The Near Fall and Rise of the Walt Disney Company

The Walt Disney Company, in just ten years, went from being on the verge of being picked apart and taken over to one of the most powerful and successful film companies of all time. Have you ever asked yourself how they did that? I did, when I was in college. In fact, I spent an entire semester researching and writing a paper on the subject. So, let me drop some fun knowledge on you. Shall we?

Let’s start before the threat of a takeover:

In the years following Walter Elias Disney’s death in 1966, the company found itself in turmoil. At first, everything seemed like it was going to be alright. The animation studios continued to make films, although they weren’t nearly as successful as the previous films had been. Then, the financial troubles began.

In the year 1970, Don Bluth, one of the Walt Disney Company’s oldest animators, left the company, taking eleven of the remaining animators with him. You see, Bluth felt that there was stagnation in the development of the art of animation at Disney. He would go on to create his own animation studio, which would later become a rival to the Walt Disney Company. This all occurred during the production of the film The Fox and the Hound, and it ultimately set the film back. As the years went on, things didn’t seem to be getting any better. In fact, they were getting worse. By November of 1983, the Disney Company appeared to be a likely takeover target. The two reasons for this were that the company was in weak condition, and its undervalued stock. By 1984, the management team was challenged by some outside high-profile investors and lost control of the company.

Once Roy Disney, Jr., who held 1.1 million shares of the company, resigned from the board, the chaos really began. There were a number of corporate raiders who saw the value of such a company, and they began buying up Disney stock like crazy. It was ultimately the Bass Brothers of Fort Worth, Texas, who invested nearly $500 million in Disney, thus preventing the dismantling of the company. Bass Brothers Enterprise ended up with around 25% of the Disney stock and it immediately boosted the Bass fortune. This was enough to control the company and appoint their own management team. This team consisted of three key people. First, Michael Eisner, formerly the head of Paramount, was appointed as Chief Executive Officer. Second, the Bass Brothers appointed Frank Wells, the former Warner Brother’s vice-chairman, as President of the company. And, third, Jeffrey Katzenberg from Paramount was appointed as the head of the film division. The Bass Brothers would be involved in making major decisions and assured this new management team that they would receive the funds to run the company for five years. Immediately following the placement of new management, the company underwent major cost-cutting measures. From 1983 to 1987, annual revenues more than doubled. The company’s profits nearly quintupled, and the value of Disney stock increased from $2 billion to $10 billion. The company was finally getting back on track.

“Team Disney”, as Eisner, Wells, and Katzenberg have come to be called, revived the nearly dead company with a number of new policies. They revived the traditional Disney by repackaging existing products and creating new animated features. They began to re-release their classic animated films, this time onto VHS tape, the first one being Pinocchio. They realized they could make money for the company this way since, during takeover discussions in the early 1980s, the value of the Disney film library was estimated to be about $400 million. This was a business strategy that was implemented throughout the 1990s. By limiting these re-releases, the company created a demand on their product. The re-releasing of their films resulted in more than $100 million in “pure profit” in 1986, according to Douglas Gomery in “Disney’s Business History”. They modernized some Disney characters, like making Goofy a father and creating “Modern Minnie”. They introduced more diverse product lines, such as films marketed towards older customers, released by Touchstone. They also implemented severe cost cutting, primarily on feature films, introduced dramatic price increases at the theme parks, and employed new technological developments.

“Team Disney” also emphasized four strategies that the Disney Company had already developed. First, they emphasized corporate partnerships. In the 1950s, the company had become reliant on certain strategic alliances due to the construction of Disneyland. As they built more theme parks, as they expanded more, more partnerships were created. Corporate partnerships also benefited the company because they relied heavily on revenues from licensing their characters to other companies. Team Disney took these partnerships even further. They rearranged the EPCOT licenses to add further benefits for the Disney Company. They created new partnerships during this time, as well. It was then that Disney entered into a ten-year formal relationship with the McDonald’s company to sell their toys and promote their films through Happy Meals.

