NAMUN 2021

Disney: Disenchanted Kingdom

Background Guide

Welcome Letter

Dear delegates,

Welcome to Disney: The Disenchanted Kingdom; An interactive look into the ruthless business practices that forged a family-friendly empire. I am so excited to be your chair for this committee! Before I introduce myself and this committee, however, I’d like to just take a moment to thank the people that worked with me to prepare this committee. First, I’d like to thank the Crisis Manager for this committee, Sara; you will all be reading the mechanics guide and the character guides that she has prepared, and I know that she is incredibly eager to make this as engaging and interactive a committee as possible. I’d also like to thank my moderator, Natalie, as well as the crisis analysts involved with this committee; their hard work is such an important part of what makes this committee work.

To me, this committee is so appealing because it exists at the intersection of two completely different worlds, combining the craftsmanship of the artistic process with the pragmatism of a huge company. Disney straddles both, and as you will learn in this background guide, has done so to varying degrees of success through its history. The most financially successful periods of Disney’s history have not always coincided with its most critically acclaimed; different people have different opinions on which should be prioritized, and giving you the option to select your path was our main priority in designing this committee. As for this particular period, we selected it for a couple of reasons. For one, you’ll find that it epitomizes the conflict between the creative and corporate cultures of Disney quite nicely. What’s more, it will soon become apparent that this was one of the most dramatic periods of the company’s history. I don’t want to spoil too much here, but suffice it to say that we have twists and turns coming your way. Any large company inevitably has its large personalities and larger personality conflicts, but Disney may prove to be especially exciting in this regard.

At this point, I think that it would be best to end this letter here and allow you to start

1 reading. I will just finish by reiterating that this committee contains both creative and corporate elements. Our CM has worked so hard to provide both of those experiences, and I hope that you all appreciate it as much as I have.

My name is Kaitlyn Min, the chair of the Disney committee, and you’re watching Disney

Channel!

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Introduction

Since its creation in 1920, Walt Disney Productions has consistently been the most prominent and acclaimed animation studio in the world. Its creative properties, from Mickey Mouse to Snow White to Cinderella, are some of the most famous in history, and the company’s animated features, in particular, have secured a niche in popular culture. However, the illustrious history of Walt Disney’s animated repertoire is intertwined with that of the company that he founded, itself a fascinating entity even beyond the wonderful works that they produce. In the earliest days of Walt Disney Productions, when it was still known as the

Walt Disney Cartoon Studio, there were only three employees, two of whom being Walt

Disney himself and his brother Roy. Each successful animated product brought a wave of expansion to the company, which steadily grew for decades before, during and after the

Second World War. In the 1950s, further success and expansion coincided with the breakup of the Hollywood studio system, allowing Disney to break into the upper echelon of filmmaking studios for the first time.

However, while the company reached its critical and commercial peak in the 50s and 60s, Walt Disney’s death in 1966 marked a dramatic change in the trajectory of the company. For almost two decades, the company fell into an accelerating downward spiral driven primarily by a lack of innovation and productivity in its creative departments, particularly the animation department that defined the company for so many years. Though the company was able to keep itself afloat on account of the success of its parks and merchandising, which were able to capitalize on the appeal of Disney’s classical properties, the creative departments had not been able to reach the same heights since the death of Walt Disney. The blaming and finger-pointing that ensued led to chaos in the company.

The committee will start in 1984, a particularly dramatic year in which Walt

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Disney Productions was following a clear downwards trend , prompting a fiery leadership dispute amid fear of a hostile takeover. Though the crisis was averted, the company still has a long way to go to return to stability, and even further to reach the heights that had once defined the company in Walt Disney’s life. This background guide tells the narrative of Walt Disney Productions to this present day, presenting the major issues that define the current situation faced by the company.

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Definitions

Net Income i​ s an indicator of the company’s profitability. It is calculated as the difference of revenue and costs.

