Friday, July 08, 2005

Summer Reading: “Eisner” Without the “D”


It’s summer—time for only the fabbest of the media big-wigs to zip into swanky Sun Valley on their G5s for Herb Allen’s annual Sun Valley media confab and mogulize together (can you tell I’ve been reading about it in the New York Post)?

Allen’s gathering is where the media elite gather to kibitz, huddle, and otherwise engage in serious discussion about mergers, acquisitions and deals, and it makes great fodder for the Post, my newspaper of record—insofar as the business section, sports pages, police blotter and Page Six are concerned.

Anyway, Allen’s retreat happens to be where, precisely 10 years ago, Disney’s Michael Eisner initiated the idea of buying Capital Cities/ABC with Capital Cities/ABC chief Tom Murphy and longtime Capital Cities investor Warren Buffett.

Buffett, who knew a hooked fish when he saw one, reeled Eisner in like one of those guys on the Saturday morning bass fishing shows…but you can read the details for yourself, and more, in James Stewart’s excellent book, “Disney War,” which came out earlier this year.

If you haven’t read it cover to cover, I suggest you take your copy to the beach this summer.

A reader can open this well-researched, 572-page look at the final days of Michael Eisner’s Machiavellian reign of terror over the media franchise Walt Built, to almost any page and find a hair-raising example of deceit and duplicity by Eisner that would make any politician proud.

To prove the point, I’ll do exactly that, right here, and open the book to random pages:

Page 244: Eisner upset after Ovitz wishes Sid Bass a happy New Year.

Eisner was upset that Ovitz [Michael Ovitz, the man Eisner had hired to run Disney] had wished Sid Bass [the major Disney investor who brought in Eisner to lead the turnaround] a happy New Year. “I really must know what you’re up to. It’s not enough that you have your secretary call to say that you wished Sid Bass a happy New Year. Hearing from a secretary…puts me in a dark position.”

Page 325 Eisner warns attorney, from the stand, not to pry.


Fields [an attorney questioning Eisner] continued: “Did you tell Mr. Schwartz [author of Eisner autobiography] that you hated Mr. Katzenberg?...You said ‘I think I hate the little midget’?”

Eisner looked uncomfortable. “I think you’re getting into an area…that is ill-advised,” he warned.


Page 453 Eisner presses latest board victim for comp tables.

The price for a table [at the opening premier of the Wall Disney Music Center Concert Hall] was high—$25,000 to more than $100,000 for tickets that included all three gala events. Despite his recent disparagement of her performance on the [Disney] board [Eisner was engineering the ouster of Andrea Van de Kamp, chairwoman of the Disney Music Center, for disloyalty to Eisner], Eisner called Van de Kamp to complain that he didn’t see why he had to pay for a table when he had been responsible for a $25 million gift [from the company].


Page 121 Eisner delights in Katzenberg mortification.

Then Eisner took the stage to announce that “I decided today to build a new animation studio on the lot.”…Wild cheering broke out among the animators. They were jubilant. Just a few years ago they’d feared for their jobs. Now they would be returning in triumph from their exile in Glendale….


Katzenberg [Jeffrey Katzenberg, who revived Disney’s animation studios and was therefore largely responsible for Disney’s revival under Eisner] looked stunned and angry. It was obvious to all that Eisner had told him nothing of any plans for a new building….The mood was euphoric at the party afterward at the Sheraton hotel.
.

The Eisners and the Disneys had not stayed for the screening but left early to have dinner together…leaving Kateznberg behind. During the meal, Eisner gloated over how he’d upstaged Katzenberg with the announcement…


Here’s the CEO of a multi-billion dollar company monitoring his number two guy’s holiday greetings; warning a lawyer in court to back off; trying to get comp tickets from a lady he is, through the most underhanded tactics, squeezing off his board of directors; and undercutting the man who had done the most of anyone to revive the Disney film franchise.

And those were only four pages out of 572! Makes you think, if Eisner had been Catholic back in the 1500’s, he could have been Pope, what with all the poisoning and usurpation and intrigue.

