The Keys to the Kingdom (20 page)

By now, Eisner and Katzenberg were completely convinced that despite his gentlemanly demeanor, Mancuso was doing everything in his power to undermine them. Those on the production side even called Mancuso “the Sicilian.” But a buttoned-down businessman like Davis found Mancuso's low-key approach far more palatable than the unpredictable and emotional style of the West Coast executives. And Davis believed that Mancuso's skill in marketing was more valuable to Gulf © Western than whatever instinct Diller and Eisner brought to picking the movies. Davis had been especially irked by a quote from Eisner in the
New York
article: “It's great to have good marketing and I think we have the best, but you don't need it to sell
E.T.
and it won't help if you're selling
The Pirate Movie
. This is a business based on twelve decisions a year. They are very important. Nothing else is close.” Mancuso had taken offense, too. He circled the quote and sent it to Diller, Eisner, and Katzenberg with a sarcastic note.

As the relationships degenerated, Davis was supposed to be in contract discussions with Diller, Eisner, and Katzenberg. Their deals expired almost simultaneously in September 1984. Months earlier, Davis had a few conversations with Diller but neither side pressed for resolution. Diller suggested that Davis start with the junior man and told Katzenberg to fly to New York. When Katzenberg arrived, the negotiation began on a sour note. “I have people in Hollywood who tell me you're Sammy Glick,” Davis intoned, alluding to the grasping character from the famed Budd Schulberg novel. He berated Katzenberg for being gossipy and for lacking creativity. He accused Katzenberg of conspiring with Diller, Eisner, and Mancuso to go to the board and have him thrown out. At this, Katzenberg says, he started to laugh.

“What are you laughing about?” Davis demanded.

“Marty, we can't decide what time the sun's coming up,” Katzenberg replied. “If you think the four of us can get together to do something about you, you don't understand.”

But despite his sarcasm, Katzenberg was horrified by Davis's attack. He also observed that during the entire discussion, Davis gazed coldly out of his office window. “He never took his eyes off New Jersey,” Katzenberg says. The meeting ended inconclusively and Katzenberg went to Diller's office
to report to his bosses. Though Eisner would later say he was shocked when he heard what Davis had said to Katzenberg, Katzenberg remembers events differently. As he recalls it, Diller insisted on getting Eisner on the phone before Katzenberg could say a word. When Eisner came on the line, Diller looked at Katzenberg and said, “Well?”

“You assholes set me up!” Katzenberg burst forth.

As he remembers the episode, Diller and Eisner burst into laughter.

The superficial camaraderie of the moment did nothing to dispel Eisner's distrust of Diller. “Barry's taking care of Barry,” he told Katzenberg. And even in his junior position, Katzenberg could read the silence whenever he asked Diller for reassurances about the future. Diller would tell him, “Hang in there. It'll all be okay.” But he never told Katzenberg what he wanted to hear: “You'll always have a place with me.”

Eisner had started to cast about for his next position. He had called Roy Disney to ask whether there might be a job for him at the then-faltering studio. Disney was in the midst of a takeover battle, however, and the outcome was uncertain. Eisner's preferred option was to start his own film company with $375 million in financing from his old friends at ABC. “I'm talking to Leonard Goldenson and Fred Pierce,” he told Katzenberg. “I think ABC will put up the money.” Eisner and Katzenberg started working out a business plan and registered their company's proposed name: Hollywood Pictures.

For Diller, the escape route amounted to changing a single consonant, from Martin Davis to Marvin Davis. He started negotiating with the latter Davis, the outsized oilman, about taking charge of Twentieth Century Fox. Meanwhile, the Davis who ran Gulf © Western was pressuring Diller to promote Mancuso. Rather than report to Eisner, he would report to Diller. Katzenberg would then report to Mancuso as well as to Eisner. Finally Diller called Katzenberg into his office and handed him a press release announcing the change. Katzenberg was infuriated, but Diller tried to reassure him that business would still be conducted as usual.