Revenue ​refers to income generated from business operations. Net income is derived from revenue by subtracting costs.

Shareholders ​collectively own the company through their investments. Shareholders who own a greater percentage of issued shares have more influence over its affairs. Shareholders have the right to a portion of the profits made by the company, and the value of their shares increase with the value of the company.

The B​ oard of Directors ​ are the elected representatives of the shareholders. They set the strategic direction of the company, acting in the interests of the shareholders, and oversee the management of the company.

Management​ refers to the executives who run the daily operations of the corporation. At

Disney, m​ anagement ​ includes those in the creative departments as well as those in the parks and properties departments.

A ​merger​ refers to the combination of two separate entities into one new entity. A merger​ occurs when the Board of Directors and management of both companies approve a merger.

An ​acquisition ​ refers to the purchasing of one company by another corporate entity. The company that purchases the other absorbs the purchased entity which no longer exists as an independent legal entity. Board members must approve an acquisition for it to occur.

Meanwhile, a​ Hostile Takeover ​ occurs when the board of directors and management of the target company do not approve of the acquisition. They will advise the shareholders

5 not to accept the offer. A Hostile Takeover typically involves the acquiring party attempting to either buy enough shares to change the board’s vote, or persuading board members to approve the acquisition.

A ​subsidiary​ is a company that has been acquired by another who has decided to preserve its brand for the sake of brand reputation or customer base.

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Historical Background

The Walt Disney Productions began in Missouri in 1920 with Walt Disney creating small animated short films. The first film that he produced, ​Alice in Cartoonland,​ was a surprise success resulting in Walt relocating his studio to Hollywood with his brother Roy to continue producing films about Alice under the name of the Disney Brothers Cartoon Studio. At this time, there were only three employees of the Disney Brothers Cartoon

Studio: Walt, his brother Roy, and animator Ub Iwerks. In 1926, the name of the company was changed to Walt Disney Studios. In 1927, Walt created one of Disney’s most iconic characters: Mickey Mouse, originally called Mortimer Mouse.​1 ​ In his first film involving the use of sound, Walt released ​Steamboat Willie,​ a cartoon debuting

Mickey, which was also the first cartoon to feature a fully post-produced soundtrack. It soon became the most popular cartoon of its era leading to Disney Studios being cemented as a major player in the emerging cartoon industry. Following this, the company expanded and was renamed “Walt Disney Productions”. Continuing into the early 1930s, Walt continued to make cartoons with Mickey Mouse and an expanding list of characters including Goofy, Donald Duck, and Pluto.

Disney’s first feature-length movie and the first widely released feature-length cartoon ever, S​ now White and the Seven Dwarfs​, premiered in December 1937 after three years of production. It soon became the highest-grossing film of that time, revolutionizing the industry and showcasing animation as a genuine competitor to live-action feature-length films. It also established one of the first instances of a studio releasing a film’s soundtrack commercially, an innovation that would become increasingly popular across the film industries as the company continued to release popular musical films.​2 ​ This film began Disney’s so-called “Golden Age” of animation

1 Chris Pallant, Demystifying Disney: A History of Disney Feature Animation (Bloomsbury, 2013), 5. ​ ​ 2 Chris Pallant, Demystifying Disney: A History of Disney Feature Animation, 23. ​ ​

7 with films including ​Pinocchio (1940),​ ​Dumbo (1941),​ and ​Bambi (1942)​.

