Michael Eisner turned a moribund dream factory from failure to success

January 12, 1992|By Neil Lipschutz

PRINCE OF THE MAGIC KINGDOM: MICHAEL EISNER AND THE RE-MAKING OF DISNEY.

Joe Flower.

John Wiley & Sons.

272 pages. $22.95.

Disney. Say the name to anyone in America and you'll probably get a smile. And a memory: Mickey Mouse, Davy Crockett, maybe only the cartoon characters on "Duck Tales" if it's a very young child. Say "Disney" to a Wall Street investor or a Hollywood mogul and you'll get a different reaction: Astounding growth during the 1980s. Global reach. Tough competitors.

What do intricate financing of movies and powerful home-video distribution systems have to do with "The Little Mermaid" and the panoply of other lovable Disney characters? Plenty, as Joe Flower shows in this competently written company profile. The book takes this factory of popular culture from its inception as an idea in the head of Walt Disney, through an almost disastrous lull after his death when it became a takeover target in the leverage-crazed mid-1980s, to its rebirth under Michael Eisner and his management team as a global entertainment monolith. The Eisner era, ongoing, is the focus.

U.S. companies are supposed to make money, and Disney has done that with a vengeance under the Eisner team, in six years tripling the company's assets, tripling its return on equity, more than tripling revenues and increasing profits by 8 1/2 times. But because it's Disney, which influenced and delighted us as children and is doing the same to our children and probably will do the same to theirs, some people think money-making isn't the only goal. Mr. Flower writes:

"That dilemma goes to the heart of the schism in Disney -- and the reason why, touring the [theme] parks, one can repeatedly hear people complain that Disney has 'gone commercial' -- as if this American corporation, at least, is expected to be something other than 'commercial.' " The difference between Disney and other big companies, he says, is that Disney "sells myth and fantasy."

Yet in the American way of doing things, public companies often don't sit still. They must constantly grow, increase profits, change, or they may cease to exist. For a time after Walt Disney's death in 1966 -- Mr. Flower describes him as such a powerful force that his void seemed impossible to fill -- the company struggled for leadership and underused its assets. A couple of corporate raiders made runs. After several machinations that included some of the big-rollers in American capitalism, a team led by Mr. Eisner was installed at the top. He had movie and television experience but had not headed a company.

In a quick aside that argues against the universal good of leveraged takeovers, Irwin Jacobs, who for a time had a chance of controlling Disney, is quoted as saying: "I doubt in all honestly it would have been the company it is today had I been there. Because of the leverage I would have needed to buy it, I don't think I could have given Eisner and [Frank] Wells [president and chief operating officer] the flexibility and the resources that they needed to do the things they ultimately did. Clearly it was better off without me."

The book's major limitations are indirectly spelled out in the introduction. Mr. Eisner wouldn't grant an interview with the author; upon hearing this refusal, few of those who worked for him would talk. So, to some degree, there's a problem with

access to material from the key players in this turnaround story. Mr. Flower also mentions that another writer didn't want to write now about Mr. Eisner, saying, "He's too young. He's not finished."

That essential point lingers with the reader. "Team Disney" has experienced huge success under Mr. Eisner: exploiting the already established name and products to build a wildly successful movie operation, reinvigorate the animated movies, create television cartoons, move toward a Euro Disneyland while updating and raising prices at the domestic theme parks. But the Disney story is far from over. The U.S. economy remains moribund, holding down consumer spending on entertainment as well as everything else. Competition is up and there have been notable movie disappointments. If things get worse, Mr. Flower writes, Disney wouldn't be in a unique position: "Nobody in any company has yet experienced a serious global recession in an international economy so intimately involved as this one."

Despite its short-term setbacks, Mr. Flower has described Disney under its current leaders as a flexible company of uncommon strategic acumen. In a business where decisions on movies still largely come down to a gut instinct on what will appeal to a broad cross-section of Americans (and the world), Mr. Eisner has a long track record of knowing where to aim.

So in the long term, Mr. Flower is optimistic. "While Disney may suffer setbacks in particular areas, and may even abandon some businesses, it is likely that, all things considered, the company will continue to grow faster and more safely through the next decade than the average American company." Mickey Mouse continues to roar.

Mr. Lipschutz is a writer living in New York.

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