme parks, increasing the number of hotel rooms worldwide and the burgeoning home video Market.
    1. Besides the obvious dollar profit, the way Disney handled the situations added a luster and prestige which allowed them to sell and license their products at incredible rates
  15. Katzenberg was responsible for coming up with the idea for the Lion King. He immediately saw the appeal of a coming of age story but this was a big risk for Disney as it would be the first time that the main character was an animal instead of a human and it wasn’t based on a classic fairytale
  16. After an incredible run of successes in the 1990s, Disney fell into a common trap of the successful and lost some of the essence which was responsible for it’s success as its costs ballooned and. The incredible success at Disney led to a feeling of complacency, even boredom with many senior executives
  17. Eisner told people he wanted to hear bad news early but the way he reacted disincentivized it. He hated it and frankly was not used to it and this kept others from being forthright, as witnessed by the Euro Disney debacle
  18. Tensions started mounting between Eisner and Wells/Katzenberg. They were driving each other crazy, especially as Eisner began getting a bloated ego
  19. Disney moved into the Broadway arena and decided to buy their own theater in New York City
  20. Frank Wells was killed in a helicopter accident in 1994. During contract negotiations, Eisner promised Katzenberg that if anything ever happened to Wells, he would become Disney’s #2. However, this didn’t happen and Katzenberg knew from then on that their relationship was over as Eisner wasn’t being honest or owning up to his word. Katzenberg threatened to leave and Eisner spoke with close confidants, many of whom which hated Katzenberg
  21. After the movie The Mighty Ducks became a sensational hit, Disney franchised the Mighty Ducks into an NHL team. Disney took control of the Anaheim Angels in 1997 after their movie Angels in the Outfield became a hit – both teams were sold in 1999/2000
  22. Eisner had emergency heart surgery and felt like he lost some of his competitiveness and drive after that – younger in body but older in spirit. He no longer felt immortal but he had now made his peace with death and was happier.
  23. Succession was up in the air but Eisner sensed that the company was undergoing an internal corporate restructuring of sorts and knew from firsthand experience how vital it is to keep employees happy and challenged in the midst of great past successes
  24. The tensions between Katzenberg and Eisner eventually became too much and Jeffrey left. He founded, along side Spielberg and good friend David Geffen, DreamWorks SKG
  25. Disney attempted to build a historic park in Virginia but certain groups thought it was too close to important Civil War grounds and attempted to block it – Disney held off as they had lost the “perception game”
  26. With record profits, Disney had to decide what to do with all this money and they felt that they need a distribution arm so they started looking at networks. The initial thoughts of buying NBC from GE fizzled and it then came down to CBS, Time Warner and Capital Cities / ABC. The merger with Cap Cities happened in 1995 for $20b and was the second largest merger of all time. This brought A&E Networks as well as ESPN into the Disney fold
  27. After much deliberation, Eisner’s good friend Michael Ovitz was hired but Eisner immediately regretted it. Ovitz founded Creative Artists Agency, one of the world’s largest talent agencies and his style of business was much different – lavish parties bringing talent together and expensive presents are norms as an agent but Eisner disapproved
  28. The tension between “Eisner and the rest of the company consumed so much of everyone’s efforts but Disney had such a deep bench that they were still able to come out with successful movies, TV shows and theme park rides. Ovitz was eventually fired at the end of 1996.
  29. Eisner may have gotten some bad reputation because in the months before Ovitz’s firing he told the media that there were no issues and everything was great. Shortly after Eisner signed a new 10 year contract with Disney which was valued at close to $200 million with options and many other perks. Eisner’s ownership eventually became the second largest in the world only behind Sid Bass and this would lead to terrible incentives and non-independent board behavior
  30. After the enormous success of The Lion King, Disney began to struggle with their animation unit. They were having some success in their partnerships with Pixar and even though many inside Disney had suggested buying Pixar in 1997, nothing came of it. The relationship with Pixar experienced tension when negotiations between Jobs and Eisner went south. Jobs said he would never sell to Disney as long as Eisner was there
  31. The Lion King Broadway show was released in 1997 and in many ways this can be seen as the pinnacle of the Eisner era for its originality and creativity
  32. One fatal flaw of both Eisner and Katzenberg is that they never knew how to encourage celebrating small wins
  33. Eisner’s management style lead to a very political, backstabbing, insecure environment where people were always looking behind their back and unsure of their place in the company
  34. Eisner’s style forced many executives to start making decisions without any help or input from the people below them
  35. The merging of AOL and Time Warner was difficult and dangerous for Disney but they eventually reached a favorable settlement in which Iger proved himself that content and is king over distribution
  36. Eisner’s major mistakes included his massive spending on Euro Disney, forays into the Internet and the acquisition of the Fox Family cable network – each of which is a mistake of more than $1b. This does not even include the firing of Katzenberg and Ovitz – both mistakes of hundreds of millions of dollars
  37. As Eisner called for Roy’s removal from the Board due to his age, Stanley Gold and Roy began a “Save Disney” campaign and called for Eisner’s removal due to terrible results the previous five years. They eventually garnered enough votes of no confidence from shareholders that Eisner stepped down. He was responsible for one of the greatest media turnarounds in history, bringing in an era of creativity and growth few expected but his egomaniacal  dishonest, micromanagement style lead to insider unhappiness and revolt. During his tenure, there was also widespread shareholder revolt for corporate governance abuses and Disney was at fault in a major way too. Many were insiders and not truly independent, getting huge paychecks from Eisner personally
  38. The catalyst for the wheels falling off during Eisner’s reign was Frank Wells’ death in 1994 – Wells was Eisner’s check and balance, rudder and sounding board. He made executives feel appreciated where Eisner was often stingy with praise. However, not even Wells could save the Euroland Disney debacle or the firing of Katzenberg
  39. Eisner was extremely creative and had massive energy. This was the shot of the arm Disney needed in 1984 when he was brought in but with success, Eisner’s ego started getting in the way and his image even fused with that of the Disney company itself. Eisner’s downfall also came from his dishonesty and “bending of the truth” to fit his needs
  What I got out of it
  1. A really good background and overview of the Eisner era – the incredible growth and creativity followed by bad management style which lead to insider revolt, poor results and his eventual ousting