Eisner believed and hoped "Nemo" would flop to gain upperhand...

Oski2005 · May 3, 2005

Interesting article about Steve Jobs and Michael Eisner. The info comes from an unauthorized biography about Jobs. Even if Eisner hadn't been a douche, I don't see how Disney could have given Jobs the deal he wanted. I'm not sure about how this works though. It all comes down to who is financing the making of the movies. I always assumed Disney paid it all, but there's no way Jobs asks for 92% of the of the profits if they aren't funding the movies themselves.

'Nemo' gave CEO Jobs upper hand

By Jeffrey S. Young and William L. Simon

Special to the Mercury News

The essence of the clash between Steve Jobs and Michael Eisner was revealed in one moment of the Pixar-Disney partnership. Shortly before ``Finding Nemo'' was released in 2003, Eisner met with the Disney board of directors and offered a prediction: Pixar was headed for a ``reality check.'' Early clips of the clown fish movie had failed to impress him, he said. The movie paled in comparison to ``Toy Story'' or ``Monsters, Inc.'' and would not sell as many tickets.

It was as if Eisner were reveling in the idea of a Pixar dud. Such a stark reality check would give him bargaining power in the upcoming contract-renewal negotiations with Steve Jobs. If ``Finding Nemo'' flopped at the box office, Steve would lose the leverage he had gained from previous Pixar blockbusters. Unlike the last negotiation, he would not be able to push for more favorable terms. Eisner desperately needed to protect every dime of Disney profits, which had slipped an incredible 41 percent in the first quarter of 2003. Though Disney would lose profits in the short term with a ``Nemo'' flop, it would win in the long term with a favorable Pixar-Disney contract.

Even as a summer release, ``Nemo'' was a resounding success. Earning some $70 million at the box office on its opening weekend, the picture had by the end of the year taken almost $370 million. Once again Pixar had broken all records: ``Nemo'' became the highest-earning animated feature of all time, and the ninth highest-grossing film in Hollywood history. It wasn't just audiences who fell in love with the movie: ``Nemo'' garnered Oscar nominations for screenplay, sound editing and original score, and won the Oscar as the best animated film of the year.

In the process, Steve had earned more than better leverage; he had stolen the ace right out of Eisner's hand. ``The impact of `Nemo,' '' said David Davis, senior vice president and box office analyst at Houlihan, Lokey, Howard & Zukin, ``is like a baseball player hitting 60 home runs in the final season of his contract.''

Pixar stock jumped up by 4 percent.

Other suitors swooped in. Warner Bros. stopped by the Pixar studio. So did Sony Pictures. ``Who wouldn't want to be in business with Pixar?'' said a spokeswoman for Sony. Disney executives fumed about Steve's ego. ``He's strutting around like a rooster right now,'' one said. ``Only time will tell if he gets his feathers plucked.''

If Steve was a crowing rooster, Eisner was a wounded peacock. ``This is all personal,'' one former Disney executive complained. Some people said that Eisner felt threatened by Steve's seemingly effortless success -- and his celebrity. Steve ``gets his face on Time magazine, he's loved by Wall Street. He'd be a perfect guy to take over Disney.''

Still, Eisner made some friendly overtures, inviting Steve to a springtime dinner at an Indian restaurant in the Bay Area. When asked whether curry and naan had warmed the relations between the two CEOs, Steve quipped, ``I'd say we had dinner.'' They also went to a World Series game in the fall of 2003. When reporters asked Steve if it meant the two had a rapprochement, he was equally dismissive: ``Sometimes a baseball game is just a baseball game,'' he retorted.

For his upcoming round of negotiations with Eisner, Steve signed on former Lucasfilm president Gordon Radley as a teammate, who advised him to be firm: ``Draw a line in the sand'' in order to force Eisner's hand. Otherwise, Radley warned, the talks could drag on indefinitely with no favorable agreement.

``The line in the sand that we drew,'' Steve said, ``was that we want to own our own films going forward, and we wanted to own `The Incredibles' and `Cars.' '' These were the two remaining films in the renegotiated Disney-Pixar pact.

