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Kenversations(tm)
Page 6 of 6

Animation - The Final Straw?
Perhaps this was the straw that broke the camel's back.

If Imagineering is the most unique part of the corporation, Feature Animation is the heart of the corporation. It is really where the corporation came from in the first place. Characters, music, setting, and gags from animated films can be used for televisions shows, videos, CDs, books, toys, clothing, games, plush dolls, artwork, collectibles, general merchandise, websites, stage plays, theme park rides/shows/parades/stores/restaurants, etc. The work of Feature Animation is much of what we think about when we hear the term "Disney".

Other serious animation studios created competition for talented animation staff, and their salaries increased. The cost of producing animated features increased with the salaries and the technical advancements as competing companies tried to outdo each other. Feature Animation even had a nice new building at the Studio.

Unfortunately, the films were not earning enough at the box office respective to their costs for the demands of some analysts. The profits weren't growing consistently at that all-important twenty-percent rate. Nothing was matching "The Lion King". On the other hand, Pixar churned out hit after hit, earning more and more at the box office. The Feature Animation outpost in France was shut down. It appears the outpost in Florida is gone now, too. At the home office in Burbank, the size an influence of the operation was being diminished, and so was Roy's influence in the corporation.

It seems logical to me that this, on top of everything else, was just too much for Roy Edward Disney to take. He could not quietly retire. He felt he had to take a stand, and that's exactly what he has done.

"For whatever reason, you have driven a wedge between me and those I work with even to the extent of requiring some of my associates to report my conversations and activities back to you. I find this intolerable.

Finally, you discussed with the Nominating Committee of the Board of Directors its decision to leave my name off the slate of directors to be elected in the coming year, effectively muzzling my voice on the board -- much as you did with Andrea Van de Kamp last year.

Michael, I believe your conduct has resulted from my clear and unambiguous statements to you and to the Board of Directors that after19 years at the helm you are no longer the best person to run the Walt Disney Company..."

What Now?

"The perception by all of our stakeholders -- consumers, investors, employees, distributors and suppliers -- that the company is rapacious, soul-less, and always looking for the 'quick buck' rather than long-term value which is leading to a loss of public trust..."

So what can Roy do?

The Walt Disney Company is a publicly traded company. Owners of shares have a vote- proportional to their ownership and subject to certain rules, regulations, and laws. Individuals can buy shares, but a significant number of outstanding shares are owned by "institutional investors". What does that mean? If you have an IRA, you may have money deducted from your salary- money you never see. It gets put into a mutual fund that is part of your IRA. The people running the mutual fund decide where to invest to get results for the fund. People are often so removed from their investments that they have no idea if they are investing in sweatshops, obscenity, weapons makers, tobacco companies, oil companies, toxic substance manufacturers, etc. They may not care, as long as they see a return on their investment.

Someone investing in Disney for the short term may WANT Disney to sell off Walt Disney World Resort, for instance, to make a hefty profit, even though it would mean less profit in the long term.

If Roy is going to make more of an impact, he's going to have to convince enough investors -whether institutional or individuals- that The Walt Disney Company would be a better investment without Michael Eisner than with Eisner, so much so that it would be worth the trouble of getting rid of him.

What can Eisner do?

"Your consistent refusal to establish a clear succession plan..."

Just like in the Star Trek universe, where it hasn't always been easy to take over for James Tertullian Kirk, it isn't easy to lead the corporation once helmed by Walt and Roy Disney, especially since it is now a much bigger ship.

Investors of all types seem most concerned with the lack of a clear, designated successor should something happen to Eisner, or just to have in preparation for his retirement. So, he should groom one publicly, one with the right traits.

If Roy and those who agree with him are right, there are also some other things Eisner should do aside from stepping down. One would be to make sure he puts visionary leaders in charge of the various parts of the company, such as the theme parks, the studio, consumer products, the networks, etc. - and then let them do their thing. The Walt Disney Company is too big to micromanage now. Set the tone, keep the parts working together as a harmonious whole, be the face of the company, court politicians, investors, partners, and talent, and be the company's cheerleader. Let others do the hands-on work.

Another thing would be to make serious investments towards long-term growth, not necessarily fast growth. What is the corporate-wide strategy?

Making more "animated sequels"? That's kind of hard to do if you aren't making originals anymore.

Building more Magic Kingdoms and building carbon-copy attractions? They aren't supposed to be like a McDonald's or a Starbucks. One of the reasons they work is their uniqueness, their extensive, careful composition.

How will Disney stay different from all of the others? Feature Animation and Walt Disney Imagineering could play an important role in that regard, if they are built up and given more to do.

Some analysts point to some good performance this year for the company. Out of three recent films based on theme park attractions, one was a big hit. What now? Well, yes, there is going to be a sequel to "Pirates", but there aren't a lot of other attractions that can be turned into decent feature films. There ARE, however, numerous animated features -from Feature Animation AND from Pixar- that have not been used to their potential as the basis of theme park attractions, as I've noted in previous editions of this column.

Another big hit for Disney this year was "Finding Nemo". Great. What happens if Pixar doesn't enter in to a new contract with the Company? What's in the pipeline? Feature Animation is mostly idle. Where is Disney going to get the content in the future for home video, games, toys, plush dolls, Broadway plays, and theme park attractions?

Eisner needs to make sure that the Company will continue to generate and own unique, quality content that many parts of the corporation can adapt for products and services while strengthening the brand name, as the brand name is one factor in the enduring survival and success of the corporation. Disney IS a business, but it is a business unlike any other.

Is Roy Disney Sailing Into the Sunset or Staging a Coup?

"In conclusion, Michael, it is my sincere belief that it is you who should be leaving and not me. Accordingly, I once again call for your resignation or retirement. The Walt Disney Company deserves fresh, energetic leadership at this challenging time in its history just as it did in 1984 when I headed a restructuring which resulted in your recruitment to the Company..."

Almost twenty years after Roy Disney and Stanley Gold brought Michael Eisner to the Company, they are now trying to get him to leave. Will we be reading a new set of books in five years about their second successful coup? It's too early to tell.

Even if you agree with everything Roy and Stanley have said, it isn't like the Company is devoid of the content, talent, and other resources to excel again beyond the pack as both an investment and a magic factory. There are so many business possibilities that still haven't been brought to fruition. With the right investors and right leadership The Walt Disney Company can have an extremely bright future ahead of it.

Discuss It

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-- Ken Pellman

Ken Pellman is Disney shareholder who has been a student filmmaker, a Disneyland annual passholder and cast member, a Disneyana collector, and animation fan. He has a BA in Thematic Environmental Design and is a trained in crisis communications. Learn more about Ken at http://www.Pellman.net and reach him directly at Kenversations[at]flash[dot]net.

Kenversations is most often posted on the fourth Wednesday or Thursday of each month.

The views, opinions and comments of Ken Pellman, and all of our columnists, are not necessarily those of LaughingPlace.com or any of its employees or advertisers. All speculation and rumors about the future of the Walt Disney Company are just that - speculation and rumors - and should be treated as such.

--Posted December 11, 2003
2003 Ken Pellman, all rights reserved. Licensed to LaughingPlace.com.

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