Of course, Eisner’s power derived not merely from manipulating individuals: it derived from the tremendous value he had help create for Disney shareholders in the first decade of his tenure, taking a stodgy, Hollywood has-been and making it a major media company.

But the key to his ability to retain that power was knowledge. Eisner insisted at all times of knowing who was saying what to board members and key executives—even, and perhaps especially, the petty stuff. And by understanding the flow of information, he could control it.

And that is how things really work in companies like Disney. It has almost nothing to do with formal structure; it has everything to do with personality, and ego, and drive—and knowledge.

Some points in the book, which came out earlier this year, have been widely covered, particularly the Michael Ovitz disaster—thanks to the lawsuit that put inflammatory remarks like “the little midget” in the newspapers.

But the best stuff here is about the internal workings within Disney, and how Eisner kept his position by manipulating the board. By the end of his reign, Eisner had created such a dysfunctional world that it resembled pretty much any family on HBO.

When Disney hired a management consultant to interview top executives in-depth about how the senior management worked together, “some were less than candid, because they didn’t trust the consultant, who they suspected would be reporting everything to Eisner. Others revealed as little as possible…and some were honest: no one trusted anyone else, least of all Eisner…”

The consultant summed up the results by telling Eisner, “you guys are not a good team. You’re not a team at all. You’re not even a group.”

Eisner’s response: “How can you say that? You haven’t been to my Monday lunches.”

But perhaps the scariest insight into Eisner—scary given that he still runs Disney—comes from Eisner’s attempt to find some sort of family legacy linking Eisner’s own name to the Disney name:

After some more conversation, and just before we leave for dinner, Eisner gets a pen and a piece of paper. “Disney is a French name, not Irish,” he reminds me. “Now look at this.” He writes “D’Isner,” “Deez-nay” as the French would pronounce it, “is Eisner without the D.”

As Stewart writes in a footnote to that story:

For the record, Roy Disney notes that the ancestral family name is “d’Isigny,” after the French village, which is not an anagram of Eisner.

For summer reading, I'd have to say that "Disney Wars" is almost as scary as "Jaws" but more entertaining.


Jeff Matthews
I Am Not Making This Up



The content contained in this blog represents the opinions of Mr. Matthews. Mr. Matthews also acts as an advisor and clients advised by Mr. Matthews may hold either long or short positions in securities of various companies discussed in the blog based upon Mr. Matthews' recommendations.

7 comments:

MD said...

Eisner's story sounds eerily similar to other "power brokers" who abused their power: Robert Moses and Michael Milken come to mind.

All were innovative people who made great strides early in their career. Their success gave them cover as they cobbled together a power structure that made them almost invulnerable to attack. When people realized how much power they amassed, it was too late to do much about it.

DaleW said...

Great piece. I think the brains of Disney went down in the helicopter crash. Eisner is a smart guy, but not nearly as smart or as well polished as Frank Wells.

ikedim said...

On the positive side, if you want to invest in the guy who you referred to as having done the most to revive the Disney film franchise (AKA the midget), you do have that opportunity now, at a pretty beaten down price (Dreamworks).

Its_strange said...

I'm headed to the Jersey shore for the last week of August. Going to a few Southside Johnny shows and now i will be reading Disney Wars....Great idea Jeff , thanks...

Prudent Investor said...

One taboo subject in the capitalist world today is this: "Has the CEO position of the big corporation become dictatorial in this Era of Entitlement?" Just see how many CEOs abuse their power during and beyond their tenure. Not only do they bully their co-workers and subordinates in the office, they also get paid HUGELY for their failures. The Adam Smith we know today is in name only and not in practice.

Its_strange said...

We can have excerpts from Disney Wars and others read on our satellite radio business blog.........Hell we can get the publishers to fund the thing...

Its_strange said...

You know the more i think about excerpts from Disney Wars and the like read over Satellite radio the more i like it. ...How many really do have time to read the many good books published every year ?...How many are in thier cars for a hour or two every day ? ..........i think there is something here