Stalking the King of Animation

Back in 1937, a skeptical Hollywood snickered when Walt Disney was making a feature-length cartoon about a beautiful maiden stranded in a forest with a group of tiny mine workers. They dubbed it “Disney’s Folly.”

The laughing stopped when “Snow White and the Seven Dwarfs” became one of the most profitable films ever. And in the six decades since, the Walt Disney Co. rarely has had to glance over its shoulder at rivals when making such animated hits as “101 Dalmatians,” “The Lion King,” “Beauty and the Beast” and its latest effort, the $70-million “The Hunchback of Notre Dame.”

At least until now. In one of the biggest bets Hollywood has made on a movie genre, studios collectively are spending as much as half a billion dollars on a risky premise: that moviegoers can develop an appetite for major, full-length animated movies beyond the one or two that Disney releases into theaters each year.

Given Disney’s dominance in making animated movies and the relentless way it defends its franchise, diving into the business might seem foolish. But in a town where money shouts, the roar of Disney’s animation profits has become deafening to its rivals.

Hollywood is enticed by the multitude of ways the studio mines its films to produce enormous profits, its success marketing them to both children and adults, and the soaring costs of making and marketing live-action movies.

About a dozen animated films are planned--with at least as many on the drawing boards. They range from basketball superstar Michael Jordan dropped into a cartoon to movies that are likely to look like high-tech “Toy Story” knockoffs.

To some observers, Hollywood’s animation frenzy is akin to trying to field a team from scratch to beat the Chicago Bulls--probably with the same result. The Disney name is on 22 of the top 25 animated movies of all time in box office receipts. The take from a single Disney hit, “Aladdin,” equals all non-Disney animated films combined. Hollywood’s movie graveyard is filled with efforts that failed, from 1994’s “Thumbelina” to last year’s “Balto.”

“Going head to head with Disney is like standing in front of a bullet train,” said Don Barrett, senior vice president for Nest Entertainment, whose “Swan Princess” failed to catch fire at the box office in 1994. “You can create a wonderful product, but if it doesn’t have the Disney brand, will the public buy it?”

Disney, a $42-billion colossus after swallowing the ABC television network this year, has mastered the art of producing top-quality animation as well as mobilizing the entire company to launch its films.

“The Hunchback of Notre Dame,” which opens Friday, is being backed by a $40-million marketing effort. Much of the promotional tab is being picked up by Burger King and Nestle because Disney animated movies help sell millions of dollars in children’s meals, dolls, chocolate bars and lunch boxes. Among the “Hunchback” promotions is an elaborate stunt estimated to cost $4 million in which New Orleans will shut down Wednesday for a parade and screening.

Disney also plays hardball to fend off challengers. Last month, it locked up McDonald’s for an exclusive, 10-year promotional agreement on future movies. This prevents competitors from promoting their films through the fast-food giant.

In April, Metro-Goldwyn-Mayer discovered how hard it is to compete head to head with Disney. After it announced it would release “All Dogs Go to Heaven II,” Disney re-released its 1988 “Oliver & Company” the same weekend. “All Dogs” quickly died.

“Once we decided on a release date, we saw how aggressively Disney could come after us,” said John Symes, president of MGM’s Worldwide Television Group, which oversees the studio’s animation efforts. “I think Disney has every right to protect their domain. But I think every company in this business has to be aware of the machine they’ve created.”

Beyond the marketing machine, fans of Disney movies believe they are not easily emulated.

“The real genius of Walt Disney himself and of his successors has not been drawing pretty pictures or making characters come to life. The real genius has been the solid grasp of story,” said critic Michael Medved, who writes extensively about family movies.

Still, competitors all hope for even a small piece of the billions Disney has generated from animated movies. In addition to what audiences pay in the United States, Disney’s animated movies can be smoothly dubbed for foreign markets, from which Hollywood gets most of its box office business.

Having a hit animated movie in the theaters virtually guarantees that a studio can make millions more selling videos. Some Disney animated videos have earned more than $200 million in profit, at least 10 times the amount most live-action videos generate.

Add in the sale of merchandise, video games and interactive products licensed to dozens of companies. Studios such as Disney and Warner Bros. stand to profit even further when those goods are sold in their company-owned stores.

Disney has shown Hollywood that animated hits can be exploited in every way imaginable. “The Lion King” earned an estimated $1 billion in profit, and continues to generate even more because characters such as lion cub Simba can be milked for years through new home videos and TV cartoons.

“Aladdin” earned $650 million in profit, analysts estimate, and “Beauty and the Beast” about $500 million. The latter found new life as a hit Broadway musical that still is playing worldwide.

By contrast, a live-action movie that generates $200 million in profit would be considered an enormous success. Even “Pocahontas,” which by Disney standards was not among the most successful animated movies, was hugely profitable, with analysts expecting it to earn $500 million in its first three years. One reason is that Disney’s success has allowed it to squeeze better licensing deals from merchandise partners.

Lousy economics in the live-action film business also have drawn Hollywood to animation. Top stars such as Jim Carrey and Tom Hanks can earn $20 million a picture. Overall, major big-budget movies can cost $70 million to more than $100 million.

For every hit such as “Twister” or “Mission Impossible,” there are dozens of films like “Nixon” or “Mary Reilly” that cost millions to market, then flop at the box office and have a limited afterlife. At Disney, animation success has masked what largely has been a mediocre performance by its live-action movies.

The demand for animators is so intense they are being imported from Canada, Great Britain and other countries. An animators union survey in March showed a $1,750 weekly median salary for animators--a figure $200 too low by the time the results were published a month later.

