Don't Blame Eisner

Disney fans wanting a scapegoat for the company's recent problems should not look to CEO Michael Eisner. They ought to look in the mirror instead.

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Published: September 12, 2004 at 5:22 PM

Don't celebrate Michael Eisner's recently announced department from the Walt Disney Company just yet. And not just because the CEO won't step down until he contract expires in 2006. Don't celebrate because the people who helped Eisner run down Disney's once-high standards for quality continue to influence the company.

Sharp fans have complained about the declining quality of Disney's theme parks and entertainment for years. Soon after Eisner appointee Paul Pressler took control of Disneyland, the park's fans started grumbling about peeling paint and burnt light bulbs on a Usenet news group. A few started Web sites, complete with snapshots to illustrate the deteriorating conditions. Within a few years, Disney's slip became common knowledge to anyone who spent a fair amount of time on one of the many sites where theme park fans gathered online.

But their complaints did little to change the average consumer's view of the company. Not until Walt's nephew, Roy E. Disney, stormed off the company's board upon being forced into retirement by Eisner earlier this year did people offline start seeing frequent news reports about declining quality at Disney and its parks.

What exactly did Eisner do wrong? Well, he brought in a team of managers to run the company's theme parks, led by Pressler, who had no experience working in them. They took a business-school, bottom-line approach to running the parks, cutting expenses with no consideration for how those cuts would affect the park's entertainment value.

Managers watered down plans for new "E-ticket"-quality attractions into clones of existing rides. Or worse, they ordered off-the-shelf versions of amusement carnival rides with little or no theming at all. And that was when they could be bothered to approve spending for new attractions at all.

But do not blame Eisner for Disney's penury. Want to blame Eisner for something? Blame him for following when he should have led. Blame him for listening to Wall Street rather than imposing an independent vision for the Walt Disney Company. But also recognize that had he done that, even more people might today be complaining about his leadership of the company.

Michael Eisner did with the Walt Disney Company exactly what hundreds of Wall Street analysts wanted him to do. Fresh out of business school, with little or no practical work experience, these young analysts talked up companies that operated like they were run by a rookie MBA -- where managers cut costs and pushed the short-term profit. Companies with mature leadership that resisted faced unfavorable reviews from these gung-ho analysts -- which brought declining stock prices and angry investors.

An investor revolt led to Eisner's installation as Disney chief in the 1980s, and the man's no dummy. So he did like almost every other major CEO and went along. He looked to the nation's business schools for new middle managers, and not to his company's theme parks, as his predecessors had once done. And they took out the axe.

Wall Street loved it, talking up Disney with one favorable review after another, even as fans put up new sites criticizing further declines at the parks. Ideally, those grassroots reviews would spread and fans would stay away from the parks, forcing even myopic pencil pushers to notice a substantial drop in the company's income.

But that didn't happen. And that's why the bulk of the blame for Michael Eisner's leadership of the Walt Disney Company must fall upon the company's fans.

Blinded by their love for the Disney brand name, they continued to fork over billions of dollars to the company for deteriorating amusement rides, hackneyed direct-to-video sequels and cheaply made consumer products. They passionately defended the company online against those who tried to point out its decline. And they flocked to Web sites that promised uncritical coverage of the Mouse, where never a harsh word would be said about the company, no matter how lame its productions.

When Universal opened a new theme park in Orlando that offered theming and attractions every bit the equal of a Disney theme park in its heyday, these fans did not take the opportunity to send Eisner a message by spending their money elsewhere. Indeed, many attacked anyone who dared suggest that Islands of Adventure offered more "magic" than Disney had in years.

When Lego opened a theme park in Southern California that provided age-appropriate and kid-friendly family entertainment unlike anything ever offered at Disneyland, these fans ignored Legoland California as if it didn't exist. No, if it didn't have the Disney brand name on it, it wasn't a worthy, family-friendly theme park. Period. No matter what.

So in the five-plus years Islands of Adventure's been open, it has not once beaten a Walt Disney World theme park in annual attendance. And Legoland's not come close to besting the attendance of Disneyland's weak sibling, California Adventure, much less Disneyland itself.

