My Dinner with Dixon Ticonderoga No. 2

First published July 14, 2004

By C. W. Oberleitner

Chuck Oberleitner tells us what one knowledgeable JHM reader has to say about the business of reporting on entertainment industry business.

When I first started writing for JHM.com I expected to hear from our readers. I quickly learned one of the fastest ways to fill up my inbox was to either a), take a stand on a controversial topic or b), really screw up my fact checking. Like the time I reported that the Orlando, Florida metropolitan area only had a population of 630,000.

Over time I've gotten used to a pleasantly steady flow of communiqués that range from thoughtful praise of my journalistic skills to unprintable diatribes questioning my lineage. Virtually all of which usually arrives in the form of e-mail.

Imagine my surprise then, several weeks ago, when a good friend and advisor said that a colleague of his was a regular reader and that he would like to meet me. Not just for the sake of meeting but also to, "help you understand how you guys are getting it all wrong." Who could refuse such an offer? We agreed upon a dinner meeting that quickly became two dinner meetings.

My friend, the gentleman acting as go between with this mysterious reader, and myself, works in the entertainment industry. He and his friend have distinguished careers that span many areas of film and television production and finance. Between them, for more than a decade, they have either been directly involved with or eyewitnesses to some of Hollywood's most successful business deals and some of its most stunning failures.

My friend has been invaluable in aiding my understanding of the Byzantine nature of entertainment industry financing. So, I didn't hesitate for a moment when he suggested the meeting with his colleague.

While perfectly willing to help me make sense out of how and why giant entertainment conglomerates do business the way they do, my friend and mentor, like most industry insiders, prefers to remain anonymous. As does his friend and colleague. Neither cares for the idea of being referred to as an "informed source."

To make things easier I've decided to refer to my dinning companion as Mr. Dixon.

They Call Me Mr. Pencil Pusher

A genial, cordial man Mr. Dixon didn't waste a second coming to the point. I had barely sliced into my burrito when he began making it clear that he had something to say not only about how I report Disney news but how others--on the Internet and in the mainstream media--are going about it as well.

"Here's the thing." He said waving his dinner fork in my general direction. "You all get so close but then you miss the point entirely."

"Close to what?" I asked. Was there a specific story he was referring to?

"Several." He responded. "Take this whole, 'is SaveDisney lost,' thing you guys have been writing about lately."

This was our first meeting and it took place just days after my column "A Different Take on SaveDisney.com" was published.

"The story was good." Mr. Dixon told me. "However you went right up to the edge and missed the real point."

He went on to tell me that he agreed in principal with what I had to say about SaveDisney.com not taking full advantage of the Internet as a tool in its fight to unseat Michael Eisner as Mouse House CEO along with several members of the Disney board of directors.

"But you completely missed the fact that The Street (large brokerage houses that hold the bulk of Disney's shares) doesn't give a damn about paint or what Tomorrowland looks like." Mr. Dixon continued. " And, Roy and Stanley haven't given The Street a real reason to remove these people."

Mr. Dixon reminded me that the representatives of six major state pension funds, that demanded and got a meeting with the Disney board, had dropped their demand that Michael Eisner be fired.

"With all these claims of 50 and 30 percent revenue growth," Mr. Dixon said, "Disney is buying off The Street. They're distracting fund managers with huge sums of short-term cash. No broker or banker in the world would ever ignore a thing like that." He went on to speculate, rather accurately, that the Disney Company would continue to curry favor among shareholders by raising its notoriously stingy dividend.

Late last week in remarks made while attending the Allen & Co. media conference in Sun Valley, Idaho, Michael Eisner was widely quoted as saying he has "confidence in the strength of the company's balance sheet." Later that day company spokesmen said in a press release that management would "likely recommend to the board an increase in the company's dividend."

I told Mr. Dixon that I thought Disney, or any entertainment conglomerate for that matter, was considered a long-term investment.

"It can be. It probably should be." Mr. Dixon responded. "But no one, especially Roy and Stanley, is giving The Street any reason to look at the Disney Company as anything other than a short-term proposition. I know, because I've been talking to the people who should be in meetings with and seeing a long-term strategy from Shamrock Holdings (Roy Disney and Stanley Gold's investment firm). They have yet to see any type of alternative plan for running the company from Roy and Stanley and their people."

Towering Expectations

Mr. Dixon didn't limit his criticism to my writing alone. At both of our dinner meetings he had a great deal to say about the way other Disney related websites also seem to be, as he put it, missing the point.

Over margaritas and our second Mexican dinner in as many weeks Mr. Dixon told me. "The Tower of Terror is a big disappointment. As a means of saving DCA it's a huge failure and Burbank knows it." He was referring to the Disney Company's corporate headquarters.

I told Mr. Dixon that by virtually all measures ToT appeared to be a hit with Disneyland Resort guests. In addition, Walt Disney Imagineering (WDI) was being praised for delivering as thoroughly entertaining a ride as the Florida original for nearly $45 million less.

"Tower of Terror was supposed to turnaround attendance and save DCA." Mr. Dixon responded. "And its just not doing it. All they're (DLR) doing is drawing in more annual passholders. They aren't attracting new overnight guests at all. Annual passholders are jumping between the parks and are making DCA look busy when in fact attendance figures are just as flat as they've ever been."