“This is about as good as it gets,” said Duncan Majoribanks, supervising animator for the Moses character in “The Prince of Egypt,” which is being made by the fledging DreamWorks SKG studio. Earlier in his career, he said, he couldn’t even afford a good pair of shoes. Now, he said, he commands a six-figure salary. Typical animator salaries can range from $2,000 to $4,000 a week, with a handful making more than $1 million a year.

Studios also are ordering truckloads of high-tech computer equipment. Advances in computer technology that save some labor-intensive steps in the traditional animation process have encouraged Hollywood to invest in a huge production infrastructure. Last year, Twentieth Century Fox built a $100-million high-tech animation studio in Arizona. Fox is hoping to attract animators tired of Southern California’s high cost of living. By locating in Arizona, the company also would like to produce movies for less than the $50 million or more it costs for a top-quality animated film. Fox’s first effort is based on its 1956 movie “Anastasia.”

Warner Bros., which over the years has had huge success with its Looney Tunes cartoon shorts, this fall will link the Chicago Bulls’ Jordan with Bugs Bunny in “Space Jam,” a theatrical movie combining live-action and animation.

Paramount Pictures will release “Beavis & Butt-head,” aimed at the MTV crowd, as well as “Rugrats,” based on its hit Nickelodeon series. Turner Broadcasting System, which is scheduled to be swallowed by Warner Bros. parent Time Warner Inc. pending regulatory approvals, plans the comedy “Cats Don’t Dance.”

By far the most ambitious effort is being undertaken by DreamWorks SKG, founded by former Disney studio chief Jeffrey Katzenberg, director Steven Spielberg and music mogul David Geffen. DreamWorks’ first animated film is “The Prince of Egypt,” based on the story of Moses.

Through Katzenberg, it has been raiding key animators from Disney. Others recruited by DreamWorks include Hans Zimmer, who won an Oscar for “The Lion King” musical score, and Elton John and Tim Rice, who won an Oscar for songwriting.

Katzenberg, who oversaw the making of such Disney hits as “Aladdin” and “The Lion King,” is hoping to replicate that formula for success: making critically acclaimed movies by sparing little expense and developing a high-quality look, story lines and Broadway-style music.

Disney, which is loath to discuss what its competitors are doing, would not comment for this story. But sources at the company say Disney executives rank DreamWorks as the biggest threat because of Katzenberg’s track record.

A glance at DreamWorks’ financial projections--given to potential investors last year--indicates animated movies are the linchpin to the company’s success. At that time, DreamWorks projected that its animated movies would generate an average profit of $200 million per film, and a staggering $355 million in income for the company in 2003. That represents more than half of the projected profit for that year.

Skeptics question how realistic the DreamWorks numbers are, especially when animated movies lacking the Disney name largely have failed. Katzenberg declined to comment. But sources close to the company say its projections are conservative considering the profit for an animated hit.

Nearly all competitors recognize the disadvantage they face in trying to sell an animated movie that doesn’t carry the Disney banner.

“Nobody on the planet is waiting to see the first or second Fox animated movie, or the first DreamWorks animated feature,” acknowledges Twentieth Century Fox President Bill Mechanic, a former top Disney executive.

Still, rivals note that Disney’s own animation efforts fell into disrepair in the early 1980s, allowing Universal Pictures to turn out two successful films made by Spielberg with animator Don Bluth, “The Land Before Time” and “An American Tail.” Disney did not firmly regain its dominance until 1989’s “The Little Mermaid.”

Competitors also note that Disney is under constant pressure to turn out huge hits. The first time an animated movie flops, they say, the company will face the inevitable backlash and questions about whether the magic is gone.

Any effort challenging Disney takes a huge investment because, despite technology advances, productions require large staffs and two to three years.

“You can’t just decide you want to make an animated film. You have to build an infrastructure, a team,” said Max Howard, president of Warner Bros. Features Animation.

Since joining Warner a year ago June, Howard has boosted the animation staff from 140 to about 400; last August, the division moved into a new studio in Glendale. DreamWorks Animation started in February 1995, and has about 400 employees. The company is spending about $150 million on an animated facility in Glendale.

Disney competitors also argue that past challenges failed largely because of sloppy attention to quality, especially in developing good story lines and music. Still, Hollywood executives fear that a glut of animated movies could turn off the public to the whole genre.

“I think everyone’s a little worried that there’s so much production out there, that the crappy product will sour the public’s attitude,” said Tom Sito, president of the Cartoonists Union, Local 839, and a DreamWorks animator.

Hollywood has a long history of killing golden geese by copying successful formulas. Three years ago, studio executives preached that the industry needed more PG- and PG-13-rated family movies. The result was such bombs as “Cabin Boy.”

Sensing another such glut in animation, some studios are taking a different strategy. Inspired by the success of the Disney-distributed “Toy Story,” which was made by the computer animation firm Pixar, more companies are stressing digital effects and technology.

“Our involvement in animation is more grounded in 3-D than in 2-D,” said Sony Pictures Entertainment Senior Vice President Ken Williams, whose company works on animated special effects. As for trying to emulate Disney, “there doesn’t appear to be a lot of room for a lot of people,” he said.

Executives at MCA are assessing animation, and hope to develop more movies along the lines of “Casper” and “Babe,” which were successful live-action family films enhanced by computer-generated images and mechanical characters. And MGM, chastened by “All Dogs Go to Heaven II,” has opted to make animated movies only for the home video market rather than compete with Disney in the theaters.

Many industry veterans expect that casualties are inevitable.

“Everyone who’s been around realizes these things change,” said Sito. “It’s cyclical, and the boom will wear out after a while.”

Sito, who teaches an animation class at USC, has seen expectations of young animators soar. One former student told him he was worried because he had no job just three weeks after graduating.

“What I want to prepare them for is a shakeout,” Sito said.