It is important to bear in mind that neither Walt Disney nor his company created the genre of feature-length animated films. Commercial animation was a form developed by a number of animators throughout the start of the 20th century, and in fact, another company, Fleischer Studios, had released two feature-length animated films of their own between the releases of S​ now White​ and ​Bambi.​ ​3​ While it is clear that

Disney played a historically significant role in the history of animation, perhaps most notably in its formal codification of animation principles that remain relevant today, perhaps the single most important legacy is in popular culture. Indisputably, Disney films firmly pushed animation into the cultural mainstream, even if they did so as the culmination of decades worth of innovation by numerous companies, and established Disney as a future powerhouse in not only the burgeoning animation industry but also the film industry as a whole.4​

While Disney’s cartoons had established the company as a viable business, financial considerations heavily shaped the company’s early history. The animation was expensive, and would only continue to become more expensive as innovations in sound and picture technology were integrated into the form. Walt Disney, driven to constantly innovate, incorporated many of these innovations by aggressively reinvesting profits, but doing so kept finances tight, forcing the company to persistently look for larger-scale successes. Its move into studio-length releases was primarily

3 Chris Pallant, Demystifying Disney: A History of Disney Feature Animation, 14. ​ ​ 4 Chris Pallant, Demystifying Disney: A History of Disney Feature Animation, 15. ​ ​

8 driven by that reality;​ Snow White’s u​ nprecedented revenue for an animated film was accompanied by unprecedented costs.​5 ​ Combining the film’s success with the massive merchandising revenue that it generated, however, gave Walt Disney Studios a clear, if narrow, path to success.

Disney’s rise to prominence corresponded more 6​ g​ enerally with Hollywood’s ‘Golden Age’ where the name-brand of individual actors and actresses reached new heights. During this time, studios began focusing on quality over quantity, so the average number of movies per year declined from 358 releases a year during the 1930’s to an average of 288 releases by the 1940’s. Walt Disney Studios was still a small independent animation studio at this time. The Golden Age was dominated by eight major studios who controlled 96% of the market and dominated at the box office. Those eight companies ordered from largest to smallest were: MGM, Paramount, 20th Century

Fox, Warner Bros., RKO, Universal, Columbia, and United Artists.​7

This era ended once America entered World War II with Disney shifting to aiding wartime efforts. During WW2, 94% percent of the Disney facilities, at which point included over 1200 staff members, were engaged in special government projects including the production of training and propaganda films for the US government. Another major setback involved many of Disney’s top animators resigning following a three-month strike in 1941 leaving them with only 694 employees and major divisions within the company. Walt particularly held a grudge for anyone who had participated in the strike and had most of them blacklisted by the US government’s House Committee on

Un-American Activities.

Following World War II into the 1950’s, Disney began to diversify its studio to expand to live-action and television. However, Disney still mainly focused on animation

5 Chris Pallant, Demystifying Disney: A History of Disney Feature Animation, 39. ​ ​ 6 “Mickey Mouse Appreciate America,” The National D-Day Memorial, National D-Day Memorial Foundation, 2017. 7 “Hollywood,” History Channel A&E Television Networks, 2018.

9 and produced many feature-length cartoons including Cinderella (1950), Alice in

Wonderland (1951), Peter Pan (1953), and The Lady and the Tramp (1955), all of which are considered classics to this day. During this time, Disney also began consolidating its production and distribution network with the founding of Buena Vista Productions, so they could handle the distribution of their own films rather than relying on other studios to distribute them. In 1953, Buena Vista Productions released 20,000 Leagues Under the

Sea, the third highest-grossing movie of that year. The 1950’s also saw an end to the old

Hollywood studio system following the Hollywood Antitrust Case of 1948, which broke up Paramount Pictures Inc and started allowing independent studios like Disney to break into the industry.​8

During the 1960’s, Disney started moving into the growing television industry. They were among the first to produce full-colour television programming. Considered a pioneer in the field of television programming, they produced successful shows such as

The Mickey Mouse Club, Zorro, and Walt Disney Presents.​9 ​ Low-budget films were almost entirely phased out, both at Disney and in the film industry generally, as the industry released an average of 160 feature films per year. In 1964, Disney released their first blockbuster live-action movie, Mary Poppins, by which point Disney controlled 9% of the film industry, a local peak.

