The Keys to the Kingdom (34 page)

D
ISNEY'S SUCCESS ALONE
would have been enough to earn it a good deal of enmity in the Hollywood community. But within a few years, the Eisner administration was fighting with virtually everyone in and out of town—even way out of town.

Some of the company's litigiousness sprang from its desire to protect its valuable rights to its characters. Frank Wells argued that these aggressive tactics were necessary. But Disney's unyielding stance began to take a toll from a public relations standpoint. Disney threatened to sue the tiny Canadian town of White River over its plan to erect a Winnie the Pooh statue and ordered three day-care centers in Florida to paint over Disney characters on their walls. MCA capitalized on the Florida case by painting Flintstones characters over the Disney figures and throwing a party for the kids. Lest anyone miss the point, the media were invited, too.

Disney also got embroiled in some lawsuits simply because its corporate culture was to play hardball. In 1988, Disney had negotiated with Rupert Murdoch, now the chairman of Fox, to team up on a satellite network in Europe. Disney wanted to use Murdoch's Sky Television to broadcast the Disney Channel overseas, with the aim of boosting merchandise sales abroad and paving the way for the Euro Disney theme park that was to open in 1992.

The two sides quickly started to feud over issues of control. The Fox side aggressively pursued deals to buy the rights to movies made by other studios; Disney complained that the Murdoch executives were overpaying. Disney felt it wasn't being consulted and the company wasn't comfortable that the Fox side would take adequate care to position the Disney brand properly, either. (News Corp's decision to flog the satellite service—including the Disney Channel—alongside a picture of a scantily clad young woman in one of Murdoch's British tabloids didn't strike Disney as the right
approach.) But Disney had never anted up the $75 million that it promised to pay into the joint venture. In 1989, Murdoch sued and the case was quickly settled. The joint venture was abandoned. It was an expensive decision. According to a former Fox executive, Disney's share in the service would have been worth about a billion dollars by 1999.

That kind of fast resolution was relatively unusual. In 1990, Eisner tangled with Murdoch again. This time he got into a self-defeating feud with his former boss, Barry Diller, who was running the Fox studio. Disney had created a series of half-hour animated shows that aired on weekdays.
The Disney Afternoon,
as the shows were called, became the Disney television division's best profit generator at the time. Diller had started running the Disney shows on the seven Fox-owned television stations. Those stations and many others that were affiliates of the new Fox television network constituted more than 80 percent of the stations carrying the Disney afternoon package.

The fight started when Disney bought KHJ, a television station in Los Angeles, and told Diller that it would stop supplying afternoon cartoons to the local Fox-owned station, KTTV. Enraged, Diller said he would drop the shows from all Fox-owned stations. And he would retaliate by having Fox make its own cartoons and sell them to all 120 affiliates of the new Fox network. There would be some small markets where Disney wouldn't even have an alternative station that might buy its wares. Fox's first effort would be based on
Peter Pan
—a move that Disney regarded as an encroachment because it had made an animated version for the big screen. (In fact,
Peter Pan
was in the public domain and didn't belong to Disney.) In time, Fox's
Power Rangers
became the top children's show and Fox dominated afternoons. Within two years, Eisner had forfeited a major profit center to service one, stand-alone television station. Still, he insisted, he “couldn't justify depriving our…station of highly desirable Disney programming.”

Disney not only sued but attacked Fox before the Federal Communications Commission. The fight grew so ugly that Diller reportedly refused to remain in a room if Eisner was present, took his name off charity events if Eisner was participating, and even began referring to the Walt Disney Company as “the Evil Empire.” In 1992, Disney dropped the case.

Disney also came to public blows over its attempt to acquire the Muppet characters. The brilliant Muppet creator, Jim Henson, started discussing the sale with Eisner in spring of 1989 and an agreement to consummate the union was announced with great fanfare that August. Disney publicized the
deal as “a business association made in family entertainment heaven.” But while Henson had wanted the sale to ensure a good, stable home for his characters, many of his creative staffers were nervous. “I was surprised about Disney because Disney is a corporate entity and Jim and the Muppets [had] a very fuzzy, Grateful Dead kind of sensibility,” said Mark Saltzman, a writer who worked on
Sesame Street
and the short-lived but acclaimed show
The Jim Henson Hour
.

