After paying off Saul Steinberg to abandon his takeover attempt, Disney was hurting.
Their wallets were hurting, their egos were hurting, even their reputations were hurting.
Perhaps most painful was the realization that the beating they took in order to rid themselves
of Saul Steinberg wasn’t the end of their troubles.
They were still facing scrutiny over the proposed acquisition of Gibson Greetings, a greeting
card company they were prepared to pay $300 million to buy.
Their management ability was being questioned, and at the same time a new investor, Irwin
Jacobs, was buying up Disney stock.
It seemed like there was no end to Disney’s troubles, but as it turned out, it was right
around the corner.
Following SEC regulations, Jacobs disclosed that he had acquired 5.9% of Disney with the
possibility of buying more in the future.
At such an early stage, it was still difficult to tell if it was another takeover attempt in
the making, or just an investor hoping to profit off a potential rebound.
Either way, as the new largest shareholder of Disney, Jacobs was understandably opposed
to the Gibson purchase.
He began to reach out to other shareholders who opposed the deal.
He then turned to Disney’s chairman, Ray Watson, and made the message clear: If Disney
wasn’t going to drop the Gibson deal on their own, he had the 10% of shareholders
he needed to force a shareholder vote to drop the deal against their will.
Such a proxy battle would be humiliating for Disney, and one more addition to the growing
list of gaffes made by their management.
Regardless, Disney CEO Ron Miller continued to support the deal, and so Jacobs began to
prepare for the proxy fight.
Meanwhile Stanley Gold, one of Disney’s newest board members and lawyer to Roy Disney,
was spending the day with Richard Rainwater, the man in charge of the Bass’ non-oil investments.
That's when the topic of Disney’s current poor leadership arose.
As representatives to two of Disney’s largest shareholders, they were both naturally opposed
to the Gibson acquisition, and weren’t afraid to point the blame at those steering the ship.
Rainwater, out of curiosity, wondered who Gold thought should be running the company,
if not Ron Miller.
Gold had one name in mind: A businessman and friend who had run a successful movie studio
as president and vice-chairman by the name of Frank Wells.
As the impending proxy fight over Gibson approached, Disney’s board members began to face reality.
They had survived their face-off with Saul Steinberg, but Disney’s stock was once again
suffering and a new investor, whose intentions weren’t fully clear, was buying up large
portions of the company.
There was almost no public support for the Gibson purchase, and it was a move that was
never really seen as an authentic decision anyway.
It was always just a defensive tactic.
Now the shareholder fight threatened a humiliating defeat at a time where they were struggling
to stay standing.
The path forward was clear.
Regardless of Miller’s support of it, they needed to kill the Gibson deal.
As Ray Watson, Stanley Gold, and a few other members worked to win over the rest of the
board, the topic of Ron Miller’s performance as CEO also arose.
After all, it was under Miller that Disney had wasted $200 million on Arvida, and it
was Miller who was pushing so hard to spend another $300 million on Gibson.
Something needed to be done about Disney management to stabilize the company so that it wouldn’t
face years of continued attacks from Wall Street.
Miller needed to go.
Watson, Gold, and another board member, Phil Hawley, decided that the best approach would
be to vote to form a committee to “review management”, which would come to the conclusion
that management needed to change.
They were able to secure the votes they needed, and so another board meeting was held to decide
the future of the Gibson deal.
The board ended up voting 13 to 1 in favor of cancelling the deal.
Gibson, understandably upset at the back and forth, would receive a $7.5 million kill-fee
for their trouble in the deal, and would even later become the exclusive rights holders
for Disney characters on greeting cards.
Disney took a slight hit, having to pay over $7 million dollars just to simply not buy
a company, but it was rationalized that losing $7.5 million ending the deal was far better
than losing over $300 million for a company they didn’t need to begin with.
With the Gibson issue settled, the board then moved onto the matter of stabilizing the company.
Watson pitched the idea of the committee to review management and explore all of its options
to prevent future takeover attempts and shareholder battles.
Ron Miller, not realizing that he was in the crosshairs of such a committee, agreed with
the idea.
The board voted in favor of the committee and set a date to reconvene two weeks later
to discuss its findings.
Though in reality, the two weeks weren’t needed.
Shortly after the board meeting, Hawley and Watson pulled Miller aside to break the news to him.
It was very likely that the committee would decide to ask for Miller’s resignation as CEO.
Ron Miller, shocked and thinking about the years he gave to the company, was speechless.
He broke down in tears.
With the gears in motion to replace Disney’s management, Stanley Gold had to move fast
if he wanted to see his friend and ally, Frank Wells, take up the mantle of CEO.
He made plans to meet with Wells that weekend to discuss the matter.
Figuring that such a management shake-up would involve replacing other roles at the company,
Wells suggested inviting the president of Paramount Pictures to the meeting.
He was reportedly unhappy in his current position and looking to explore new opportunities.
Perhaps he could find a place at Disney, running their studio.
His name was Michael Eisner.