During this period, Walt Disney also launched what initially was a side project but soon became a vital component of Disney’s operations. Disneyland opened on July 18, 1955, but their opening day was plagued by many problems which resulted in such extreme negative media coverage that Walt referred to it as ‘Black Sunday’. However, the park soon rebooted and began attracting visitors. By 1956, Disneyland had over 5 million visitors and by 1957, this number had doubled to 10 million. This was buoyed by the

8 “U.S. Supreme Court decides Paramount antitrust case,” History Channel. A&E Television Networks, 2020. 9 "The Walt Disney Company," FundingUniverse, 2004.

10 addition of America's first monorail system in 1959 and the 1964 New York World's Fair in which Disney had 4 attractions. Walt Disney’s death in 1966, while tragic, makes for a convenient turning point on a timeline to highlight a few of his company’s trends. As mentioned earlier, by 1966, Walt

Disney Studios was in one of its most successful periods to date, and the success of Disneyland boded well for the future of the company’s Parks and Entertainment department. However, the success of a few projects developed before Disney’s death notwithstanding, the future for the company was unclear. Between 1966 and 1971, the company was overseen by the so-called “Disney troika,” led by Walt’s older brother Roy

O. Disney alongside Donn Tatum and Card Walker. Roy’s death in 1971 coincided with the resolution of many of the projects that Walt had left.1​ 0 An executive meeting in 1972 kept Tatum and Walker at the helm of the company, also giving significant roles on its executive committee to Ron Miller, who was Walt

Disney’s son-in-law, and Roy E. Disney, the son of Roy O. During the 1970’s, however, the movie industry in general was in a period of decline with movie attendance numbers hitting an all-time low. Furthermore, Miller and Disney did not get along, seemingly buoyed by Disney’s lack of faith in Miller’s ambition to increase the standard of the company’s films. Following five desolate years in terms of cinematic output, Disney resigned from the executive committee, although he would remain on the Board of

Directors. In an ironic twist of fate, that year, 1977, also happened to mark the release of The Rescuers, ​arguably the company’s most profitable and acclaimed film since Walt

Disney’s death in 1966. It only partially, however, relieved fears widely held by the general public that Walt’s demise had marked the end of Walt Disney Studios’ reign as a creative powerhouse, fears that were exacerbated by the theatrical release that year of ​The Many

Adventures of Winnie-the-Pooh​, essentially a re-packaging of earlier works designed to

10 Chris Pallant, Demystifying Disney: A History of Disney Feature Animation, 71. ​ ​

11 generate additional revenue for the company.1​ 1

Those two, along with the release of ​Pete’s Dragon ​ that year, which combined live-action, cell animated and CGI elements, highlighted what appeared to be an identity crisis for the creative division of the company, no longer unified by Walt’s vision. The concerns were felt inside the Animation Studios as well as outside; the 1979 release of ​The Fox and the Hound ​ was viewed by many in the creative departments at Disney as the epitome of its post-1966 issues, with a forgettable narrative and a completely unoriginal animation style. That year, around a third of the Animation Studios left along with senior animator Don Bluth to form a new animation company. Among Bluth’s issues with

Disney was that the company was stifling the voices of its young animators and that the company had become accustomed to a lack of competition in the animation market and therefore no longer tried to present innovative content.​12

Even while the company’s new content 13​struggled in relative turns, Disneyland continued to perform well, and so soon, location scouting began for a second park, that would be called the Walt Disney World Resort, or Disney World.1​ 4​ With an initial investment of $17 million, Disney World began operation on October 1, 1971, with the Magic Kingdom park, at a total cost of $400 million. Though the end of the 1970s were actually a relatively

11 Chris Pallant, Demystifying Disney: A History of Disney Feature Animation, 71-73. ​ ​ 12 Chris Pallant, Demystifying Disney: A History of Disney Feature Animation, 74. ​ ​ 13 Thomas Smith, “40th Anniversary Commemorative Map of Magic Kingdom Park,” Disney Parks Blog, ​ ​ Disney, 2011. 14 Dave Smith and Steven Clark, Disney: The First 100 Years (New York: Hyperion, 1999), 110-111. ​ ​

12 profitable time for the company in spite of its internal turmoil, peaking at a net income of $135.1 million, much of this stability was buoyed by the success of its Parks and Entertainment departments, as well as its merchandising.1​ 5​ In the years to follow, the

EPCOT Center theme park opened on October 1, 1982, at a building cost of US$1.2 billion, with two areas, Future World and World Showcase. This began what would be an expanding chain of theme parks and hotels, with Tokyo Disney Land opening in 1983.

