In The News

A new book gives Eisner new PR woes

Commentary: 'DisneyWar' clouds Disney's image, too

By Jon Friedman 
Jan 5,2005

NEW YORK  -- For Michael Eisner, the chief executive officer of Walt Disney Co., 2004 was a year to forget in many ways.
 
Just the same, 2005 promises to be every bit as controversial, if not more problematic, for this embattled billionaire. The reason is the looming spectacle of Pulitzer Prize-winning journalist James B. Stewart's explosive new book about Eisner and Disney. Carrying the provocative title of "DisneyWar," it's scheduled to hit bookstores in early March.

Eisner has been one of the most talked-about corporate titans of his generation. Fresh from management successes at ABC and Paramount, he took the reins of Disney in 1984. Eisner promptly won raves for breathing life into what had deteriorated into a "Mickey Mouse" franchise. But his reputation has dimmed over the years and he has been criticized for his gargantuan pay packages.

Nearly a decade ago, the key element to Eisner's compensation arrangement "was a grant of stock options worth an estimated $770.9 million," Stewart reported. "The financial newsletter Executive Compensation Reports cited it as the richest option grant ever given a chief executive."

Skeptics say Eisner has weakened Disney by forcing out such well- regarded executives as film studio mastermind Jeffrey Katzenberg and the former agent-extraordinaire Michael Ovitz, as if he feared that they would vie with him for the top job.

Eisner was also heavily criticized for failing to solidify a long-term partnership with Pixar ( PIXR :news ,chart ,profile ), the company which has teamed with Disney to create such animation blockbusters as the "Toy Story" series and "The Incredibles."

Hoping to calm Disney's shareholders, Eisner last year relinquished the title of chairman while retaining his post as the CEO.

Hot topic

Stewart's pedigree will also enable "DisneyWar" to become a hot topic in Hollywood -- and, potentially, on Wall Street. Stewart, a master storyteller, wrote the best-seller "Den of Thieves" as well as other notable books.

The New Yorker this week showcased a 12-page excerpt of "DisneyWar," giving Stewart one of the most coveted and high-profile placements in the publishing business. The riveting piece focuses on Eisner's tragicomic efforts to a) recruit his long-time friend Ovitz and b) then shove Ovitz out the door -- all in a little more than a year.

True, many details of the Eisner-Ovitz battles were revealed during a trial in Delaware late last year. The legal proceedings centered on questions about Ovitz's $140 million exit package from Disney. At the same time, it's fascinating to see so many tidbits in one article, underscoring the impression that this partnership was doomed from the start.

Eerily, for instance, Eisner and Ovitz, otherwise brilliant businessmen and shrewd tacticians, separately said the same thing in private just after Ovitz agreed to join Disney: "I just made the biggest mistake of my career."

Further, according to the excerpt, Eisner was planning to give a 50th birthday for Ovitz -- even as he was trying to banish him.

Eisner's desire to force Ovitz out apparently knew no bounds, according to Stewart. While Ovitz was still a Disney executive, Eisner tried to persuade him to pursue a position at rival Sony (SNE). Small wonder the New Yorker's front-page headline described Stewart's story as "Mickey v. Goofy."

Big effect

The publicity enveloping the book could affect Disney in profound ways. Eisner has already announced his intent to retire when his contract expires next year.

But if Stewart's book causes a furor, Eisner may decide to move up his retirement date as a way to ease the burden on his company. ("DisneyWar" will be published by Simon & Schuster, a division of Viacom, which is in turn a significant investor in MarketWatch, the publisher of this report.)

"Books and articles like this will create pressure for Eisner to leave sooner, as opposed to later," said Ken Marlin, the head of Marlin &  Associates , a New York investment banking boutique.

Still, Eisner is not without his weapons as well. He can take great satisfaction in knowing that Disney's shares rose 19 percent in 2004, versus a 9 percent gain in the Standard & Poor's 500 and a 3.2-percent increase in the Dow Jones Industrial Average.

Even so, Eisner's dream of strolling gracefully into the sunset seems unlikely to materialize. Now, at the very least, "DisneyWar" forces him - and his battalion of spin doctors -- to discuss subjects he had hoped to forget.

"The slam on Eisner surrounds the allegation that Eisner is not a strong leader and a strong manager," Marlin said. "Since (former Disney chief operating officer) Frank Wells died, Eisner has been unable to bring in a strong potential successor."

This week, I left three phone messages for Disney public relations representatives, seeking comment on Stewart's book. But I didn't receive a call back.

"The real issue," Marlin said, "is whether the company has strong leadership -- and whether these kinds of stories are diversions."