The Keys to the Kingdom (42 page)

On the strategic level, Katzenberg had an enormous triumph. Having pretty much given up on his efforts to grow his own prestige product, he pulled off the 1993 acquisition of Miramax, the most rapacious and successful independent label in the business. Founded by brothers Harvey and Bob Weinstein, Miramax was behind sophisticated films, including
The Piano
with Holly Hunter, and
The Crying Game,
the brilliant film about an IRA terrorist who takes part in a botched kidnapping. (The profit margin on the latter film, which cost a couple of million and grossed about $63 million, helped convince Eisner to make the deal.)

The Weinsteins were among the industry's toughest and roughest customers. They fought with each other relentlessly and brutalized their staff. But they had great taste. Katzenberg got to know them when Disney agreed to help finance
Sarafina!
starring Whoopi Goldberg as a defiant schoolteacher in South Africa. Katzenberg loved the film and was impressed with the Weinsteins' passion for moviemaking. He was also struck by their skill in piecing together the financing for their films. They seemed to be “Scotch-taping”
Sarafina!
together, Katzenberg says, and he came to believe that with a real bankroll, the Weinsteins could be formidable.

The deal was barely signed when a script arrived on Katzenberg's desk for
Pulp Fiction.
The Weinsteins intended to make the film with Quentin Tarantino, the young director of
Reservoir Dogs
. Katzenberg had found that film so violent that he had literally covered his eyes when he saw it.
Pulp Fiction
promised to have plenty of violent content, too, not to mention stories involving drugs and sadomasochistic sex. This was a far cry from Disney fare, as the Weinsteins well knew. On top of that, they had set John Travolta, whose career was comatose at the time, to star. Katzenberg says that after Harvey Weinstein called to tell him about the project, “he must have hung up that phone and rolled over laughing for twenty minutes.” But if this was a test, Katzenberg intended to pass. A day later, he called back and said, “I wish you well. I want to remind you that [under your deal], no NC-17.”

The Weinsteins immediately justified Katzenberg's faith in them. Despite its quirky content,
Pulp Fiction
was a $100 million hit. They followed with the Italian charmer
Il Postino.
Miramax scored Oscar nominations for these films and in ensuing years became a daunting Academy Award contender.

The Miramax relationships hit rough patches on occasion. Notably, there were controversies over Miramax's decision to release such material
as
Kids
and
Priest,
two challenging adult films that had the potential to embarrass the Disney company. (There was another problem some years later when Miramax was caught exceeding the bounds of good taste in exaggerating the opening-weekend tallies from its pictures. Other studios overstated their numbers but Miramax finally went too far with
Scream 2,
overestimating the real number by $9 million. Eisner made it clear that such “errors” had to stop.)

Katzenberg's biggest coup, however, was keeping the mighty engine of animation purring. The studio, which had generated pretax profits of about $2 million in 1984, would make $800 million in 1994. Eisner had all but credited
Beauty and the Beast
with saving the company in 1991, and the grosses from animated films just kept growing. The animation division was gushing profits that boosted results throughout the company and Katzenberg certainly deserved credit for some of that success.

But if Katzenberg thought these achievements made him indispensable, he seriously underrated the tensions that had begun to emerge with Eisner after the Katzenberg memo. In fact, Katzenberg showed signs that he enjoyed tweaking the boss. It wasn't just his pleasure in Eisner's incredulity over his contract decision. Around this time, he also gleefully told his staff that Eisner was annoyed about Katzenberg's involvement in Dive!, a restaurant in the Century City shopping mall on the west side of Los Angeles. Katzenberg had created Dive! in partnership with Steven Spielberg and reveled in the new project.

In fact, Eisner later said it showed “bad judgment” on Katzenberg's part to get so deeply involved in an extracurricular activity. But there was another element in the equation: Disney's attempt at a fast-food chain, Mickey's Kitchen, had died quickly after two prototypes withered. Meanwhile, the partners behind Dive!—a near-theme-park experience with flashing lights, sonar screens, deep-sea videos—were boasting about plans for expansion. (Those plans never materialized although a branch was opened in Las Vegas. By 1999, Dive! in Los Angeles was out of business, though the Las Vegas location was still open.)