Eisner, by that point, had made a name for himself in Hollywood.
Born and raised in New York, Eisner got his start in television, eventually climbing the
ladder at ABC where he pioneered concepts like the ABC movie of the week and oversaw
the airing of shows like Happy Days and School House Rock.
In 1976 he moved on to film, becoming the president and CEO of Paramount Pictures.
Under his leadership at Paramount, the studio put out films such as Raiders of the Lost
Ark, Grease, Star Trek, Beverly Hills Cop, and Friday the 13th.
Crediting a childhood of frequenting Broadway shows and a degree in English, Eisner stood
out as an entertainment executive with an eye for storytelling.
Eisner spent the meeting that weekend pitching himself, explaining to Wells and Gold how
he would revitalize the stagnant studio.
He brought a level of enthusiasm to the conversation that energized the two.
Eisner wasn’t just some straight-laced business executive.
He had a creative eye for what made good entertainment.
Gold couldn’t promise the two any positions, but he let them know that he wanted the board
to consider them both for Disney leadership.
They wouldn’t be the only ones in the running however.
Dennis Stanfill, who was once the head of 20th Century Fox was also being considered
for the role by Disney board member Phil Hawley.
Watson, as chairman, took time to visit both Eisner and Wells separately, and was impressed
with both of them.
While Eisner was the enthusiastic and creative option, Wells was pragmatic and had a solid
business-centric mind.
Both of them, he realized, would be good at the role.
However at the end of his meeting with Wells, Watson mentioned that Disney was ultimately
only looking for one executive.
In a move that would perhaps be considered rare in the world of big business and big
egos, Frank Wells replied, saying “Then get Eisner.
You need creativity more than you need anything else.”
Watson agreed, and that Labor day he wrote to the board, urging them to hire Michael
Eisner as President and CEO of Walt Disney Productions.
In another act of selflessness, Watson also offered to step down as chairman of the board
if they felt it would be the right direction for the company when leadership changed.
The board was torn.
On the one hand they liked and respected Eisner’s creativity, but at the same time they feared
his lack of experience as a corporate executive.
Sure he ran Paramount Pictures, but that was ultimately just a subsidiary of the larger
Gulf and Western.
They pushed back, asking if Eisner would take another role besides CEO.
When Watson went back to Eisner and asked if he would instead accept the role of chief
operating officer, Eisner declined.
After spending some time considering what he’d do at the helm of Disney, he wanted
CEO or nothing at all.
Watson agreed and once again urged the board to vote Eisner in as CEO.
Meanwhile, Roy Disney and Stanley Gold reached out to Watson to see if they could still find
a place for their pick, Frank Wells.
And Hawley continued to campaign for Dennis Stanfill.
On September 7th, as the board continued to consider their options for a new CEO, they
officially met to decide the fate of their current CEO.
After a tense meeting, the board voted unanimously to ask for Ron Miller’s resignation.
Miller read a letter he had written to make his case for staying on, but it was too late.
In an unexpected turn, the board ended the meeting there and tabled the discussion of
Miller’s replacement, deciding that it would be a bad idea to rush into a choice.
After days of consideration, it began to look like Watson would be changing his mind and
siding with Dennis Stanfill.
As former CEO of 20th Century Fox, Stanfill was known in the entertainment industry for
turning the studio around from potential financial ruin.
He ran the studio from 1971 to 1981, and in those ten years oversaw the release of films
such as The French Connection, Young Frankenstein, Star Wars, and Alien.
He was admittedly a great choice for Disney.
He not only had experience running a studio, but he had a proven track record when it came
to saving a studio that was in dire need of saving.
However, still wanting to keep Roy and Gold on his good side, Watson decided to offer
Frank Wells a position at the company as the head of business affairs of the film division.
Considering just a week ago he was in the running for CEO, Wells felt insulted at the offer.
Wells countered by pitching the idea of him and Eisner becoming co-chief executives, with
Wells controlling the business side while Eisner focused on the creative.
Eisner once again pushed for being the only chief executive at the company, arguing that
having two captains steering the ship would only result in trouble.
Wells conceded, offering to take the role of president while Eisner took the position
of CEO and Chairman.
With a structure they finally agreed on, all that was left was convincing the Disney board.
To do that, Wells turned to the Bass Brothers, who originally supported him for the CEO job.
The Basses didn’t know Eisner the way they knew Frank Wells, but Wells made it clear
that it was he, himself, who pushed for Eisner as CEO while he took the job of president.
The Basses, trusting in Wells’ judgement, met with Eisner and backed the decision, and informed the board
that they were behind Eisner and Wells instead of Stanfill.
They then took it a step further.
Similar to the way Irwin Jacobs gathered shareholder support in an attempt to hold a proxy fight
with the board over Gibson, Sid Bass gathered the support of major shareholders to the tune
of 40% and delivered an ultimatum to the board.
If the board didn’t choose Eisner and Wells, the Basses would start a proxy fight to oust
the Disney board and replace them with new members who would select Eisner and Wells.
