Four stories about M.E.

First published June 23, 2004

By C. W. Oberleitner

Chuck Oberleitner takes a look at how the Mouse House's Big Cheese, Michael Eisner, has been behaving lately.

While the Walt Disney Company board of directors may be standing firm with their equally rigid CEO, Michael Eisner, they have been unable to stem the tide of criticism eroding his leadership. Last week was a particularly bad one for the Mouse House CEO, whose first name the media has virtually changed to "Embattled."

Celebrity Poker Anyone?

Last Tuesday, Meg James and Sallie Hofmeister, writing for the LA Times, did—in the words of Kali-fornia Governor Arnold Schwarzenegger—a "fantastic" job of establishing Michael Eisner as one of the worst poker players in history.

Their article, "This Family Was Really Messed Up," tells the story of how Uncle Mike managed to pay $5.3 billion—yes that's BILLION with a "B"—for Rupert Murdock and Haim Saban's FOX Family cable channel — a money-losing enterprise that Murdock's own bankers barely valued at $3 billion.

They also told Eisner there would be no dickering over price or they would put the channel up for auction. When Eisner balked at paying for a costly and money-losing Major League Baseball contract that was included in the purchase price, the response was the same: Take it or leave it. In the end, he took it all.

Rupert Murdock was later overheard saying that Eisner was so desperate that he, Murdock, actually felt he'd left a billion or more on the table.

James and Hofmeister further explain how Eisner and his management team managed to convince the Disney board of directors—which at the time included Roy E. Disney and Stanley P. Gold—to go along with the deal.

Eisner said Disney would revolutionize broadcasting. His vision: to take shows on the company's ABC broadcast network and rerun, or "repurpose," them that same week on the cable channel. This, he predicted, would open up a second stream of advertising revenue for the same program, on top of the money cable operators would pay Disney to carry the channel.

There were just two small obstacles in Mike's path toward media moguldom. The revenue projections he'd used to convince the board to go along with the purchase were based, in part, on ad rates being charged by successful cable channel outlet USA Network and not money-losing FOX Family. And, he had failed to secure permissions and agreements from the actors, writers, and producers of ABC network shows to "repurpose" them on the cable channel.

The result has been that for nearly seven years Disney has been mired in a series of money-losing schemes to revitalize this extremely overpriced cable outlet. Now you know why they can't spend $50 million to refit Disneyland's submarine ride as a Finding Nemo attraction. Or, put $10 million into banking the track for Rocket Rods to soak up the expected crowds for Disneyland's 50^th Anniversary celebration.

Scream 4?

Not to be outdone by the LA Times, Rupert Murdock's New York Post came out with its own bit of bad news for the Mouse House Big Cheese. The same day the LA Times ran the story about the FOX/ABC Family channel, Richard Johnson, writing for the Post's Page Six gossip column, informed his readers that:

As tensions escalate between Miramax—the studio founded by Bob and Harvey Weinstein—and its corporate parent Disney, investment bankers are making the rounds pitching an idea that would rock Hollywood: for the Weinsteins and Steve Jobs' Pixar Animation Studios to join forces…

Johnson and Post staff writer Tim Arango go on to say that no one will predict the likelihood of such a deal. They add that sources close to all parties concerned are preparing for an "ugly divorce" between the Weinsteins and Mickey. Score one more for "executing against the company's strategic plan."

Who's Your Backdoor Daddy?

Not all the bad news for Uncle Mike made it to the papers. Colleagues who attended the world premiere for Disney's "Around The World In 80 Days" had some interesting things to say about M.E.'s appearance at the event.

Haunted as he is by predictions made earlier this year, during an investors conference call, that "The Alamo" would be a big success—it opened circling the drain—Michael Eisner has been very careful to not say much, if anything at all, about the potential success of subsequent Disney films. At the world premier of the studio's latest entry into the lowest grossing film of 2004 derby, he took things one-step further.

According to correspondents for other Disney-related websites, as the celebrities and guests arrived via limo at the premier, their names were announced to the attending crowd. Jackie Chan and a host of other stars and celebs dutifully made their way down the red carpet pausing for pictures, signing autographs, and answering questions from various reporters along the way.

When Michael Eisner arrived, his name too was called out to the crowd. As reporters looked up from the line of guests already making their way down the line to see when they might be able to chat up the Mouse House CEO, they were startled by what they saw next. Instead of making his way, slowly and deliberately down the red carpet like everyone else connected to the picture, Uncle Mike ducked behind the barricades and was sprinting into the theatre without even pausing to catch his breath. Not bad for a man with a heart condition.

Over the Transom and Through the Woods

The following bit of trivia was slipped into my inbox by sources inside the WDC's bunker, err…I mean headquarters, in Burbank.

Generally speaking, Information Technology (IT) departments at big corporations are fairly paranoid places to work. Rare is the IT department that actually makes money for a company. As a rule, quite the reverse is true, they are usually a constant drain on operating expenses.

The IT department at the WDC is no different. Like most Fortune 500 IT departments, the Disney IT folks constantly work just as hard to justify their own existence as they do to squelch the latest round of PC worms and viruses. To that end they are currently involved in,

"IT Squared"... the massive reorganization of *all* of Disney's IT departments.

IT Squared, according to internal Disney sources, is supposed to make the company "more efficient" by eliminating redundancies, which, presumably, the same IT department managed to create with its last go-round of systems upgrades. To accomplish this, Studio IT has been talking about outsourcing and off shoring software development and support.

As you might imagine, there are some problems with this idea. According to the people who actually support systems and users within the company:

Studio IT (previously) did *one* off shored project, lured by the glittering promise of a world-class app done on the cheap by legions of offshore code monkeys. It was a failure—an expensive failure—made all the more expensive by our having to yank it back in-house and rewrite it from scratch.

Hard as this may be to believe, apparently the notion of shipping still more Mouse House jobs overseas—an extremely unpopular practice among the nation’s unemployed—had completely escaped America's most notorious micromanager.

A very surprised Michael Eisner reportedly asked, "Maybe we need to take another look at that?"

A Final Observation

As you may have noticed, this story, like several of the stories it referenced, made use of anonymous sources. Over the past several weeks, some of you have commented about the use of expressions like "according to unnamed sources…" and "reportedly" here at JimHillMedia.

In a letter to the business section editor of the Sunday LA Times, John Spelich, Vice President, Corporate Communications Walt Disney Co., wrote a response to a story the Times did on the WDC's relationship with fast-food giant, McDonalds.

He complained the tone set in the Times piece was deliberately unfavorable towards the Disney Company. As proof, he cited the fact that the Times, like JHM, had kept its source for negative comments about the relationship between the two companies anonymous.

It is true that a story gains a great deal of credibility when sources of information and fact can be quoted by name. It is, however, a little disingenuous to expect people to risk their careers and their families’ livelihoods by going on the record and speaking out about the people who hold the power of financial security over them.

Our goal is inform in as fair a manner as possible. That being said, nothing we write about here is worth anyone's job—with, of course, one or two possible exceptions.

C'ya real soon!