According to Steve, he offered Disney a deal ``less favorable to us than we could get from several other studios -- for example, with much higher distribution fees, a much longer-term commitment and free use of our characters in their theme parks.'' That was his public statement; in fact, he was demanding 92 percent of the profits. Describing the kind of distribution deal he was after, he said, ``You rent a system.'' He wanted to rent the Disney marketing machine, not partner with it.

Steve must have known what Eisner's answer would be. The Walt Disney Company stood to lose hundreds of millions of dollars by signing away the rights, shutting itself out of not only money from ticket sales but also merchandise franchises, tie-ins and sequels. No CEO would have willingly sacrificed so much, even to save a valuable partnership.

``We're not for rent for anybody,'' Eisner said. He wanted a partnership, and in his mind it was Disney who brought the most to the table.

Negotiations devolved to the point that Al Gore attempted an intervention. Former Vice President Gore joined Apple Computer's board of directors in 2003 and offered to see if he could broker a peace between Pixar and Disney, where he felt he had some connections, though these were on the feeble side. The company had donated ``Beauty and the Beast'' costumes to him and his wife for a Halloween party, and Gore, while still serving as vice president, had discussed legislation with Eisner. He called Disney board member George Mitchell, a former Democratic senator, and encouraged him to press forward in talks. Mitchell in turn called Eisner.

Gore's efforts only raised Eisner's hackles. Not even a former vice president could convince him to make nice.

The problems were personal. As early as 2003 Steve had been button-holing various Disney execs to warn them that he and Michael Eisner couldn't work together: ``I don't see how the relationship can continue as long as Eisner is there,'' he told one executive. This dovetailed with a boardroom battle brewing in the Magic Kingdom. Roy Disney, Walt's nephew, had decided that Eisner had to go. After a dinner at Steve's home in Palo Alto to sound out his feelings, Roy was alarmed. It seemed as though Steve was willing to take Pixar out of the Disney fold, and that would be disastrous for the company's ailing profits.

Roy had reason to be concerned. The ax was about to swing, and the woodsman was Steve Jobs.

In January 2004, Pixar abruptly ended negotiations. ``After 10 frustrating months, we ended our talks with Disney,'' Steve said. ``Frustrating'' was no slip of the tongue. With that one word, Steve made his position clear: The talks were not friendly. Pixar played the victim of Eisner's tyranny.

Steve couldn't stand the thought of Disney holding beloved Pixar characters and movie titles captive. It made him resent their current agreement all the more. ``We feel sick about Disney doing sequels,'' he said. ``Because if you look at the quality of their sequels, like `The Lion King 1 1/2' and their `Peter Pan' sequels, it's pretty embarrassing.''

In his view, Disney had never contributed to Pixar's creative process. ``The truth is that there has been little creative collaboration with Disney for years,'' he said. ``The collaboration we do have with Disney is centered around the marketing of the films, not the making of them.''

He even denigrated Disney's marketing efforts. He paid a compliment to ``Dick Cook and his talented marketing team'' but then alluded to the Disney flops and added, ``But no amount of marketing will turn a dud into a hit.'' In other words, Disney couldn't even market its own productions into blockbusters.

His final insult, however, was also the most pointed. ``We think the Pixar brand is now the most powerful and trusted brand in animation,'' Steve said. He mentioned Disney's own research showing that Pixar had transcended Disney as a brand. Pixar was now more persuasive and meaningful to movie fans than Disney was. Steve wanted a deal that would reflect it.

Disney licked its wounds and bit back. Zenia Mucha, the Disney senior vice president of corporate communications, called it ``sad and unfortunate that he has resorted to insults and name-calling in the wake of the disagreement. We expected better of him.''

Excerpted from the book ``iCon: Steve Jobs, the Greatest Second Act in the History of Business,'' by Jeffrey S. Young and William L. Simon, to be published by John Wiley & Sons on May 16. Copyright (c) 2005 by Jeffrey S. Young and Wilarvi Communications, Inc. Reprinted by permission of John Wiley & Sons Inc.
http://www.siliconvalley.com/mld/siliconvalley/11537132.htm
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MadMax · May 3, 2005

Eisner sucks.

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Eisner believed and hoped "Nemo" would flop to gain upperhand...

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