The message to Michael Eisner and his team was clear: Keep cutting back the quality. Millions of Disney's loyal fans won't care. They can't tell the pony from the poop -- all they look for is the Disney name.

So Eisner & Co. slapped it everywhere: From toothpaste to toasters, computers to cruise lines. Only after the American economy fell into recession in March 2001 did the numbers start to slip. Disney's fans began to run out of money to spend on all the Disney-branded stuff they company offered them for sale.

Yes, the criticism did have some effect. Disney was forced to discount theme park tickets more aggressively than it ever had in the past to keep attendance numbers up. And while not enough fans opted to visit places like Islands of Adventure and Legoland to drive them ahead of their Disney competition in annual attendance, many did discover and cherish alternatives to Disney parks. And Wall Street developed some skepticism after scandals toppled one-time Street favorites like Enron.

But let's not forget that it was fans' willingness to buy so much Disney branded stuff of dubious quality in the late 1990s that led Eisner & Co. to dilute the company's name with so many ill-advised productions and products. If those fans had abandoned Walt Disney World and Disneyland for Universal Orlando and Legoland five years ago, Disney and its theme parks never would have slipped to the condition they are in today. If animation fans had made "The Iron Giant" a blockbuster and left "Dinosaur" a flop, the company might have continued to value storytelling ability over gimmicks and formulas. Losing market share to competitors would have shown Eisner and his team the need to improve quality. Or the company's crashing income would have earned the scorn of even novice analysts, who would have demanded an executive change.

That didn't happen. Even as Eisner plans to step down, millions of Disney fans remain intolerant of the idea that another company can build or operate a theme park better than Disney. They live under the delusion that Michael Eisner's the reason they aren't enjoying their Disney World visits as much as they used to. They refuse to acknowledge that it is their own inability to recognize better alternatives that encouraged Eisner and his team to get greedy and slash quality.

And that it is their continued zeal for the Disney brand that will enable Eisner's successor do the same.

Readers' Opinions

From Kevin Baxter on September 13, 2004 at 12:53 AM
Hey, I've been blaming the Disney Dorks for years!

Though there is plenty of blame left for him. People that played apologist for the decline in the theme parks aren't to blame for Eisner buying ABC or Fox Family or for him driving away Pixar or Katzenberg. Or allowing inept people like Iger and Pressler do their things for so long.

At least people are finally starting to wise up. Many of the votes cast against Eisner were from those stockholders that hold Disney stock because of sentimental value. People have stayed away from most of the lesser animated films at the box office, though they still help out by purchasing DVDs. Attendance isn't where it should be at any of the US parks this year, which could really hurt them when attendance is tallied at the end of the year. Like I have said, when IOA and/or USF pass up AK and/or Disney-MGM, Disney will have lost the one advantage they have always held.

From M F on September 13, 2004 at 9:02 AM
I don't know the source of the information for this piece but this is inaccurate at best. Sure Mr. Eisner "brought in a team of managers to run the company's theme parks, led by [Paul] Pressler, who had no experience working in them." Let's explore the reason why this happened.

You are one of maybe two people who thinks Michael Eisner did a good job in his later years at the company, the other person being Mr. Eisner himself. It has been widely reported in most respected business magazines and newspaper columns that since Frank Well's unfortunate and untimely death, Michael Eisner took on a management style that conflicted with most other executives. He reportedly had a micromanagement style. This is not news. As numerous executive talent left or was shown the door, the company was left with Mr. Pressler, who according to some websites, made a mess. The point is this - when there was nobody left to work with, Mr. Eisner had to take what he could get. Executives who understood Disney and theme parks had left, been shown the door, or would not work at Disney with Mr. Eisner. As Disney is a public company, you can see in its annual reports that it once had talented executives who would have been great successors and who now run other companies. Stephen Bollenbach, Stephen Burke, and Jeffrey Katzenburg, to name a few. As the second largest entertainment company in the world, one must marvel at how there could be no succession plan in all of Mr. Eisner's 20 years. Even now, with Mr. Eisner's retirement in two years, there is no named successor.