They also put their money where their mouth was, buying up an additional 3.1% of the company.
They were invested in Disney, and they wanted Michael Eisner and Frank Wells.
On Saturday, September 22nd, the board, realizing that Eisner and Wells were a capable choice
and the preferred choice of many of its shareholders, and perhaps exhausted at the prospect of even
more infighting, voted unanimously for Michael Eisner as CEO and Frank Wells as President.
While the two wouldn’t share a co-chief executive title, they would still hold onto
that idea of Eisner focusing on the creative end of the company while Wells managed the business.
It was a dynamic very similar to the one that Walt and Roy Disney held all those years before.
Now that Eisner was steering the ship, the Bass brothers had a renewed and empowered
faith in the future of the company.
They purchased another 1.5 million shares of Disney, upping their stake in the company
to nearly 16%.
Irwin Jacobs offered to buy the Basses stake in the company figuring he might be able to
make a takeover play at Disney, or at the very least get some greenmail out of it.
However true to their faith in the new management, they declined the offer.
Jacobs, understanding that the Bass brothers would be a significant foe in any takeover
attempt, turned around and sold them his shares instead, and just like that, the Bass Brothers
owned just over 24% of Walt Disney Productions.
With such a large investment, Disney, at least for the time being, was safe from future takeover attempts.
So with the Gibson deal cancelled, future raiders blocked, and new management installed,
Disney entered into a new era.
Eisner and Wells were able to turn around the company’s fortunes in just a matter of two years.
Eisner brought in a colleague from Paramount by the name of Jeffery Katzenberg to head
up the film division.
Films such as Down and Out in Beverly Hills, Ruthless People, and Three Men and a Baby
ushered in a trend of modest budgets and big returns.
Roy Disney would be given the title of chairman of feature animation, and with the release
of 1989’s The Little Mermaid just a few years later, Disney would enter into its animation renaissance.
The theme parks would see explosive growth, with more hotels, more experiences, and more
rides being introduced.
The 1990’s, crowned “The Disney Decade” by Michael Eisner, would propel the company
to new heights.
Disney’s market cap would grow from $2 billion in 1984 to $53 billion by 1996.
As for Arvida, it did end up proving useful for a short while.
Their continued real estate development amounted to between 12% and 15% of Disney’s total
revenues in the few years they were a subsidiary of the company.
Disney would be able to use a good portion of that money to help fund that string of films that
would bring new life to their studio.
Then in 1987, citing a desire to focus on entertainment and the theme parks and a lack
of desire to deal with the issues that come with being real estate managers, Disney sold
Arvida to the Chicago-based JMB Realty Corp for $400 million.
Disney had managed to make use of the company in those three years, and also managed to
turn a profit on its sale.
1984 was perhaps one of the most tumultuous years for Walt Disney Productions.
At its worst, Disney was a weekend away from potentially being taken over, broken up, and
sold off in pieces.
It was the result of actions taken by corporate raiders but at the same time, in a way, it
was also the result of over a decade of inaction at Disney.
And yet, nobody at Disney was necessarily the bad guy.
Tatum, Walker, and Miller had benevolent motivations.
After all, they came from the Walt era of the company.
They treasured the organization.
They wanted to preserve the spirit that Walt Disney had instilled in the company.
The problem was they wanted to do it by pretending he was still at the helm when he wasn’t.
Those well intentioned desires just happened to create financial hardships at a time in
which not only the world of entertainment, but also the world of business was rapidly changing.
That unfortunately made Disney a prime target, and while over the years much of the public
thought of Disney as a hallowed American institution, Wall Street carried no such sentimentality.
Like any person or group backed into a corner, Disney fought.
It wasn’t a clean fight.
They made mistakes, some of which would ultimately cost people their jobs.
But over those crucial few months, with the help of board members, investors, and Roy
Disney himself, who was both, they managed to fight their way through the gauntlet.
The Walt Disney Productions that stepped out on the other side of 1984 expanded their scope,
experimented with new ideas, and evolved with the times, which some might argue, is exactly
what Walt would have done.
Walt Disney: Well it looks like I’m stuck here, so why don’t you go on without me
and I’ll be catching up with you somewhere along the line.
Rob: Hey everybody.
Thanks for watching the series.
I hope you all enjoyed it just as much as I enjoyed creating it.
I wanted to offer an extended and sincere thanks to all of my patrons over on Patreon.
A series like this is pretty new for the channel and YouTube, as many people know, can be pretty
unpredictable and so having that sort-of extended support really made a series like this possible.
If you got through all five parts and you loved it and you want to know more about this
story, I highly suggest checking out Storming the Magic Kingdom by John Taylor.
The book has been out of print for a little bit so you’d have to go digging for a used
copy on Amazon or eBay, but it is one of the primary sources that I used in writing this
series and it goes way way more in depth into the crazy year that 1984 was for the Disney company.
Anyway thanks again for watching the series, have a fantastic week, and I’ll see you next time. Bye!