Also in 1983, the Disney Channel launched and quickly reached nearly two million subscribers, followed by the creation of the company’s adult-oriented Touchstone film brand. In spite of high start-up costs, these ventures were sound investments in the long run, presenting only a short-term deficit.1​ 6

The poor financial situation that Disney Productions finds itself at the committee start date, then, is primarily the product of massive deficiencies in the company’s film-making studios, in particular its animation studios. The film industry at the end of the 70s and beginning of the 80s was dominated by huge blockbusters, including J​ aws​, Star War​s, and E​ .T. ​Disney was mostly left out of this trend, with its attempt to create its own space blockbuster with 1979’s T​ he Black Hole​ emphatically unsuccessful. In the animation department, the situation is even worse; Disney has only released a single animated movie since T​ he Rescuers ​in 1977, that being the aforementioned T​ he Fox and the

Hound​ in 1981. The result was that by the early 80s, Disney’s share of box office revenues had fallen to a mere 4%, and in 1983, Disney’s stock had fallen by 18% over the course of the year.​17 ​ It is with this backdrop that present events should be considered.

15 Chris Pallant, Demystifying Disney: A History of Disney Feature Animation, 77-78. ​ ​ 16 Ibid. 17 Chris Pallant, Demystifying Disney: A History of Disney Feature Animation, 78-80. ​ ​

13

Issues

Walt Disney Studios and Animation

As has been discussed at length, the late 70s and early 80s have been desolate periods for Disney’s film production, particularly its animation. In spite of its illustrious history, Disney held a relatively small share of film industry revenue by the time Eisner took charge, at only 4% of box office revenue in 1983. Compared to, for instance, 20th Century Fox,

Warner Bros, or Universal Studios, Disney has not had a big success in the movie industry for years.​18​ Making matters more complex is that by this point, consumers have more options than ever; half of movie industry revenues came in the form of movie rentals, and some of the highest-grossing movies of recent years, including 1983’s ​Star Wars Episode VI: Return of the Jedi,​ have earned massive amounts of money from that method.1​ 9

To capitalize on this, however, Walt Disney Productions will have to start making compelling products again. Starting in the 1970s and entering into the 1980s, the film market was generally less hospitable towards family movies and more oriented towards the highly profitable and growing teen audience; franchises like S​ tar Wars​, or blockbusters like

Raiders of the Lost Ark o​ r J​ aws​ have, in many ways, redefined the cultural impact that movies can have. In 1983, some of the most popular movies outside of those action genres include romances like T​ ootsie ​or F​ lashdance​.2​ 0 ​ Disney’s own ​The Black Hole​ has been discussed earlier, and its 1980 foray into horror with T​ he Watcher in the Woods​, are both indications that Disney has had difficulty replicating these styles to this point. Through Disney’s adult-oriented

Touchstone label, launched in 1983, however, there may be potential to carve out a place.