During the negotiations, Disney offended the Muppeteers by suggesting that they could quickly train personnel to operate the characters. “I don't think they understood that it took Jim years to get a single puppeteer up to speed,” said Joan Ganz Cooney, head of the Children's Television Workshop (home of the
Sesame Street
characters, including Big Bird and Bert and Ernie).

But Henson “loved Michael and trusted him a lot,” says Bernie Brillstein, Henson's manager for many years. So before the deal was final, Disney went ahead with a couple of theme-park projects, including a 3-D film and stage show.

Despite his rapport with Eisner, Henson was surprised to find that Disney was determined to negotiate to the last decimal point. “You'd have to call Michael Eisner and say, ‘This is where it's gone with your zealous robots,'” one of Henson's representatives complained. “Every single issue was pushed as a deal point by Disney. As opposed to focusing on the big points, they focused on everything.”

As he often did, Wells kept Eisner in line. “Wells consistently was the good guy,” says David Lazer, then president of Henson's company. Eisner seemed to forget certain deal points that the Henson side thought had been resolved—and then would become petulant about his position. “He's like a spoiled child sometimes,” Lazer says.

The negotiations stalled over such issues as Henson's reluctance to hand over the rights to the
Sesame Street
characters. Cooney said that Henson regarded
Sesame Street
as “a holy place” to be kept separate from Disney. “He told me not to worry about them trying to exert pressure on us,” she said. “He said, ‘Joan, that would never happen.' A few days later, he called back and said, ‘Joan, I was wrong.'” Cooney said Henson had made it clear that the issue was a deal breaker. “Jim said, ‘It is not discussable.' [But] it went on and on,” Cooney said.

Henson prevailed on that point, but when he died suddenly in May 1990, the deal had not been signed. As it turned out, Henson's five children
stood to incur huge tax losses on the estate. Henson had also promised substantial payments to some of his top employees. The children stood to make much less than anticipated from the sale. Meanwhile, Disney discovered that Henson had already licensed the Muppet characters to some stores outside the United States. The deal would not give Disney the exclusivity it wanted.

By December 1990, negotiations to rework the deal with the Henson children had collapsed. The rift would end up in court.

 

WHILE DISNEY WAS
fighting with outsiders, friction was growing within the studio as well. It didn't take long for the natural competition to take a nasty turn between Ricardo Mestres, the meticulous executive who had been with Jeffrey Katzenberg since the Paramount days, and David Hoberman, the newcomer agent. At meetings, former studio executive Marty Kaplan recalls a “barely concealed mutual contempt.” Hoberman was more demonstrative and emotional than the carefully controlled Mestres, and nervously avoided flying and even elevators.

Despite Mestres's long history with Katzenberg, other film executives at Disney saw that Hoberman, who as an agent had been out in the world more and had developed his own network of relationships, was gaining favor with Katzenberg while Mestres fell behind. “David was more charming and smooth and adept at navigating the Hollywood waters,” says a Disney executive. “He was a popular, handsome guy. He was a player.”

Many of those who worked for Mestres thought he was a good boss. But he was widely judged to be too corporate and cerebral for the movie business, which retained more than a trace of lunacy despite ongoing efforts to impose more regular discipline. “He was into memos and positioning paper clips and having his pencils sharpened,” says a former colleague. “He was a very decent guy. I just don't think he was someone who should have been deciding what movies should be made.” Ultimately, however, neither Hoberman nor Mestres was responsible for picking movies. Those decisions rested with Katzenberg and Eisner.