I would suggest that the news of Mr. Eisner's retirement can only be good for Disney and its fans. Creative executive talent who can work with other creative executive talent is what that company needs and has been sorely lacking.

From M F on September 13, 2004 at 10:11 AM
I'll accept that my inital post might have been misguided and apologies to Robert. However, my point was that Mr. Eisner is at the heart of the problem. He is the CEO, the leader of the company. He takes home the most Disney bucks in return for bearing responsibility when things go bad. He is also the one who would be remembered and praised if and when things went well. I don't find it to be a coincidence that numerous talented executives are not at Disney anymore. Let me also clarify and say that there may still be other talented executives there now. The problem is that the selection for those who would succeed Mr. Eisner at the very top is thin. Any outsider would need these two years to "learn the ropes." The reason for the lag time between development and construction can be attributed to bad decisions. Those who would make decisions that generate, and not lose, money for the company were gone. Projects turn around quicker when the money or credit is readily available to finance them. Money and credit are not readily available when flops like DCA and EuroDisney happen. To his credit, I suppose, Mr. Eisner has keep Disney in the black ("making money"), not in the red. Speculation here but I really doubt that the widespread reporting of the announcement of Mr. Eisner's retirement is because the business community and Disney fans are lamenting his loss at the company, talented though he may be.
From Russell Meyer on September 13, 2004 at 11:08 AM
I don't think Robert's saying that Eisner did a great job of running the company over the past few years. He's saying that all the crazy Disney fans accepted some of the crap that Eisner was putting out. Eisner was getting away with normally unacceptable products because there are so many people in the US and abroad that will go to the ends of the earth for something with Mickey ears on it. To some of the Disney-dorks, a DVD filled with static would be the greatest release of the year if it had the Disney name on it. Did Eisner do a great job over that past few years, No! But is it completely his fault that the company is in the situation it is now, No!

Eisner, like a good manager was looking out for the bottom line, and in many ways, he succeeded in keeping the bottom line out of the red. I think part of the reason for the tarnishing of the Disney image is the internet. Without the internet, there would not be a place for open criticism. 10 years ago, if you were planning a summer vacation, you'd either automatically go to Disney because that's what you did, or you'd check Consumer Reports to see where they thought you should go for your vacation. Disney was rarely criticized, and frequently praised for its high quality, and even attractions that critics today cannot stop complaining about rarely got press 10 years ago. Now, there are so many online resources for opinion and criticism of the various vacation options that savy shoppers are slowly beginning to realize that Disney is not the only option for vacations.

Disney is also realizing that it is behind the times because of the lag time between its development and construction. WDW is still building hotel rooms to adjust for the lack of rooms in the mid 90's. The properties they're finishing today were first planned almost 10 years ago, and now people are questioning if they're really needed, or even if they're up to the modern standards that other parks are installing. The same thing goes for their rides and new parks that are seeming outdated and inadequite by the time they're completed. The movie and TV sides are another story, because movie and TV critics have been widely published for many years now, and its clear from the ratings that Disney doesn't have the golden touch anymore.

Is Eisner the cause of there problems, No, but getting him out is part of the solution.

From John Franklin on September 13, 2004 at 2:44 PM
You people say that there's no talented mangers left a t Disney? Well, how about Matt Ouimet? Look how fast he turned Disneyland around. I wonder how well he could do as Disney President or CEO?
From Ben Mills on September 13, 2004 at 2:53 PM
And I still stand by my belief that Jay Rasulo has the right idea. Maybe he's not the most inspirational guy in the world, but at least he's never said anything as dumb as Pressler. And I'm sure he must have been partly responsible for the demise of Cynthia.
From David Klawe on September 13, 2004 at 3:09 PM
An Open Letter to the Non-Employee Members
of the Board of Directors of
The Walt Disney Company

Roy E. Disney
Stanley P. Gold

4444 Lakeside Drive
Burbank, CA 91505

September 13, 2004

Mr. John Bryson
Mr. John Chen
Ms. Judith Estrin
Mr. Alwyn Lewis
Ms. Monica Lozano
Mr. Robert Matschullat
Mr. George Mitchell
Father Leo O'Donovan
Mr. Gary Wilson

Ladies and Gentlemen:

For each of you the upcoming September 20 Board meeting will be a moment of truth - one in which you will have the opportunity to exercise your fiduciary duties and demonstrate your commitment to serving the best interests of The Walt Disney Company and its stockholders.

