It must have stung. After all, Katzenberg reinvented Disney, not only with animated wizardry but live-action winners like “Pretty Woman.” Now, while Hollywood celebrates a record-breaking summer with such blockbusters as Universal’s “Jurassic Park” and Warner Bros.’s “The Fugitive” (generating $326 million and $166 million at the box office, respectively), Disney has fallen off the charts. its biggest moneymaker in 1993 so far has been the year-old “Aladdin.”
Farther from home, the huge Euro Disney park outside Paris is hemorrhaging money. Wall Street has lost some faith in Disney, after years of worship. And though analysts expect the company to report higher profits, projecting 14 percent increases for the fiscal year that just ended, many have lowered their estimates. “Disney is having a lousy year,” says analyst Emanuel Gerard. Tinseltown types, many of whom envy Disney, are less kind. To hear them dis, the Disney magicians have lost their touch. Neither Katzenberg nor Disney chief executive Michael Eisner would comment.
One bad season for a studio isn’t anything remarkable. Some of Disney’s problems, too, may be growing pains in its emerging strategy to be a top supplier of movies and other entertainment for the 500-channel, multimedia future. But Katzenberg and Eisner have a record to defend; they’re the team that moved Disney from a 4 percent share in 1984 to market champ four years later. Now, just as they try to push a more ambitious agenda, they may be marking the end of an era when Disney could do no wrong.
Perhaps their biggest headache is Euro Disney, the $3.7 billion resort that the London Independent recently called “America’s cultural Vietnam.” Europeans haven’t taken to the park idea like Americans and the recession doesn’t help. They pack their own lunches, shun the Disney hotels and buy fewer Goofy sheet sets. Disney owns 49 percent of the park, and its share of losses this year could top $130 million.
Even in sunny Florida, there are problems. The murders of several tourists have threatened business. Meanwhile, analysts say, gate sales at Disney parks are flat and face rising competition. Premier Cruise Lines just ended its exclusive deal with Disney, switching to a new package that offers stops at Universal’s theme park. “Families want more variety says a Premier executive. Universal is planning to triple the size of its park complex, with Steven Spielberg as muse. Disney, also expanding, will remain dominant, but in a tighter market, analysts say, Universal’s gain might come at Disney’s expense.
It’s the flubs at the studio, though, that really hurt. Movies, along with TV programming, have been the key to Eisner’s push to diversify from theme parks; they made up 35 percent of operating income last year, up from 21 percent in 1988. And they’re the fuel for the rest of the empire, from merchandise to theme-park characters. But after hits such as “Beauty and the Beast” and “Sister Act” (and TV shows like “Home Improvement”), this year’s crop provoked more winces than cheers. “Super Mario Bros.” and “Another Stakeout” were among at least 10 box-office flops. Hopes are riding on such upcoming releases as “The Three Musketeers” and a stop-motion animated movie from “Batman” director Tim Burton. But Burton’s “The Nightmare Before Christmas” poses a marketing dilemma. Too macabre for tots, it’s being released under the Touchstone banner. Disney’s animated hits have succeeded because of repeat viewers kids who can’t get enough–but “Nightmare” is being pitched to an older audience that usually shies away from animation.
The crucial question about these stumbles: are they glitches, or a necessary consequence of the Disney way? The answer rests largely with Katzenberg. The hyperenergetic studio boss is widely credited with Disney’s successful attention to detail. But Katzenberg’s bean-counting intensity isn’t popular. The studio has a reputation for top-down control, hellish hours and being cheap.
Now Katzenberg wants to milk even more product from this lean operation. Although Disney has steered clear of the industry’s recent frantic dealmaking, it is positioning itself for the future by building a massive film library. Part of the strategy is to release more movies-55 in 1994, up from 25 this year. But Katzenberg says he’s swinging for low-budget “singles and doubles,” not home runs. Hollywood is skeptical that he can make money on the cheap. Says a top agent: “Jeffrey is in complete denial.” If he’s having trouble making 25, what will happen with 55? And isn’t it the blockbusters like “Aladdin” that are saving him?
Still, Katzenberg may have the last laugh. As the overseas markets explode, Disney could make more money even on less stellar products. Its animated properties are particularly lucrative and durable; a re-release of “Snow White” made $41 million this year, and “Aladdin” sold 10.5 million videos in the first three days of release this month, topping the $217 million the movie has grossed in theaters. Disney is also getting acclaim for “The Joy Luck Club,” which is making more money per screen than any other current film.
Katzenberg has also moved to give new authority to people who complement his expertise. Disney has bought Miramax, the art-house distributors of “The Crying Game,” and has signed deals with Merchant Ivory Productions, the makers of “Howards End,” and Joe Roth. the former head of Fox. Disney “started to get a reputation as not being as talent-friendly,” says Roth. By contrast, Roth has a reputation for creative sensitivity; he has already helped lure the Hughes brothers (“Menace 11 Society”). Katzenberg himself seems to have relaxed, switching from a suit to jeans and urging his staff to follow their hearts. “He’s suddenly more open,” says director Randal Kleiser.
Disney’s greatest strength, unique among modern-day studios, is its name. Audiences will flock to “a Disney movie,” but haven’t a clue who made “The Firm.” But there’s an underside to name recognition. When audiences are disappointed, they remember who let them down. If the name loses luster, Disney loses big.
