After a long hot streak, the studio looks goofy at the box office.
(October 7, 1991.)
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Youre 60 days early, Jeffrey Katzenberg said.
The chairman of the Walt Disney Studios was working the phones again.
A legend in Hollywood because of his ability to make 200 phone calls a day.
Even in the good days, Katzenberg had never wanted to have anything to do with the press.
This time, there was even more reason not to want to talk.
In the past, when reporters came calling, it was because Disney was on top.
These guys were unbelievable.
By 1988, it had moved to first place with more than 19 percent of the total box-office take.
And it worked miracles.
The Walt Disney Companys earnings went from $98 million in 1984 to $824.5 million in 1990.
Then, in 1989, the film division started to go cold.
After a long slump, it was saved byPretty Woman.
But by the fall of 1990, things had started to cool down again.
In the past 12 months, the studio has had several debacles (among themThe Marrying ManandV.I.
This is a total breakdown of the system.
This is a tragedy were talking about here.
It was a tragedy that Eisner and Katzenberg did not want to discuss right now.
I am changing the direction of what were doing, Katzenberg said.
He would discuss his plans on background, he said, if I waited another five to eight weeks.
(I learned that from him, one former Disney staffer said after I described the conversation.
He was still unfailingly polite, but now there was a slight edge to his voice.
If you are doing it by jumping on it overnight, then go ahead.
Talk to a lot of producers and writers and directors.
They had come from Paramount Pictures, where both had spent a large chunk of their professional careers.
Around Paramount, it became known as the Paramount Philosophy Paper.
1 of the Paramount Philosophy was high concept, or The idea is king.
There you had to be able to promote a show in between commercials in 30 seconds or less.
2 was Get them cheap.
Keep in mind hes a rich kid who doesnt believe in spending his or anybody elses money.
Its really out ofOur Crowd.
Another grandfather became wealthy running a clothing business that manufactured uniforms and parachutes for the Army.
Eisners father, Lester, was a lawyer who invested in New York real estate.
My grandfather drove across the Willis Avenue Bridge to save the toll.
3 of the Paramount Philosophy was Keep control.
It starts with Michael, says one former Paramount producer.
Michael is one of the biggest fing control freaks youll ever know.
It followed through with Katzenberg, who learned the business from Diller and Eisner.
Katzenberg, the son of a stockbroker, was raised on Park Avenue only a half-block away from Eisner.
At the age of 14, he became a volunteer in John Lindsays mayoral campaign.
In the early 70s, he left politics for show business.
At Disney, he hired two executive vice-presidents.
He brought Ricardo Mestres over from Paramount.
Katzenberg also brought in David Hoberman, a former ABC Radio president who created the talk-radio format.
But Hoberman and Mestres were given little leeway to make final decisions.
I think Jeffrey has always been a control freak, says a former Paramount executive.
I think it was always in his nature, absolutely.
His office at Paramount gave you a clue.
On Saturday Id work from nine to six and on Sunday from noon to five.
It was kind of an unwritten rule that you had to come in and do your reading there.
At other studios, the production executives read their scripts at home.
You had to be on call like a little slave.
There wasnt a day I never felt panicked.
You become so insulated.
You never see your family.
You miss those essential components that you gotta figure out what good stories are all about.
Jeffrey hasnt seen his twins growing up; he has missed all that.
He was there at six in the morning, at seven on Sundays.
Jeffrey called me for my job interview in his office at 7 a.m. on a Sunday, he says.
There is one story Ill never forget that typified the time I was at Disney.
I had to write a development memo for a Friday meeting.
I said, Im kind of panicked.
Im having a terrible time.
Your brains about to shut down.
Work until midnight, go home, get some sleep, come back at four in the morning.
But this is very important, Zarpas continues.
I look back on that story with the utmost affection for the place.
Because I was never asked to do anything that they wouldnt do themselves.
Jeffrey Katzenberg works harder than anyone Ive ever met in my life.
People say, What an assh, but I dont look at it that way.
And I learned how to make a movie.
It was treacherous; it was hard; it was horrible at the time.
But I was given the education of a lifetime.
With the Disney Method, Eisner and Katzenberg raised that battle to high art.
You know about a hands on experience?
quips one producer who used to make movies at the studio.
Making a movie for them is a hands in experience.
It starts in the pitch meeting.
They write down every word you say its like giving a deposition you feel like youre testifying.
And they are obsessed with details that dont matter.
Youd pitchLawrence of Arabiaand they would want to know what color shows he would be wearing.
The Disney Method continues in the contract negotiations.
The studio tried to get writers, directors, and producers cheap and then sign them to multi-picture deals.
The whole tenor is Lets go beat them up, one former production executive says.
They disregard everyones previous quote.
She soon became known around town as Attila the Hahn.
There is an absolutely arrogant attitude among Helene Hahn and all her people, says one agent.
She is, in a way, Jeffreys hit man.
Once the contract negotiations are concluded, the real fighting begins.