Michael Eisner's announcement that he intends to remain CEO for the next two years forces you to make a critical decision. Will you choose to let the Company drift for two more years - allowing the pall Mr. Eisner has cast to continue to drive the most talented and creative people away from Disney, erode the morale of current employees, and prevent the Company from attracting the strong, dynamic, and creative leader it needs? Or will you reject Mr. Eisner's brazen attempt to usurp your responsibilities as directors by stage-managing the appointment of his anointed successor and instead tangibly show your commitment to best corporate practices by immediately initiating an expeditious and broad search for a world-class CEO?

We understand and appreciate the difficult position in which Mr. Eisner has once again placed you. As those instrumental in bringing both Michael Eisner and Frank Wells to Disney in 1984, we know how close some of you are to him personally. But there is no acceptable solution that includes Mr. Eisner's continued leadership at Disney for the next two years - let alone any longer than that. Regardless of whether he serves in a diminished capacity during the next two years as a "lame duck" or continues to manage the Company, the changes necessary to restore Disney's luster will simply not be made.

As former Disney directors, major stockholders, and individuals with a longtime passion and commitment to the Company, we believe it is intolerable for Michael Eisner to continue to hold the Company hostage for two more years - and perhaps longer. As recently pointed out by the Los Angeles Times, "Management experts note that most retiring CEO's take three to nine months to tie up loose ends and train a successor before hitting the exits. Longer transitions, they say, can be chaotic and disorienting." In the case of Disney, where management turmoil has enveloped the Company for years, dragging out succession planning for another two years would be catastrophic. Disney cannot compete effectively in the constantly changing and evolving entertainment and media industry if it is frozen in place. Stockholders will continue to see the value of their investment languish, just as the price of Disney's shares has over the past seven years.

While Mr. Eisner's announcement at first blush looks like a major change, it is in truth mere window dressing. What he has really proposed is a scheme to arrogate the authority of the Board and maintain the status quo at the Company's expense.

Press accounts suggest that Mr. Eisner intends to ask you to install him as chairman after he relinquishes the CEO title. In other words, his "succession plan" is for a company led by Michael Eisner and his obedient lieutenant, Bob Iger, to be handed over to . . . Michael Eisner and Bob Iger. Do you really think that this result will be tolerated by stockholders or will satisfy anyone that you have carried out your responsibilities? Any arrangement that permits Mr. Eisner to remain as Chairman after relinquishing his position as CEO is contrary to best governance practices. Disney stockholders deserve exemplary governance from their directors.

In effect, Mr. Eisner has challenged each of you to exercise the power delegated to you by stockholders. His preemptive announcement of his favored candidate to serve as CEO once again demonstrates his disregard for the proper responsibilities of the Board to make such vital decisions. In his view, the Board's role is merely to rubber stamp his unilateral decisions, to provide cover for his real agenda.

Your course is clear. We ask you to immediately engage an independent executive recruiting firm to conduct a worldwide search for a strong visionary leader capable of guiding this Company as it faces the challenges ahead. Because we believe that no one with the skill, experience, dynamism and creativity needed to lead Disney will take the job if Mr. Eisner remains as CEO or chairman, we ask you to concurrently announce that Michael Eisner will retire as CEO and as a director at the conclusion of that search. If you make it clear that Mr. Eisner is leaving the Company and the Board, we have no doubt that a number of excellent candidates will beat a path to your door. In that case, choosing a successor could be accomplished prior to the 2005 Annual Meeting of Disney stockholders. This is more than five months away, surely enough time for a proactive Board to get the job done.