Later, Spielberg defended Katzenberg. “I know for a fact that from the inception of Dive!, Jeffrey was concerned about any issues Michael and Frank would have,” he said. “He made it clear that if they had any objections whatsoever, he would not have gone ahead. Not only did they approve Jeffrey's involvement, they told him they had gotten it cleared by the board of directors.”

But another former studio chairman, observing the interplay of the parties, said Katzenberg had violated a law of corporate survival. “With people you care about in business,” he said, “you've got to make sure that your self-interest is identical.”

 

AFTER THE AUGUST
blowup over whether Katzenberg was entitled to his 2 percent payout if he left in 1994, Katzenberg thought his gambit had paid off. The critical conversation, in Katzenberg's mind, happened on an October day when he and Eisner had strolled the streets of Aspen. Both were in town for a meeting sponsored by the Aspen Institute, a nonprofit educational organization. As Marilyn Katzenberg and Jane Eisner shopped for sweaters across the street, Eisner and Katzenberg stood outside Boogies, a diner, and discussed the delicate topic of Katzenberg's future.

Katzenberg wanted a new challenge. One idea that he and Rich Frank had been pushing was the purchase of a network. Eisner said he didn't like the prices. What was there for Katzenberg to do? Eisner floated another idea.

“I am prepared to make you vice-chairman and put you on the board, if that's what you want,” he told Katzenberg—according to Katzenberg's account. “I don't necessarily think that's what you want, but I'd be willing.”

“I want to be involved in the reinvention of the Walt Disney Company,” Katzenberg answered. And he made a bold suggestion. “Would it be inappropriate if I became president of the company?” he asked. In his scenario, Wells—who had just agreed to renew his contract with the company for another seven years—would become vice-chairman. Katzenberg insists that he did not mean to displace Wells. Nonetheless, Eisner said that such a change would be perceived as a demotion for Wells.

“I could never do that to Frank,” Eisner told Katzenberg.

Katzenberg says he quickly insisted that he meant Wells no harm. “I would never want you to do that to Frank,” he said.

“I believe Frank would accept it because he would do anything to keep you in the company,” Eisner continued. “But in the quiet of his room, he would feel hurt.”

“I would not want to take anything away from the guy,” Katzenberg remembers saying. But Eisner insisted later that Katzenberg was deliberately trying to elbow Wells out of the way—perhaps because Eisner had done exactly that to Wells himself when the pair had sorted out their roles at the
Disney company back in 1984. “I think he was hopeful that Frank would step aside once again,” Eisner said later. “But he backed off immediately. It was unreasonable and he realized it very quickly.”

At that point in the conversation, in Katzenberg's account, Eisner said the words that Katzenberg took so much to heart: “If for any reason Frank is not here—if he decides to run for political office, if he goes off to climb the summit—you are the number-two person and I would want you to have the job.”

At the time, of course, it seemed highly unlikely that Wells would not be around. So Katzenberg walked away gratified by the sentiment but not truly satisfied. He did not become vice-chairman or join the board. The Disney board was not particularly independent and he knew that becoming a member would require him to disclose financial information he preferred to keep private. But refusing the opportunity to carve out his own profile with the board was a decision he would later regret.

Eisner put him in charge of launching the company's New Amsterdam Theatre in New York and the stage production of
Beauty and the Beast
. He also offered him responsibility for Disney's failing record label and new interactive media. Katzenberg enjoyed working on the Broadway show and new video games, but none of this appeased him. Eisner would have to come up with a better offer if Katzenberg was to remain with Disney beyond 1994.

 

AT THE SAME
time that Katzenberg was threatening to opt out of his contract, Eisner was getting more and more bad news about Euro Disney—information that undoubtedly left him feeling deeply threatened. And several other projects failed to gel.