I pointed out that several Disney fan sites, including SaveDisney.com, had already been speculating about just this thing for several weeks.

"And that's my point." Mr. Dixon responded. "All they do is go on and on about how ToT has failed to bring in the crowds that were supposed to turn DCA into a destination in its own right and that it's all Michael Eisner's fault. They don't get it."

"Get what?" I asked, slightly confused myself.

"Disney is spending millions to advertise Tower of Terror." Mr. Dixon responded. "You can't turn on a TV or radio without seeing some sort of Tower of Terror ad and the streets are littered with Tower of Terror billboards. Burbank already knows its not working. That all they're attracting is locals. You don't need to spend $10 to $20 million to bring local area visitors into the parks. That's money that could be used elsewhere. For example, to fix things in Tomorrowland or put on a better show for the 50^th Anniversary and that's the story these sites are failing to tell people."

I decided to play devil's advocate and come up with my own theory as to why ToT was not attracting the volume of overnight guests Disney management had hoped it would.

"Who says Disney is spending that much money to promote ToT?" I asked. "Or, even if they are, how much of that money is being spent in markets outside of Southern California." I proceeded to share with Mr. Dixon a story about Disney theme park advertising a former Disneyland executive shared with me the year before.

Prior to the events of September 11, 2001, Disney Theme Parks and Resorts used to split its advertising dollars between major markets East and West of the Rocky Mountains. The Eastern markets featured ads for Walt Disney World vacations while the Western markets promoted stays at Disneyland. Following the attacks attendance and revenues dropped precipitously at both resorts with WDW taking the hardest hit.

With the decline in revenue came the order to cut back on spending of all kinds. This included advertising. The new strategic plan was to target advertising spending--regardless of geographic market--where it could ultimately generate the greatest return and increase cash flow.

The Disneyland Resort--which has for years averaged a 60/40 mix of local to overnight visitors--began to recover from its drop in attendance more quickly than its more long-term guest dependent Florida sibling. The result was that ad dollars poured into national campaigns promoting the Florida property while the Disneyland Resort saw its advertising budget virtually eviscerated.

For months Los Angeles television viewers, along with the rest of the country, were saturated with ads for Walt Disney World vacations. While at the same time Disneyland Resort ads virtually disappeared everywhere but on a few billboards along I-5 and the Hollywood Freeway just outside the gates of Universal Studios Hollywood.

"Suppose," I said to Mr. Dixon, "that this massive ad campaign you're seeing and hearing for Tower of Terror is concentrated here in the Southern California market with only minimal spending in the rest of the Western States. Wouldn't that go a long way toward explaining why ToT is attracting so many locals and not the number of out of town overnight guests Disney had hoped for?"

"It would." Mr. Dixon said, cautiously adding, "I haven't talked with anyone in Burbank about this (advertising spending). I'd have to ask them about it. But, tell me this, why would Disneyland use its limited resources to advertise Tower of Terror so heavily in its own backyard as opposed to the rest of the Western states?"

"Because Michael Eisner doesn't live in Seattle, Portland or Denver." I said.

A week later I ran into Mr. Dixon on the lot of another major motion picture studio. We had a chance to speak briefly. "As a devil's advocate you were pretty darn accurate." He said. It turns out that his contacts inside the Disney Company confirmed that the lion's share of ToT's advertising budget was spent where the boss could see it.

Housekeeping

While I'm catching up on readers' responses I want to take a moment to respond to couple of issues readers, other than Mr. Dixon, have brought to my attention.

A couple of weeks after I suggested that the folks at SaveDisney.com might do their cause a bit of good by offering their popular t-shirts for sale at cost to their supporters I received several e-mails with a link to the new SaveDisney.com Online Store.

The official announcement reads, "SaveDisney has put together some merchandise packages in response to those who asked for ways to help spread the word."

We congratulate SaveDisney.com on the opening of their new online store and wish them every success, although I do wish they'd bring back those attractive blue and yellow "Save the Magic" t-shirts.

For those readers--both of you--who asked if I received any response from George Mitchell, Chairman of the Board of The Walt Disney Company, regarding my willingness to be considered for one of the open seats on the company's board of directors I have the following update.

On June 4, two days after my column "Dear Mr. Chairman…" first ran here on the site, I received a letter dated June 3, from David K. Thompson, Senior Vice President Deputy General Counsel – Corporate and Corporate Secretary The Walt Disney Company. In his letter Mr. Thompson thanked me for my letter to Senator Mitchell. He went on to say, "I would be happy to bring your interest to the attention of the Governance and Nominating Committee when it next considers potential nominations for the board."

Mr. Thompson asked for my current resume and, "any other information that you think would be helpful to the Committee in its deliberations." He also included a copy of The Walt Disney Company's "Corporate Governance Guidelines" for my review. If you're interested this document is publicly available as a .PDF download under the subheading "More Information: [PDF Version] at Disney.com. Link

After more than a decade of working for myself it pained me to admit that my resume was bit dusty. It was so out of date that I had to transfer the creaky old file into my current word processor before I could even update it. Finally on June 24, I sent a copy of my now current resume to Mr. Thompson for presentation to the committee.

My objective: Member of the Board of Directors for The Walt Disney Company.

I welcome your thoughts on this issue and anything else I've written about.

C'ya real soon!