The second strategy that Team Disney emphasized was limiting exposure. They very often used other people’s money in order to limit the company’s risk. The third strategy was diversifying expansion, which they worked on mostly in the 1990s with magazines, book publishing, and ownership of professional sports teams.

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The fourth strategy was corporate synergy. They became particularly good at this one, especially by the time Hercules was released.

Although the bulk of the Walt Disney Company was beginning to prosper, the Disney Animation department was not. That department hit rock bottom in the year 1985, when The Care Bears Movie beat out The Black Cauldron at the box office. Two things then happened. The first was that Roy Disney, Jr. asked to take over the animation department. Roy called on a friend for help, and that friend sent in Peter Schneider, who became the Vice President of Animation. The second was that Jeffrey Katzenberg suggested that animated films could be edited. Now, this was something that had never been suggested before. Up until this point, what was shown on the storyboard wall was exactly what would be in the film, no more and no less. Editing an animated film was a brand new concept that would ultimately benefit the animated films that the company would make.

The Great Mouse Detective was released in 1986, and it was successful enough, both theatrically and critically, that the Walt Disney Company had some faith restored in its animation department. However, a new threat to animation had arrived and that threat’s name was Steven Spielberg. Although The Great Mouse Detective did well enough in theater’s to restore Disney’s faith in animation, Spielberg’s An American Tail beat it overall. However, if it weren’t for Steven Spielberg, Disney’s animation department would have never been fully restored to what it once was. Disney Animation Studios was asked by Spielberg to help in the production of Who Framed Roger Rabbit? Due to the technical breakthrough of this film, it returned millions of dollars to the Walt Disney Company and renewed interest in theatrical animated cartoons (if you would like to read more on that, I wrote an entire post about the importance of Who Framed Roger Rabbit? Go have a look!)

Following the success of Who Framed Roger Rabbit? in 1988, the Walt Disney Animation studios began its most successful run to this date. The film that began this run was none other than The Little Mermaid. The film had been in development since the 1930s, but because of one reason or another, the film wasn’t made and released until 1989. The Little Mermaid, in its own way, became a renaissance period for the animators, themselves.  The animators looked back on the films that had been successful and used those as inspiration for how they were going to make this film. Mermaid went on to break The Land Before Time’s record of “Highest Grossing Animated Film”. It had marvelous press coverage and was a commercial success. The New York Times called it “the best animated Disney film in at least 30 years”. The Little Mermaid went on to win two Academy Awards, one for Best Original Song, which was “Under the Sea”, and one for Best Original Score.

The next film that followed was Rescuers Down Under. This was Disney’s first animated sequel, so it was a bit of a risk for them. Unfortunately, it did not perform well at the box office and, as a result, Jeffrey Katzenberg pulled advertising for the film after it only made $5 million on opening weekend. Even though this film did not do well at the box office, it was still a very important one for the Walt Disney Animation Studios because Rescuers Down Under was the first digital film to be produced in Hollywood. The Animation Studios used a program called CAPS, Computer Animation Production System, to put the film together. This program allowed the animators to paint the characters and to digitally assemble all of the artwork. Thus began Walt Disney’s affiliation with PIXAR, the company working on the CAPS program. They would later make a film with this company that would be the very first of its kind, all because Peter Schneider couldn’t hire away John Lasseter.

Beauty and the Beast was the next film the studios had planned. The decision was made to screen an unfinished version of the film at the New York Film Festival, which was a very risky move for the studio. Luckily, the unfinished version of the film was a massive success, which only gave them hope, and rightfully so. Beauty and the Beast opened with huge box office earnings and many glowing reviews. When it came time for the Academy Awards in Hollywood, Beauty and the Beats was nominated for Best Picture. Even though it lost to Silence of the Lambs, this was the first time an animated film had been nominated for the Best Picture award, and it was groundbreaking.

The Little Mermaid and Beauty and the Beast are the films that had established the template for Walt Disney’s animated films. They found that a musical comedy format with Broadway-styled songs and tent pole action sequences, paired with cross-promotional marketing and merchandizing designed to pull in audiences of all ages and types is what worked.