An alternative route worth watching out for is that of independent film. While ​Jaws set the stage in 1975 for the film industry to become dominated by the blockbuster hit, it was

18 Aljean Harmetz, “Hollywood’s Winners and Losers in ‘83,” The New York Times, Jan 19, 1984. ​ ​ 19 Ibid. 20 Ibid.

14 born out of the New Hollywood style dominant over the previous couple decades.​21 ​ In other words, it has only been a decade or so since the film industry was dominated by films with a distinct indie aesthetic, distinguished by a subversive style, rebellious tone, and subservience to a director rather than the studio. Examples include ​The Graduate o​ r ​Taxi

Driver,​ and one can even argue that ​Star Wars b​ ears some of these traits.​22 ​ There is always a market for subversion in the film industry, and one could argue that this trend is beginning to resurface, through the Utah/US Film Festival founded in 1978 and the Sundance Institute founded in 1981, both founded by actor Robert Redford and both dedicated to promoting independent film.2​ 3​ Watching out for this trend, and paying attention to any independent studios beginning to make a name for themselves, such as Miramax, could be a wise decision.2​ 4 Animation, of course, has always been the Disney trademark, and as has been discussed earlier, has been mostly absent from the Disney portfolio since 1977. Meanwhile, the projects currently in production have faced their own issues. The Black Cauldron, the most expensive animated cartoon to date, is faced with a ballooning budget as creative teams come and go. Originally set to release in 1980, the film has already gone over budget multiple times with the release date being pushed back to the end of 1984. Further, Katzenberg, who had just been brought on as the head of Walt Disney Studios, wants to make major changes to the film, requiring more expensive and time-consuming re-animation. The resulting clashes with animators bring even more instability to an already struggling film. Plagued with these issues, and following on the heels of some relatively unprofitable animated films, The Black Cauldron’s success could greatly impact the reputation and future of Disney’s animation department.

21 Perren, Alisa, "Sex, Lies and Marketing: Miramax and the Development of the Quality Indie Blockbuster," Film Quarterly 55, no. 2 (2001): 31. ​ ​ 22 Perren, Alisa, "Sex, Lies and Marketing: Miramax and the Development of the Quality Indie Blockbuster," Film Quarterly 55, no. 2 (2001): 30. ​ ​ 23 “Festival History,” Sundance Film Festival, Sundance Institute, 2020. 24 Ian G. Mason, “When Harvey Met Mickey,” New Statesman. Oct 11, 2004. ​ ​

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On the bright side, the trend towards watching movies from home may very well be to Disney’s benefit. Disney had become infamous for ‘re-issuing’ its animated films when they were short on cash; starting in 1944 with the re-release of Snow White and the Seven

Dwarfs which was originally released in 1937, this pattern continued in the following decades. Referred to as the ‘Disney Vault’, they would release films on VHS for limited periods of time to create artificial scarcity. Profits from re-releasing previous movies, especially animated films, sometimes outpaced box-office profits. Disney began releasing their old ‘classic’ movies on VHS to bolster profits but again, this re-directed focus from creating new work contributing to the sense that the company valued profits over quality.

This coincided with the general industry trend as audiences began preferring watching movies from the comfort of their own home bringing in the new industry of ‘home-entertainment’ or ‘direct-to-VHS’ movies.

The last major component of Disney’s media creation branch is in its new television network, the Disney Channel. The channel, which at its conception mainly played reruns of past Disney movies, has quickly expanded to produce original content, both made-for-cable movies and TV series.2​ 5​ It only entered into its second year in 1984 and thus faces many more-established competitors in the industry such as HBO, Cinemax, Showtime, The Movie Channel and Spotlight. While these competitors had moved to 24-hour programming by

1984, the Disney Channel remained limited to a 16-hour daily schedule. Additionally, the channel had not yet reached the number of subscribers required to turn a profit. The channel lost $48.3 million in its first year, which was expected considering the large amount of money required to start up a television channel across the entirety of the United States, but the company is expecting to reach the break-even point by the summer of 1985. The break-even point is around 1.75 million to 2 million subscribers depending on subscription price increases while the channel currently only has around 900,000 subscribers.

