Mighty Disney Learns to Duck : CEO Eisner Is Dodging Slapshots on Euro Disney, Box Office Blues
When Walt Disney Co. Chairman Michael D. Eisner looks back on 1993, will the launch of the Mighty Ducks hockey team be his fondest memory? It’s plausible, given the summer-that-wasn’t at the box office and the gathering gloom surrounding Euro Disney.
After playing America’s corporate sweetheart for nine years, Eisner has been second-guessed lately by everyone from pundits to financial analysts, even though the Burbank-based company as a whole remains obscenely profitable. The most troubling question for many is how Disney--the world’s premier theme park operator--miscalculated so badly on Euro Disney.
Eisner has hardly seemed anxious to answer that question over the last year. But now he’s come out swinging, following reports that the park outside Paris might be closed after losing $83 million in the third quarter. Eisner calls the reports “insane” and insists that Euro Disney will remain open 365 days a year if he has his way, which one assumes he will. But he also revealed that plans for international expansion have been shelved until the park’s problems are resolved.
“You don’t build the kinds of parks we build for what a shopping mall costs,” Eisner said Monday. “This (problem) will pass. But while it’s passing we’re going to hunker down.”
Short-term Euro Disney fixes under consideration include a cash infusion from Disney, a 49% partner in the project. The company could also bring in a new outside investor, said Eisner, but he would not predict when the park might turn around.
He blamed Euro Disney’s performance on Europe’s economic downturn and the appreciation of the French franc against other European currencies, among other things. Disney executives have also been surprised by the propensity of Europeans to bring bag lunches and leave early, forgoing the park’s gourmet restaurants and showcase hotels. Even the ubiquitous Disney merchandise isn’t moving. But he insists he would not do anything differently.
“We have planted a flag in the middle of Europe, which is among the most spectacular things any company has ever done,” Eisner said. “Do I wish it was profitable in the first week? Absolutely. But it will not bring down Walt Disney Co. or even dent it substantially.”
On that basis, Eisner contends that people have overreacted to the park’s problems.
“It’s unbelievable,” he said. “People approach me as if someone died when they talk about Euro Disney. . . . We have a creative smash. It’s as good a piece of entertainment as we’ve ever delivered anywhere in the world. So I know this is like a movie that starts off slow. You just have to be a believer in better times.”
Others aren’t so optimistic. They consider Euro Disney a real drag on earnings and a public relations nightmare--an issue that Eisner supposedly acknowledged at a recent Aspen retreat for senior executives.
Analysts have estimated that the park’s annual loss could hit $300 million this fiscal year and that Walt Disney Co.’s share of the loss for the same period may approach $150 million. John Forsgren, vice chairman of Euro Disney, announced plans Monday to resign, a move that’s thought to be related to its problems.
Rebecca Winnington-Ingram, an analyst at Morgan Stanley in London, said Monday, “Euro Disney is in a dire situation and investors are very nervous.”
As for the U.S. stock, entertainment analyst Lisbeth R. Barron of S.G. Warburg & Co. in New York earlier this month projected that Disney’s stake in the park would cut overall earnings by 25 cents a share this year and 19 cents a share in 1994.
Others say Disney is equally concerned about the pounding its image takes each time Euro Disney, which is a separately owned and operated corporation, announces quarterly results.
Eisner agreed that Euro Disney’s stand-alone status leads to more scrutiny. “Since it’s its own public company, we have to expose every pimple and wart,” he said. “And that’s a problem because it can become a self-fulfilling prophecy. . . . We don’t want the public to become disenchanted.”
Image-wise, at least, Disney hasn’t had it so bad since 1991, when domestic theme park attendance tumbled during the Persian Gulf War, and the company became entangled in dispiriting and embarrassing lawsuits with the Muppets and a wheelchair-bound Peggy Lee.
But its financial performance remains strong. Even with a $30.9-million hit on Euro Disney, the parent company reported earnings of $259.1 million for the quarter ended June 30--17% above the year-earlier period.
Eisner says Disney’s filmed entertainment division is healthier than Paramount was during his best days there, when he enjoyed phenomenal success under then-Chairman Barry Diller.
Television production is one reason, thanks to hits such as “Home Improvement” and “Dinosaurs.” But the summer film crop was a disappointment.
Some analysts feel the studio got trampled in the audience rush to quality, big-budget films such as “Jurassic Park,” “The Fugitive,” “The Firm” and “Sleepless in Seattle.” Other say Disney’s movies, besides being cheap, just weren’t very good.
And even within the studio there’s a tendency to disown titles such as “My Boyfriend’s Back,” “Life With Mikey,” “Another Stakeout” and “Guilty as Sin.” “What’s Love Got to Do With It” seems to be the one summer movie that generated creative excitement within the administrative fortress guarded by the stone dwarfs.
While Disney executives insist that “Life With Mikey” and “Another Stakeout” are the only summer films that will ultimately post a loss, it’s illustrative that its biggest grosser was the umpteenth release of “Snow White and the Seven Dwarfs,” which has taken in $37.6 million.
But studio Chairman Jeffrey Katzenberg, who returned from a weeklong Malibu vacation this week, is telling colleagues that the studio plans to stick to its high-volume, low-cost formula. It will distribute up to 60 films next year between its Buena Vista and Miramax Films.
Underlying all the talk is the sincere belief that the studio is much better positioned for fall and winter.
Disney executives seem convinced that audiences will find more to love from such varied offerings as “The Three Musketeers,” “The Piano” and “The Nightmare Before Christmas” than the lion’s share of what the studio rolled out between May and August.
Those films also represent the first fruit of Disney’s many outside deals. “Musketeers” is the maiden release from high-profile producer Joe Roth. “The Piano” comes from Miramax Films, the feisty independent that Disney acquired earlier this year. And “The Nightmare Before Christmas” is from director Tim Burton, not Disney’s usual in-house animation crew.
The studio also appears to have a stronger in-house slate, including “Sister Act II” and “The Joy Luck Club.” Eisner says he’s satisfied with those movies.
“The world judges you by blockbusters, and we had our share as recently as ‘Aladdin.’ But the quest for a blockbuster is usually a quest in futility. . . . We have a strategy. We’re not going to chase other people’s strategy. We’ll do what we do.”
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Holy Box Office Bonanza: The record-setting summer of 1989, when “Batman” ruled movie theaters, has finally been surpassed, according to Daily Variety.
The trade paper reported that summer box office revenue reached $1.82 billion as of Aug. 19. Business is expected to remain strong through Labor Day.
So will studios splurge on more big-budget films with all the cash they’re pulling in? Not likely, they insist. Hollywood executives say the town will remain in a relatively conservative mode, mostly because they still remember the pain of more disappointing seasons.
Disney’s Summer Slate
Walt Disney Studios had a disappointing summer, with the reissue of “Snow White and the Seven Dwarfs” ranking as its biggest grosser of the season. Top summer hits ranked by opening date, with box office in millions of dollars:
Film Opening Date Box Office Super Mario Bros. May 28 $20.8 Guilty as Sin June 4 22.4 Life With Mikey June 4 12.2 What’s Love Got to Do With It June 9 37.0 Snow White July 2 37.7 Son-in-Law July 2 31.4 Hocus Pocus July 16 33.5 Another Stakeout July 23 17.9 My Boyfriend’s Back Aug. 6 3.2
Source: Entertainment Data Inc. Box office as of Monday.