The nineties were meant to be “the Disney decade,” and Eisner had ambitious plans to build more projects than had ever been constructed in the company's history—billions of dollars' worth of work. There was an oceanside park at Long Beach, near Disneyland; the addition of ambitious second gates in Europe and Tokyo; and the creation of an attraction in Burbank. With so much to do, the Imagineering staff had been dramatically expanded to some three thousand people.

But all these projects were dropped or put on hold. “They completely misjudged the timing, the level of investment, the requirements on all levels,” says former Imagineering executive Dave Fink. “They were driving
deals way too hard. Every one of those projects involved a relationship with a community or a partner. Disney could not do a deal. They went in too hard, too heavy. Either that or there were environmental problems.” Meanwhile, he says, “Every one of the projects had a fairly high level of design completed—and the costs associated with that.” Around Imagineering, he adds, the failed “Disney decade” became known as “the Disney minute” or, sometimes, “the Disney second.”

Of all the projects that ran into trouble, one was a particularly painful public embarrassment. The plan got into trouble after Eisner made a political miscalculation that showed he had learned little from the company's experience at Euro Disney. Ironically, the problems at Euro Disney had been a major catalyst for Disney's plans to build a history-themed attraction called Disney's America. In the wake of its difficulties abroad, the company decided to develop some smaller and more manageable theme parks. In 1993, having homed in on the Washington, D.C., area, Disney bought an option on 2,400 acres in suburban Prince William County. The company wanted to buy several hundred more acres and was intent on keeping its plans for the attraction secret to prevent a surge in prices.

But by October 1993, word of Disney's interest in the area began to leak out. Eisner later acknowledged that Disney made several key errors, among them the failure to lay the groundwork for the project with local leaders and members of the community. He also lamented the decision to give the project the presumptuous-sounding title Disney's America. That almost ensured that Disney's take on history would be contested by some group, no matter what it was. And Eisner said Disney failed to understand that local residents wanted to keep their community as it was. This was an especially serious problem, because the land to the west of the project was owned by the rich and powerful—including
Washington Post
publisher Katharine Graham.

With rumors about the project beginning to circulate, the company felt compelled to announce its plans. Disney's America was to include an Indian village, an ersatz nineteenth-century development, and a World War II fighter aircraft. The $625 million plan eventually burgeoned to include Disney-built hotels, shopping, and houses. The Imagineers believed that these additions were a mistake and that Eisner's overly ambitious approach to Disney's America sparked hostility from wealthy locals who feared over-development. Other protesters were concerned about the impact on the environment. (A
Washington Post
headline observed that some feared
A
smoggy, cloggy transportation mess
.) And Disney had failed to consider how strongly Civil War historians felt about preserving the sanctity of a nearby battleground at Manassas.

From a public relations standpoint, Disney's America was a disaster. Overall, Eisner's dealings with the media had suffered since late in 1992, when he had lost Erwin Okun, his chief of corporate communications and a capable survivor from the old Disney regime. Okun had a shrewd yet avuncular style that worked well with the press; many reporters had made the unusual gesture of dropping by his office when on the Disney lot merely to say hello. He died at age fifty-eight in November, two months after being diagnosed with cancer.

Okun had always made sure that Eisner was up to speed on any journalist who was about to interview him, probing reporters about their interests so that Eisner was prepared with some engaging banter. After each meeting, Eisner sent a note (or in one case, dropped it by a reporter's home himself), offering some charming and humorous comment on the interview that had taken place. When Katie Harris, then a business-affairs reporter for the
Los Angeles Times,
had a baby, Okun dispatched Mickey Mouse to the hospital. “He somehow pushed that button in all of us that said Disney is an honest, good company that meant well,” says journalist Peter Boyer. “He packaged [Eisner] well without seeming to do so.”

Eisner said he relied on Okun “to counsel, review, berate, encourage, and protect me.” After Okun's death, the press felt his absence keenly. His successor, John Dreyer, came from the theme parks. He lacked Okun's cordiality and treated the press with suspicion bordering on hostility. At the
Washington Post,
he quickly alienated the very reporters whose coverage of Disney's America would prove most influential.