For a time Katzenberg dealt with the Hoberman-Mestres rivalry “the way Bluhdorn and Barry Diller used to handle [internal conflict]—enjoying the creative tension,” says Kaplan. But eventually Katzenberg elevated Hoberman to president of Touchstone and Walt Disney Pictures (the family label). After the announcement, Mestres barely emerged from his office for
a week. He tried to get out of his contract. Finally he had to go back to work. “It was ugly because David didn't want Ricardo there,” says a former staffer. “He publicly embarrassed him and countermanded him in meetings. Before, they used to sit in the middle of the conference room, next to each other. But now they sat at opposite ends of the table.”

At the same time Mestres was lobbying Katzenberg and Eisner, and after some months, they came up with a solution. They dusted off the name they had registered a few years earlier when they were about to leave Paramount: Hollywood Pictures. In late 1988, Disney announced the creation of a new division that would be run by Mestres. He reported to Katzenberg.

The competition between Hoberman and Mestres continued unabated. One executive remembers that the two even started a sartorial war. The uniform for a Disney executive was a dark suit with a shirt. Only Katzenberg wore striped ties (and handmade shirts with extra-long cuffs). But when Mestres was given Hollywood Pictures, says a colleague, he started dressing more professionally. He asked producer Bob Cort, who had made
Three Men and a Baby,
to help him suit up at Versace. Mestres began to appear at work in full corporate regalia. Hoberman promptly began to wear suits and ties himself. “It was like, he who dresses best wins the prize,” says Adam Leipzig, a bemused studio executive at the time.

Some Disney film executives thought from the start that adding another label made no sense. The creation of Hollywood Pictures did little more than increase overhead. Eisner would later insist that he went along so that Katzenberg could accommodate his two lieutenants. But the advent of the new division roughly coincided with Eisner's decision that Disney would start to crank up production to dominate market share. It was a move that he would later try to disavow, but at the time it was part of his strategy. While other entertainment companies were expanding, first by snapping up theaters and then buying a broadcasting outlet or cable systems, Eisner had for years maintained that he wanted to “stick to his knitting.” Disney's rivals had concluded that they needed a pipeline to the public to ensure that their wares would win some shelf space in an increasingly crowded and competitive market. Katzenberg and Rich Frank argued strenuously that Disney should buy Capital Cities/ABC or NBC. But while Eisner window-shopped, Disney didn't act.

Eisner concluded that Disney would simply make so much entertainment that all the networks and cable operators would have to reckon with it. Thus Disney started on a slippery slope of trying to make a lot of movies
cheaply, just at a time when its old methods were starting to fail. The bland formula that defined Disney “product”—usually high-concept comedies that were designed for mass appeal, that weren't too edgy, that made do with stars from television like Tom Selleck or recycled film talent like Bette Midler—no longer had mass appeal. Few executives or producers can tap into audience tastes for more than a fleeting moment, which explains why the industry puts up with so much excess from those who know what the public wants to see.

The Hollywood Pictures logo was, inexplicably, a sphinx. (Insiders joked that the sphinx bore a resemblance to Mestres.) Executives who worked for the new label found that Hollywood Pictures would mostly stick to making comedies for a price. “They kept saying, ‘We'll make more interesting movies later, once we have success with our cookie cutters,'” says Michael Peyser, then an executive at the studio. Peyser soon learned that he would have a long wait.

 

ONE OF THE
last successful films made according to the old Disney formula was
Pretty Woman,
a bright romantic comedy that sprang from a dark script about a prostitute hired for a week by a ruthless businessman.

There is some dispute over whether it was Disney science or just dumb luck that made
Pretty Woman
such a huge hit in March 1990. Screenwriter Jonathan Lawton contended that Disney executives “didn't have a clue what they were doing” and merely stumbled into the fortuitous chemistry between Julia Roberts and Richard Gere. “They're so desperate to try to justify this concept of managing ideas, and it has no basis in reality,” he said.

But certainly, a theory informed Disney's decision making. “It was at the peak of studio executives believing that their imperative was correct,” concurs an executive who worked at Disney during this period. “If they could fix a movie in postproduction, like
Cocktail,
or fix a movie that had sort of ignoble beginnings, like
Down and Out in Beverly Hills,
it proved that they were the ones who achieved [the success].”