Still riding on the high from Beauty and the Beast, the animation studios continued onto their next film, Aladdin. But, by this time, the executives began to wonder “how long can we keep this going?”. The work load was becoming unbearable, as the studio was working on nearly five animated films at once, all in different locations. A Goofy Movie was in production at their studio in Paris, Toy Story was in production at their studio in Florida, and everything else was in production at their studio in California. Tensions began to run high amongst the executives. But, they carried on as best they could and Aladdin became the first animated feature to gross over $200 million. It was, once again, another milestone for the company. This film also established a new trend of hiring celebrity actors and actresses to provide the voices for Disney characters.

Since the film made so much money, they decided to keep focus on their animated films.

The next film to come out of Walt Disney Animation Studios was The Lion King. It was during the production of this film that tragedy struck, and the tensions between people became exposed.

On April 5, 1994, Frank Wells, the President of the Walt Disney Company, died in a helicopter crash. Frank was the peacemaker among the three tremendous egos at the studio, and when he died everything seemed to shift. But, as Disney always does, they got through this hard time and The Lion King became their highest grossing tested film of all time. But, the success of The Lion King was not enough to calm the tensions among “Team Disney”.

An article in the Wall Street Journal had stated that Katzenberg was the guy who was saving animation. This article ultimately doomed Katzenberg. He was not “saving” animation. He had merely become the face for the company and didn’t argue with people when they made this claim. This was the last straw for Roy Disney, Jr. and Michael Eisner. After the opening of The Lion King in 1994, Jeffrey Katzenberg, head of the film division, resigned after Michael Eisner informed him that he would not be getting Frank Wells’ old position. Katzenberg would later go on to help found DreamWorks SKG with Steven Spielberg and David Geffen.

There most certainly had been a shift. The Walt Disney Company had lost two of their three “Team Disney” members within a year. But, that did not stop them from making more animated films. The next film was Pocahontas, and it opened to mixed reviews. But, those mixed reviews did not stop moviegoers and the film grossed $346 million. Following Pocahontas was The Hunchback of Notre Dame, and this film, unlike all the previous ones, was not received well by the critics. The film only made $323 million. Hercules was released on June 27, 1997, but the promotional activity and merchandising began long before that, in an attempt to cause more excitement about the film. This, unfortunately, did not help all that much, as the film only made $250 million – $73 million less than Hunchback. The studio began to become concerned. Although, they weren’t concerned for long. Mulan earned $304 million at the worldwide box office. This restored the commercial and critical standing of Disney’s output.

The last film in the Disney Renaissance period is one that clearly had a different style than the rest. This one was no longer in the Broadway style that all the other films had been. But, that didn’t stop Tarzan from becoming Disney’s most commercially successful film since The Lion King, earning $448 million at the box office, and earning glittering reviews. With Tarzan came the next advancement in animation called the deep canvas technique. Animator Dan St. Pierre wanted to find a way to really immerse characters into their environment. St. Pierre teamed up with the Computer Graphics Supervisor Eric Daniels to make this dream a reality, and they were able to do it. This technique allowed the animators to move the “camera” as if it were a live action film. The animators were now able to follow the characters while adding strong movement and depth to the film. Tarzan ended the ten year run for the company, and after its release, the focus of the Walt Disney Company shifted. It moved away from making so many animated films, and began to focus on how to best benefit from the business deals that were made within this ten year time.

Roy Disney, Jr. had made a promise in the late 1980s to release a new animated film every single year, instead of releasing a film every four years as they had done in the past. Roy had kept his promise: ten films in ten years. Because of the new management that had been put in place, the Walt Disney Company was able to expand wider and become more successful than it ever had before. Now they have entered into, what is being called the “the Disney Revival” and it is sure to be as successful, if not more successful than the Disney Renaissance Period. But, no matter how many movies they make, no matter how successful they become, let’s all keep one thing in mind: “It was all started with a mouse”.

 

 

 

I’d like to give credit where credit is due: the two main materials used for my research for this entry were the documentary Waking Sleeping Beauty (which I highly recommend watching) and Janet Wasko’s book Understanding Disney (which is a fascinating read).

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