25 Dave Smith and Steven Clark, Disney: The First 100 Years, 137. ​ ​

16

Walt Disney Parks and Entertainment

While the content creation side of Walt Disney Productions had run into serious difficulties by 1984, leading to its dire financial situation, Disney’s Parks and Entertainment division had actually contributed relatively consistently to the company’s bottom line.2​ 6​ Even without much in the way of original content, Disneyland had always been a compelling product, relying on the incredible brand power of Disney’s most famous animated properties. Disney World, too, has proven a popular attraction, and the costly expansion plans will likely have positive impacts on the bottom line in the future. The two parks at Disney World, Epcot and the Magic Kingdom, received 23 million visitors in the year since

Epcot had opened, outstripping both forecasts and the attendance of Disneyland to the west.​27​ By the early 1980s, the theme parks were generating close to 70% of the company’s income.2​ 8

The most recent massive expenditure in this department has been for the construction of Tokyo Disneyland, which cost around 180 billion yen, which converts to around $800 million, slightly less than the $1 billion spent on EPCOT.2​ 9 ​ The project, like

DisneyWorld and its EPCOT expansion, incurred huge initial costs, but because of how consistently popular the parks have been, they almost always remain safe investments. Developing and expanding this branch of the company will be expensive as always, but is typically an effective use of funds.​30

On a similar point, Disney at its most profitable took advantage of its animated properties through the release of extensive merchandising and the commercial soundtracks of its films. Effectively bringing Disney back to financial stability will likely involve

26 Dave Smith and Steven Clark, Disney: The First 100 Years, 136-137. ​ ​ 27 Thomas C. Hayes, “The Troubled World of Disney,” The New York Times, Sept 25, 1983. ​ ​ 28 Ibid. 29 “Opening of Tokyo Disneyland,” OLC Group, 2016. 30 Chris Pallant, Demystifying Disney: A History of Disney Feature Animation, 78. ​ ​

17 commercializing its new properties and finding new ways to commercialize its existing properties. Thankfully, Walt Disney Productions has a solid foundation in this regard, with the universally recognizable Mickey Mouse serving as a symbol for Disney in all merchandising. Beyond this, though, even without recognizable new characters, the characters created by Walt Disney Studios during its most productive years remain some of the most recognizable in fiction, with massive merchandising potential.3​ 1​ Beyond this, of course, one of the main financial incentives with creating new popular movies is being able to tie them into commercial tie-ins; S​ tar Wars ​ is a fantastic recent example. All this is incredibly important to stimulate Disney’s finances, lagging in recent years. Though 1982 and 1983 both saw downwards trends in the company’s finances, with net income falling by 7% in 1983 after an 18% drop in 1982, the prospects now seem more optimistic, especially at the year-end report immediately following Eisner’s arrival.3​ 2

Despite an accounting write-off of future costs for movies and television as well as costs of abandoned projects led to the fourth quarter in 1984 reporting a loss of $64 million, the overall outlook is more positive; Disney’s year-end report in 1984 listed that net income rose

4.9% over the year to $97.8 million, and that revenues rose 26.7% over the year to $1.66 billion.​33​34

31 Chris Pallant, Demystifying Disney: A History of Disney Feature Animation, 82. ​ ​ 32 John Taylor. Storming the Magic Kingdom: Wall Street, the Raiders, and the Battle for Disney, 39. ​ ​ 33 Thomas C. Hayes, “The Troubled World of Disney,” The New York Times, Sept 25, 1983. ​ ​ 34 Robert J. Cole. “Disney Has Loss of $64 Million.” The New York Times. Nov 15, 1984. ​ ​

18

State of Affairs

Owing to a number of factors, Walt Disney Productions found itself in a vulnerable position in 1984. The continued disrepair of the film-making branches of the company had already led to the departure of huge numbers from those branches, and in 1984, Roy E. Disney resigned from the Board of Directors, fully severing the company from the Disney lineage. The greatest fear at this point amongst the remaining Disney executives was the threat of a hostile takeover, in which investors would take advantage of the company’s financial struggles to buy enough stock to challenge leadership.3​ 5