There are endless meetings about the script, and an endless number of production memos.
All the studios do it to some degree, says a former executive.
But at Disney, they got carried away.
On page 33, we dont think Charlotte should use the words Mom died.
Basically what it was saying was Jeffreys not going to make this movie with those words in it.
But I dont think you could lay it on David.
Part of the problem was I was coming off another film and had had no break.
They come in and make you crazy, said Marshall, who went on to directPretty Woman.
I wasnt going anywhere [when I walked off the set].
I just went into my act.
Pretty soon, everyone is so worried that youll leave that they leave you alone.
They took me because I hadnt directed before and I was cheap.
They do that, then they like to think they can push you around.
you’re able to make your own movie, but you have to stand firm.
I even had to have one of the young production executives thrown off the set once.
Its so twisted, its so bizarre.
Theyve been calling me about a project that theyre really anxious to do, one producer says.
Then, in postproduction, they tend to dispense with directors by simply doing it their way.
The fact that the studio has a point of view is something someone should be grateful for.
Some people think thats an inappropriate way to conduct business.
I guess you just have to want to fight for what you care about.
And theyre at the end of it.
They are an enormously hand-on group of executives.
Thats the corporate mentality.
A lot of this has to do with your expectations.
Because they are forceful, you have a lot of arguments with them.
Listen , I grew up in a family where you argued.
Its not the most painful thing in the world.
Given the choice, we would prefer to be with the hands-on punch in.
A lot of good things come out of it.
Even once the picture is finished, Katzenberg never lets up.
Jeffrey basically ran the marketing and distribution departments as well, one former Disney marketing staffer says.
I would never be able to be that single-minded about my business, ever.
Some say thats pathological; some say its the mark of a good executive.
For six years, that system gave Katzenberg and Eisner a remarkable run of successes.
They created the Disney formula film an urban, adult comedy starring easy-to-get-for-a-good-price television and movie stars.
It was a strategy that Katzenberg called bottom fishing, and the box-office dollars started pouring in.
Even more dramatic is the story ofPretty Woman,Disneys biggest box-office hit.
Katzenberg bought a script called3,000, a dark story about a softhearted prostitute and a heartless businessman.
Disney made the film for $17 million (paying Julia Roberts only $350,000).
From 1984 to 1990, the Walt Disney Companys earnings exploded exponentially.
The Disney Studios contributed to that with more than their new box-office hits.
And they accelerated the rerelease of animated classics likeLady and the Trampfrom every seven years to every five years.
They have been well rewarded for turning the company around.
Jeffrey Katzenbergs contract is not a matter of public record.
They announced that in addition to their existing movie labels, Touchstone Pictures and Walt Disney Pictures.
So far, it hasnt worked out that way.
The studio fell to fourth place in the 1989 box-office ranking.
AndDick Tracyexacted a different kind of price.
The movie cost that studio $46.5 million to make.
Even worse, according to figures obtained byDaily Variety, it costs $54.7 million to distribute.
Then came the fall of 1990.
It started with two flops,Taking Care of BusinessandMr.
BothRescuersandThree Men and a Little Ladyran into a buzz saw calledHome Alone, says Wall Street analyst Manny Gerard.
It went after their audience, and it just buried them.
Cause every kid in America wanted to seeHome Alone63 times.
Disney had moderate successes inGreen CardandWhite Fang.
In April, the company releasedThe Marrying Man, the film thatPremieremagazine dubbed the production from hell.
But even worse than the financial loss was the psychic loss.
Midway through shooting, the studio had to threaten to sue Kim Basinger is she caused any more slowdowns.
In May, it had its one solid hit of the year,What About Bob?
(about $28 million in rentals).
The recession finally hit the movie business as theater admissions dropped to their lowest level since 1974.
TheRocketeerthing really was a marketing debacle, one insider says.
They made every 14-, 15-year-old buy think it was a baby movie and completely missed their teenage audience.
The Rocketeerwas followed byV.I.
Warshawski, the Kathleen Turner film that became a Hollywood laughingstock.
It cost about $17 million and took in only about $3.7 million in film rentals.
And Disney films arent doing well anymore.
That added up to five off its first six films.
The rumor mill around Hollywood started speculating about how long Mestres would be in his job.
But no one who knew Eisner and Katzenberg well believed they would remove him.
This is a group of people who are very loyal, one former Disney insider says.
by giving up on Ricardo, Jeffrey would be admitting that he was giving up on himself.
101 Explanations
WhytheDisneyMagicStoppedWorking
So what went wrong?
Here are the most popular theories about what has gone wrong at Disney:
.Nobody Knows
.
I really dont want to be anywhere near this, says a producer.
But take a look at the movies that come out at Paramount after Eisner and Katzenberg left.
It was as bad a year as theyre having now.
Indeed, the list bears him out.
This Is Now, Young Sherlock Holmes.The only notable films on the list areCompromising Positions and Witness.
Michael and Jeffrey dont talk about that, the producer says.