Martin Davis arrived in Los Angeles on Tuesday, September 4, 1984. He had some inconclusive discussions with Diller about his contract and then met uncomfortably with Eisner. When Davis reiterated his complaint that Diller and Eisner were being paid too much, Eisner responded, “I think you're being paid too little.” The conversation went nowhere. Next, Davis met with Katzenberg and took a different tack. Perhaps he sensed that Katzenberg could be the last of the Diller dynasty who might consider
remaining at Paramount. Davis apologized for his earlier diatribe. “I relied on third parties, who did a very effective job of downgrading you,” he said. “I realize I was misled. I withdraw the negative things I said. I think you have a superb future.”

The following Friday, Davis again met with Eisner. By now, Eisner was emboldened; he was certain that Disney was about to offer him a new job and he told Marty Davis that he was in demand. Davis was indifferent. Later that afternoon, Eisner learned that he had spoken too soon. But it was too late.

That night, top Paramount executives gathered for a dinner in Davis's honor at Diller's Coldwater Canyon house. A couple of weeks earlier, the
New York Times
had published another adulatory profile, headlined
BARRY DILLER'S LATEST STARRING ROLE
, in which Diller was praised for presiding over “perhaps the best-run, most stable and most consistently successful movie company in Hollywood.” The article detailed Diller's exceptional skills at picking and marketing films and concluded that he was “brilliant, very hard-working and a tough negotiator.” Still, it was obvious that however successfully Diller had run the studio—and however effectively he had romanced the publications that spoke most directly to Wall Street—Davis was going to mow him down.

Against the backdrop of all the simmering hostilities, the dinner party was not exactly a pleasant event. “It was the most tense social engagement that I've ever been at,” marvels one of the executives who attended. Katzenberg remembers the evening as “genuinely terrible. Just pain.” The awkwardness wasn't eased when Davis made a point of singing the praises of his absent favorite, Frank Mancuso.

The following Monday, September 10, Diller announced that he was leaving to become chairman and chief executive at Twentieth Century Fox. Davis was indifferent. “I said, ‘Fine. Good-bye,'” he remembered.

But Eisner was stunned by the way Diller made his announcement. “Michael didn't know,” says a former Paramount executive. “I think Michael felt completely betrayed because Michael had been assured by Barry that he'd be defended.” Even though Eisner had not relied on those assurances, he was angry and upset that Diller had frozen him out.

Diller maintains that he had told Eisner a month earlier that he was in talks about going to Fox and even asked Eisner to join him. At the time Eisner had other irons in the fire and clearly must have been hoping, finally, to step out of Diller's shadow—whether at Paramount, Disney, his own
new company, or someplace else. Regardless, Eisner clearly thought that Diller should have told him by the night of his party that his departure was imminent. As it was, Eisner was in the dark. Diller says he held back because he had not quite made up his mind. “I was 98 percent gone—993?4 percent,” he asserts. “I had not signed a deal with Fox. I did not sign until Sunday.”

The next Tuesday, Davis called Eisner at home. By now, it was about six
P.M
. in Los Angeles. Davis asked Eisner to fly to New York at once. Eisner stalled. “I can't come tonight,” he said. “It's my son's first day of school tomorrow.” Davis said he should come the next day. “Are you going to ask me to report to Mancuso?” Eisner asked. If so, he didn't see the point in making the trip. Davis said nothing had been decided.

Diller says he implored Eisner to stay home: “I said, ‘Don't go to New York. Marty Davis is going to repudiate you.' And Michael didn't trust me. And he thought I was probably manipulating him to get him to go to Fox with me…. Marty Davis lied to him and I begged him not to go.”

By happenstance, Eisner's former boss at ABC, Fred Silverman, was at a meeting in Eisner's office at this time and witnessed some of these discussions with Diller. Both men were very nervous, he recalls. “They talked about [Davis] like he was Vlad the Impaler,” he says. “I found that kind of interesting because these two are not exactly pussycats.”

Tuesday afternoon, Eisner and Katzenberg flew to New York—and they flew commercial. They spent the flight talking about their hope that Davis would breach Eisner's contract, which required Paramount to offer Eisner the top job if Diller left. If Davis passed Eisner over, Gulf + Western would have to pay Eisner to go away.