The actions this Board needs to take are straightforward. Once again, Mr. Eisner has placed his personal ambitions ahead of the interests of the Disney stockholders; in so doing he has hijacked your duties as directors. The only question is whether you have the courage to confront Mr. Eisner. More than six months have passed since the stockholders cast their resounding vote of no confidence in Mr. Eisner and this Board. During those six months, you, the non-employee directors, have done little or nothing to restore that confidence. For the good of the Company, it is time for this Board to demonstrate its independence. Bringing in a new CEO - and doing so quickly - is the first step in restoring the vibrancy of this Company. It will allow the Company to strengthen and broaden its management team and rebuild the morale of Cast Members. It will allow the Company to attract top talent and begin to repair the damaged relationships with Disney's creative partners.

We intend to make it clear - to our fellow stockholders, to Disney Cast Members and to other Disney constituencies - that we will strongly support Directors who want to move Disney forward by requiring Mr. Eisner to leave as CEO and as a Director no later than the 2005 Annual Meeting and who are committed to the Board conducting an immediate search for a new CEO. By the same token, we will oppose with unrelenting vigor Directors who continue to support drift, delay, and decay. Should the Board not take the actions proposed above - immediately engaging an independent executive recruiting firm to conduct a worldwide search for a talented CEO and concurrently announcing that Michael Eisner will leave the Company at the conclusion of that search - we intend to take our case directly to our fellow stockholders and propose an alternate slate of directors committed to moving the Company forward aggressively.

You have the authority and the responsibility to manage Mr. Eisner's succession. In so doing, we urge you to put first and foremost the interest of the Company stockholders, Cast Members, and the millions of people who love Disney. The spotlight is now on each of you. Disney stockholders and Cast Members deserve to know where you stand after this important Board meeting. We await your response.

Yours very truly,

Roy E. Disney Stanley P. Gold

From TH Creative on September 14, 2004 at 8:07 AM
So Fredo and Stan will refuse to support any CEO candidate that would allow Mr. Eisner to remain on the board? A potential candidate can be a creative visonary, technical and business genius and if he lets Eisner stay on the board of directors that CEO is unacceptable?

How can anyone take these two clowns seriously?

From M F on September 14, 2004 at 8:08 AM
As to John Franklin's comment, I was careful to add that "there may still be other talented executives there [at Disney] now." I am aware of Matt Oiumet and the things he is doing for Disneyland. I understand he has prior experience running Disney's cruise lines and was brought to Disneyland to help fix it (and has been doing a fine job). I do not discount Mr. Ouimet, however, I do not know if he is ready for a CEO position. I do not say this because I doubt his abilities but rather because I do not know if he is at that level of management yet. His name has not been mentioned on the short list of possible candidates, most of whom are outsiders. Robert Iger is considered the possible inside candidate but he can't even fix ABC. Given Mr. Ouimet's track record, I think he would be a great CEO at some point in the future. Do not misconstrue my earlier postings as dismissing the possibility of any talent within the ranks of Disney management.
From M F on September 14, 2004 at 8:19 AM
Why, TH Creative, why would the board want to keep Mr. Eisner when he is obviously the one holding the company down at this point? He will not benefit the company in that capacity and would likely try to dominate and control the whole board, given the numerous newwspaper and magazine reports of his micromanaging style. Indeed, the board consists of people he approves of. If you understand corporate governance, the board appoints the officers, not the other way around. I strongly believe that Mr. Eisner is leaving now when he can save face. His contract, as we all know, expires in 2006 and I believe he made this announcement to save face, realizing that the board would likely not renew his contract. A 45% vote of no confidence [at the last shareholders' meeting] is unprecedented. I will say that he has had a tremendous run at Disney but I would also qualify that, adding that other creative executives were there as well helping to contribute to the company's success. Those people are gone. Roy Disney, Diane Disney, and a handful of state pension fund investors (the institutional investors) are apparently now calling for him to leave. It is certainly well past due. It's not the end of the company, just the end of his run as CEO and probably for the better.
From TH Creative on October 4, 2004 at 4:01 PM
Mr. Baxter writes: "Like I have said, when IOA and/or USF pass up AK and/or Disney-MGM, Disney will have lost the one advantage they have always held."

I Respond: Fair enough. That standard seems to be reasonable. Should that happen, Disney will have lost that advantage. Of course if that doesn't happen shouldn't Mr. Eisner deserve a little respect?

