Case Analysis: Michael Eisner has More Problems than He Can Face

Topics: The Walt Disney Company, American Broadcasting Company, Walt Disney Parks and Resorts Pages: 11 (4705 words) Published: January 11, 2012
Eisner's Mousetrap Disney's CEO says the company has a lot of varied problems he can fix. But what if the real issue is something he can't face?

By Marc Gunther Reporter Associate Carol Vinzant
September 6, 1999

FORTUNE Magazine) – Michael Eisner, the famously hands-on CEO of Walt Disney, is up to his old tricks. Last night he screened a rough cut of Dinosaurs, Disney's big animated movie for next summer; he loved the story but complained that some jokes were stale. Today he's holding a four-hour brainstorming session about Mickey Mouse, looking for ways to keep the 71-year-old rodent relevant. (One idea: a skateboarding Mickey.) Later, he'll watch Peter Jennings' newscast on Disney-owned ABC and surf the Internet to see how the company's Websites stack up. Is this any way to run the world's most troubled entertainment giant? After all, as Eisner sweats the details, earnings are dropping, top executives are defecting, and Disney stock is plunging like a ride down Splash Mountain. "Maybe I'm crazy," Eisner says, "but I don't consider this a crisis. I don't think our problems are in the fabric of our company. And I don't have my head in the sand." Sitting down for a two-hour interview, he admits mistakes. He says, for instance, that he should have settled former studio chief Jeffrey Katzenberg's suit against the company earlier to avoid a "parade of horrors" (see box). And he concedes that the company has sustained real damage: "It's like a train wreck, only nobody got killed." But Eisner denies that he has lost his touch. "The criticisms of me and Disney today," says the 57-year-old chief executive, "are as shortsighted as were the praises of me and Disney in the high economic times." Sunday nights on ABC, Michael Eisner--celebrated CEO, business magazine cover boy, and author of his own life story--still hosts The Wonderful World of Disney. The rest of the week, life is not so sweet in the Magic Kingdom. Certainly shareholders have reason to feel grumpy, with the stock trading at about 37% below last year's high. There's no quick fix in sight either. Tarzan, the $160 million summer blockbuster, won't have much impact on earnings; the movie cost too much to make and isn't selling enough T-shirts and toys because the market's glutted with Star Wars stuff. That's one of the scary things about today's Disney: The company has grown so big and its problems are so far-reaching--ranging from the phenomenon of "age compression" to the explosion of media choices--that they can't be fixed by a couple of hit movies or TV shows or more Disney stores. The other scary thing is this: Disney seems less able than ever to cope with adversity. That's because Eisner, for all his creativity and charisma and grand plans, presides over an insular--some say arrogant--corporate culture where decision-making is hierarchical, centralized, and slow. It's an utter mismatch for the Internet age. "This isn't Mickey's house anymore," says a former Disney insider. "It's a multibillion-dollar company." Eisner does have a plan. He is cutting costs and reengineering a company that got bloated with success. He's making overseas growth a top priority. He wants Disney to be an Internet giant, taking on Yahoo and America Online. And, yes, he'll keep on tweaking theme park rides and screening ABC pilots and driving subordinates up the wall with his meddling, because he fervently believes that if you demand high quality and develop synergy, financial results will follow. "The interesting thing about our company," Eisner says, "which I think is extremely flattering, is that everybody takes for granted that we make good products. They think, Oh, the Disney cruise ship, they take a wand and a little pixie dust and all of a sudden you revolutionize the cruise industry from floating Vegas hotels to romantic ocean liners. There are zoos all over the world, and up comes the Animal Kingdom. Or Tarzan, or the Lion King on Broadway--people say, 'They have no trouble...
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