Rich Frank, president of Paramount's television division, had also been summoned to New York. He flew separately and found that he had arrived at the Gulf + Western building first. It was late at night when he was ushered into Davis's office. To his shock, Davis peremptorily told Frank that the top job at the studio was going to Mancuso. “Michael's a child,” Davis said contemptuously. “If I put blocks on the floor, Michael would sit down and play with them.”

“Then get all the blocks you can,” Frank said, “and let him play.”

Frank told Davis that he was about to commit a blunder that would become textbook material at the Harvard business school. Just as Frank was leaving, Eisner and Katzenberg arrived. They were put into separate offices and told to wait while Davis conducted successive meetings.

Eisner went into Davis's office just after midnight. According to Davis, Eisner “fought like hell” for the job. Eisner does not remember waging any battle at all. Both agree that Davis asked Eisner if he would report to Mancuso, and Eisner said no. When the meeting ended, Davis did not sound as resolute as he had been when he spoke to Rich Frank. “I'll have to sleep on it,” he told Eisner. Then Katzenberg had his turn. Davis once again expressed his view that Eisner was simply an overgrown child but repeated that no decision had been reached about the top job. He asked Katzenberg for a commitment to stay after his contract expired. Katzenberg said he couldn't give him an answer on the spot.

Later, Eisner and Katzenberg commiserated at the Brasserie, an all-night restaurant, and then Eisner went to the Mayfair Regent. Katzenberg preferred the Regency. By now it was the wee hours of the morning. On his way to his hotel, Katzenberg picked up an early edition of the
Wall Street Journal
. There it was in black and white: the
Journal
was reporting that unnamed Gulf + Western executives had disclosed that Frank Mancuso would be named Diller's successor that day. Davis was quoted criticizing the studio's performance.

Katzenberg called Eisner's room frantically to tell him the news. It was an exceptionally cold way for Davis to let Eisner know that he had reached a decision. Davis always maintained that the
Journal
simply made a lucky guess. “Was it a good bet?” he said. “I wouldn't deny it.”

Eisner called Diller at home in Los Angeles. “I said, ‘Sorry to tell you, I told you so,'” Diller says. “He was devastated. He was publicly repudiated.”

Eisner may have been upset but he was hardly incapacitated. He maintained that his contract guaranteed him the right to be considered for the top job if it became vacant. Now Eisner argued that Davis had never really given him that opportunity. Before he had even met with Davis, the
Journal
had the story that Eisner was out of the running. Eisner had brought along a copy of his contract and a letter drafted by his lawyer, Irwin Russell, that he could use if events played out this way. It pointed out the breach and demanded that the studio forgive certain loans—such as the $1.25 million that Eisner had borrowed for his house in Bel Air—and make payments that were due to him. Eisner sat in Davis's office and refused to leave until he was given a cashier's check for the full amount—$1.55 million.

He got it. That afternoon, he and Katzenberg strolled together to the Chemical Bank and promptly deposited the money. (Davis contended that
he never actually breached Eisner's deal. “His contract had expired,” he said. “[But] he did have money due him.”) Despite all the signals that Davis was more than willing to let Eisner go, Eisner felt deeply betrayed. He was so anxious that he insisted that the Chemical Bank deposit the money, as cash, at once.

Eisner issued a statement that mentioned neither Davis nor Gulf + Western: “The untimely death of Charles Bluhdorn…and this week's resignation of Barry Diller, chairman of Paramount Pictures, marked a period in my life to move on. I will always be indebted to both men.”

Katzenberg returned to Los Angeles while Eisner remained in New York to talk to Arthur Krim, one of the founding partners of Orion Pictures. Orion was one of Hollywood's most artistically successful studios—it was home to Woody Allen and had produced Oscar winners like
Amadeus
—but the company always struggled financially. Aware of the troubles at Paramount, Krim wondered whether Eisner might want to make a deal and bring some of his commercial know-how to the studio. Despite Davis's low opinion of him, Eisner was a hot property.

Diller says he also asked Eisner to join him at Fox. And according to Diller, Eisner agreed to take the job and even negotiated a contract. But Eisner must have figured that he would be an apparent afterthought at Fox. Diller's move had already made a splash, with plenty of publicity trumpeting his deal as the richest in the history of the business. Eisner was not prepared to go meekly to work for Barry Diller again.