Side note: I'm not so certain Eisner has driven Pixar away. Mr. Jobs announced he was walking away from Disney last February -- not-soangely just before the Disney shareholder's meeting. It's rather odd that, eight months after that announcement, Mr. Jobs has yet to sign a multi-picture distribution deal with another studio.

From Kevin Baxter on October 4, 2004 at 8:01 PM
Why, when a distribution deal wouldn't be necessary until late 2006/early 2007? I said a while back nothing would happen until we got returns on The Incredibles. So far I am right. Pixar doesn't even need a distribution deal if they wanted to follow the DreamWorks plan and just use Universal's distribution machinery.

As for Eisner getting credit? For what? Two parks that have been miserable failures? Another that took ten years to become successful? Add in WDSP and his track record looks pretty pathetic in the theme park category.

Eisner isn't credited with improving the theme parks in the 90s but improving WDW, meaning increasing its profits. And I would be willing to admit he did a good job there if the past few years didn't show the downside of that expansion. There are now too many rooms and this problem is seriously affecting profits at WDW. (DLR, on the other hand, doesn't have too many rooms, just not enough reason for people to stay in those rooms.)

From M F on October 11, 2004 at 9:50 AM
As to TH Creative, it has been reported that Eisner has sullied relationships with major talent and Pixar is yet one more example. There is nothing odd about the fact that Pixar has not lined up another distribution deal at this point. First, with 5 releases and 5 hits, it is arguable that Pixar is a player in its own right. Secondly, as Mr. Baxter correctly points out, there is no need for a distribution deal at this time. It was reported that most or all of the major studios would seek a chance to partner with Pixar when the Disney deal was deemed dead. With 5 for 5, at 100% hits and profitability, who wouldn't want to partner with Pixar? Lastly, it is apparent that Pixar and Steve Jobs would like to continue its partnership with Disney, sans Michael Eisner. Pixar has not partnered with anyone at a time when Pixar could probably name the terms of its deal and get the deal done. With Eisner's departure imminent (some counting the days or minutes until 2006 when he is supposed to resign) Pixar will likely wait until the successor is announced and then decide what to do at that point. With a dearth of executive talent at these levels and with Robert Iger as an inside possibility, one can only hope that Disney under Iger does not look like Disney under Eisner. Finally, Mr. Baxter is right about Eisner and credit. If you look at the Disney successes, they occurred largely when there was teamwork and relationships with other talented executives, many of whom have left for other successful endeavors. Sure Eisner has had some success on his own with Disney but these stand in the shadows of some major corporate blunders.
From Ted Heumann on March 17, 2005 at 5:05 PM
I am not a "Disney dork", but I disagree with your assement of Disney.
In relationship to it's heyday, Disney is in a sorry state. BUT compared to everyone else, it is still the best.
I can't speak about Florida parks because I live in Southern California and have never been to Florida. But in Southern California Disneyland is still the best.
Legoland is allright, but is a little boring from an adult's perspective.
Knott's is kind of a dump and Cedar Fair is turning it into another roller coaster mecca with theming mostly related to the color of the current roller coaster (i.e. silver bullet).
Universal is lame. You can do the whole park in about 2 hours at best!
Magic Mountain $%^&# bites! It's in the middle of nowhere and is hot as hell in the summer. The lines exceed 4 hours in the busy months. It's rides are poorly maintained. And the staff there sucks.
As far as Disney's other offerings. I admit that Disney has over-merchandised themselves for at least the past decade.
As far as entertainment goes it has been mediocre for awhile, BUT there is no one better.
Iron Giant is a GREAT movie (i own it), but the studio set it up for failure.
Dreamworks can't produce anything that isn't HIGHLY sexualized and inappropiate for children and I would NEVER let my kids watch any of their stuff.
Nickeloden isn't much better. The stuff they do have that is appropiate for little kids (my kid is 2 1/2) is LAME. Dora makes me want to kill myself and Blues Clues is better, but not by much.
In conclusion, can Disney be better? ABSOLUTELY! But for now they are the best game in town.

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