Though a number of investors were circling Disney with the intent of initiating a hostile takeover, the largest threat in this regard came from Saul Steinberg, an investor notorious for hunting vulnerable companies against whom he could launch hostile takeovers. With Disney vulnerable, there was little that they could do in defense, especially once they learned that the Reliance Financial Services Corporation, owned by Steinberg, had begun purchasing Disney shares.3​ 6​ Ultimately, a “greenmailing” scheme was executed, in which Steinberg purchased enough shares to initiate a takeover, which

Disney then bought back at a premium. Though the practice was generally regarded as taboo, since it cost the rest of the shareholders without giving them an option to purchase (indeed the practice was later banned), it kept Disney alive at a price of $325 million.3​ 7 Walt Disney Productions was still in a vulnerable position. Ron Miller had been the CEO since 1980, but Disney’s financial and creative issues were at their worst. It was clear that some change was necessary, and behind the scenes, change was coming in the form of Roy E. Disney. While the Steinberg situation was playing out, Disney was planning a return to his family’s company, along with his business associate Stanley Gold

35 Chris Pallant, Demystifying Disney: A History of Disney Feature Animation, 80. ​ ​ 36 Ibid. 37 Fred R. Bleakley, "OUTRAGE OVER DISNEY BUYOUT," The New York Times, June 13, 1984. ​ ​

19 and a group of advisors called the Brain Trust.3​ 8 ​ Once the Steinberg situation was resolved with the greenmailing scheme, Disney’s group found financial backing in the form of the billionaire Bass brothers. Over the course of 1984, Roy’s group carried out a bold “Save Disney” campaign, culminating in the Bass brothers purchasing 25% of the company and the Disney board ousting Miller and promoting a new leadership group. Roy E. Disney returned to head the animation department, marking the symbolic return of a member of the Disney family to this position. Of his Brain Trust, Stanley Gold took on a role as a board member, but there are three names in particular that stepped into leadership after the Bass purchase. Firstly, Frank Wells was the only one of them who was part of Roy’s Brain Trust; with a background as vice-chairman at Warner Bros, he stepped in as the company’s president.​39 In replacing Miller, the board ultimately selected Michael Eisner, who had been a senior executive at ABC and Paramount Pictures.4​ 0​ Along with him came the third person of note, Jeffrey Katzenberg, who became the head of Walt Disney Studios, overseeing the motion picture division.4​ 1​42​ Eisner is entering with an established pedigree and the trust of the board, but perhaps most importantly, is entering to be the figurehead that Walt

Disney Productions has not had since its founder’s death. In spite of his background with film companies, Eisner is not a creative type; his strength is in management, and in selecting the right people for the jobs that need to be done.​43

In summary, Walt Disney Productions are still in a trough. In spite of its wealthy investors, the company is still suffering from the past few years of losses, and its film-making departments have never been less culturally or financially relevant. With

38 John Taylor. Storming the Magic Kingdom: Wall Street, the Raiders, and the Battle for Disney (New ​ ​ York: Knopf, 1987), 46. 39 Chris Pallant, Demystifying Disney: A History of Disney Feature Animation, 80. ​ ​ 40 John Taylor. Storming the Magic Kingdom: Wall Street, the Raiders, and the Battle for Disney (New ​ ​ York: Knopf, 1987), 200. 41 Dave Smith and Steven Clark, Disney: The First 100 Years, 141. ​ ​ 42 Chris Pallant, Demystifying Disney: A History of Disney Feature Animation, 83. ​ ​ 43 Chris Pallant, Demystifying Disney: A History of Disney Feature Animation, 81. ​ ​

20 that said, the company is hopefully entering a period of stability in its leadership.

Finding new ways to grow, bringing Walt Disney Productions into cultural relevancy and financial prosperity, will be the harder task.

21

Sources

Pallant, Chris. Demystifying Disney: A History of Disney Feature Animation. Bloomsbury, 2013.

Taylor, John. Storming the Magic Kingdom: Wall Street, the Raiders, and the Battle for Disney. New York: Knopf, 1987.

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