They neatly escaped it.
So this is not Oh, my God, how did this happen to us?
It happened before, it will happen again.
Now its an obvious formula.
They skinned this cat every way it can be skinned.
It can work for a little while, as then the audience is exhausted and you have to change.
People are responding to quirky movies with unsympathetic heroes, stories that even have unhappy endings.
And this is a lesson for everyone.
.Nickel-and-Diming
This is one of the two theories that presuppose that there is divine retribution in Hollywood.
Its karma for killing people in deals, says one producer.
Its insane; its not wise, says another executive.
Their ending tested a couple of points better, she says.
And Jeffrey heard me say that and, without any malice at all, said, Finish your movie.
.Beep, Beep, Beep
Their marketing sucks, one former Disney staffer says.
They do everything in house, which is cheap but stupid.
They have the same trailer for all the films with the same pattern, says a studio executive.
They tell the whole story beep, beep, beep with that same announcers voice Jeffrey likes.
Its just stale; they should shake it up and invigorate it.
When they started Hollywood Pictures, I asked them one question, Manny Gerard says.
How do you increase the units of production and maintain quality?
I still havent gotten an answer.
One studio executive says he could have told them that from his own experience.
Until you have done it, you dont know how hard it is.
.Too Much Jeffrey
They have extremely good people in David and Ricardo, says one producer.
They ought to give them more power.
Let them go with their instincts in a lot more cases.
Which isnt always right, because Jeffrey can surprise you a lot of time.
.Too Little Jeffrey
Heres the problem, says one former Disney staffer.
When Jeffrey is focused on a single thing, theres no one better.
Because Jeffreys so good, Michael has allowed him the freedom to look into other areas.
He made Disney Television a personal mission; he got involved in a lot of areas of the company.
Jeffrey flew off to the park in Japan and came back and said, The toilet in stall No.
3 at the Space Mountain Ride isnt working.
Jeffrey got into too many things.
By the end of the month, it was reprinted in its entirely inDaily Variety.
They felt it was written by Jeffrey the politician, Jeffrey the survivor.
(Michael jokes that he plagiarized it, one insider says.)
And thats too high a price to pay for any movie.
On March 31st, Disney declared declining six-month earnings for the first time since Eisner took over.
The financial outlook for the immediate future is not bright.
The international release of this years films wont be as strong, and the video sales will be slower.
Studios have different personalities, producer Robert Cort says.
There are very hysterical, truly out-there studios and very paranoid studios.
Disney is a very obsessive-compulsive studio.
Disney right now is saying, All right, lets look at ourselves.
I really respect those guys for doing that.
The five-year deal called for Disney to distribute the Vajna films.
In the memo, Katzenberg wrote that this would allow Disney considerable upside potential with minimal downside risk.
But they will be at substantial risk, along with us, in failure.
Even more dramatic that that was what began happening a couple of months after the memo was written.
Katzenberg started talking about how he was going togive up some control.
According to David and Ricardo, he was very forceful then.
The question now is whether Hoberman and Menstres will be able to take this opportunity and run with it.
Those who have worked with the two men say they are placing bets on Hoberman.
David has always given Jeffrey less of his way then Ricardo has, one says.
I think Ricardo is more of a soldier and David is more of a partner.
Katzenberg continued to insist that he did not have time to talk about these changes.
Theres an understanding that sometimes in companies, the company can be perceived as one person, Payser said.
I think thats what were realizing.
There was a strong feeling at this level of senior management that there was a frustration with the process.
It was something that was recognized quite clearly by the rest of senior management, Katzenberg, Eisner.
So not every decision is made by Jeffrey now?
Those days are long gone, he said.
Peyser said that the changes had nothing to do with any one string of films, successes or failures.
Do you really believe that they would be talking about changes if the studio wasnt having a rough year?
Its harder to get people to respond if youre winning every day, he said.
But the internal impetus has always been there.
One positive thing I should say.
I think whats going on is a testament to the smartness of these guys.
Whats smart about them is that theyre not deaf.
In July and August, Katzenberg took the same message out on the town.
He told the agents and lawyers he planned to step back and let Hoberman and Mestres take more control.
He said if its a very expensive film, hes going to interfere.
If its not, there will be less interference.
He was also trying to say they will become a kinder, gentler nation in terms of negotiating.
He said they will attempt to make deal-making a little smoother.
He apologized for making a big mistake in green-lighting all of these expensive movies.
He said theres a new era; hes going to make less expensive movies and give more creative freedom.
I think everybodys attitude is: Well wait and see.
The films budget has risen to $40 million amid rumors of unhappiness among the Disney executives.
Its popular now in Hollywood to say that it cant be found on their release list.
They dont have one!
But no one pickedPretty Womanahead of time.
No one pickedHome Alone.
Im convinced its a cyclical thing, says Chris Zarpas, the man who owes his career to Disney.
Thats part of what keeps people going in this business the magical and mysterious nature of it.
