When Michael Eisner turns in his company ID on Sept. 30, 2006, and looks back on his 22-year reign as The Walt Disney Co. CEO, he will be able to boast of having transformed the company from a down-on-its-luck has-been with a market capitalization of less than $3 billion into a media powerhouse with a brand known the world over and a market cap approaching $60 billion.
But when it comes to television, the picture is not as bright.
Mr. Eisner can lay claim to acquiring and growing the most powerful and successful brand in cable television-sports programming giant ESPN. And he can be proud of Disney’s ownership interest in a number of other big-name cable networks such as the Disney Channel, Lifetime, A&E and History Channel.
But Mr. Eisner has also overseen ABC as it has wallowed in third or fourth place among the broadcast networks for several years. And he was the executive who ultimately OK’d Disney’s $5.3 billion purchase of the Family Channel-a deal that was derided by observers as costing Disney $1 billion more than the channel was worth.
Those missteps have been at the heart of a months-long fight between Mr. Eisner and a number of shareholders, including several state pension funds and former Disney board members Roy E. Disney and Stanley Gold, all of whom have waged a campaign to oust the 62-year-old executive.
Now that Mr. Eisner announced last week that he will not renew his employment contract when it expires in two years, the performance of Disney’s television business could very much affect how history views Mr. Eisner’s leadership of the media giant.
The problems in TV will also play a central role in what will likely be a closely watched process to find a replacement CEO. Mr. Eisner has all but designated his No. 2, Disney President Robert Iger, as his choice to replace him. But that could be a tough sell to many shareholders, in large part because of problems in TV.
Mr. Iger has won points from a few board members for his loyalty to Mr. Eisner and his deft handling of the onslaught of shareholder criticism. He has been so much in Mr. Eisner’s shadow that Mr. Iger’s critics worry that he lacks the management acumen and broad vision required to run a large media company. Others complain that installing Mr. Iger in the top post will just keep Mr. Eisner’s policies in place at a time when the company needs fresh direction.
In fact, Mr. Iger’s record is far from untarnished. He is the executive most responsible for the fortunes of the ABC Network. He has taken a personal and visible interest in its recovery over the past few years. Yet the network has continued to falter and has been further buffeted by a procession of management changes.
That Mr. Eisner could leave behind such a mixed record in TV is a paradox. He cut his teeth in the TV business at ABC, where he rose to senior VP of prime-time production and development before leaving to become president of Paramount Pictures in 1974. In his day, Mr. Eisner shepherded such hits as “Happy Days,” “Barney Miller” and the landmark miniseries “Roots.” At that time, he helped take ABC No. 1 in ratings for the first time.
At Disney, Mr. Eisner revamped the company’s storied animation business and extended its brand into a host of arenas that have proved profitable over the years. Under his leadership, Disney bolstered its theme-park business as well, including a significant overseas expansion.
However, Disney’s foray into the TV business has been anything but smooth sailing.
The deal to acquire ABC was initiated by Mr. Eisner at an investment conference. When Disney bought ABC in 1995 the network was already declining in the ratings but Mr. Eisner pledged he would return it to its glory days. Instead, his notorious micromanaging of personnel, schedules and shows has been blamed over the years for poor programming choices and a high rate of turnover of executive personnel.
For ABC executives, the change in environment was particularly palpable: ABC under Capital Cities had been a largely decentralized operation in which top executives generally stayed out of the way of managers as long as they made their numbers.
“When Michael bought ABC, his reaction was one of wanting to get involved with ABC,” said a former Disney executive. “He had ideas.”
The problem, this person said, was that Mr. Eisner was “living in the past,” declaring in the mid-1990s that a particular show was the next “Laverne & Shirley,” a reference to the 1970s hit sitcom. Further, because of his management style, programming executives often deferred to Mr. Eisner, even going as far as watching his reaction to pilots before voicing their own opinions. “Decisions were inhibited,” and Mr. Eisner’s reputed insistence on approving everything slowed the development process, the executive added.
Mr. Eisner’s presence has also created a bit of a revolving door at Disney. A number of high-profile and up-and-coming executives have come and gone over the years, many clashing with Mr. Eisner, who prefers to be the sole executive in the spotlight.
A Disney spokesman did not return a call seeking comment.
The story has been quite different for Disney’s cable properties. Sources say that because Mr. Eisner readily admitted he wasn’t an expert in cable, ESPN and the company’s investments in other cable channels were largely left alone-and have flourished. ESPN, which is 80 percent controlled by Disney, has become an important profit center for the company, while the Disney Channel is a favorite among cable operators for its ability to draw young audiences. Even ABC Family, the channel formerly known as Family Channel, has begun to show signs of life.
Mr. Eisner has been less of an issue at Lifetime, which is 50 percent controlled by Disney, and at A&E and History Channel, which are 37.5 percent controlled by Disney, because the channels’ ownership is split between Disney and Hearst Corp. (NBC Universal also owns a slice of A&E and History Channel.)
“Michael knew he didn’t know about sports and cable, so he kept his hands off of both,” the former executive said.
With two more years before he retires, what Mr. Eisner does in that time period could be as important to the legacy he leaves as his past 20 years.
Richard Greenfield, a media analyst at Fulcrum Global Partners, said he’s most interested in what Mr. Eisner does to stoke the company’s growth into 2006. He said that while Disney seems poised to post earnings gains in 2005, it will still be at a level that he described as a recovery phase. “How do they grow from 2004-2006?” Mr. Greenfield asked. “That makes the [retirement] announcement secondary.”
Indeed, Mr. Eisner could improve his legacy if ABC generates some hits. Mr. Greenfield and others say much will rest on this fall season, with the success of new scripted series “Lost,” “Desperate Housewives” and the reality show “The Benefactor.”