HOLLYWOOD— ONE year ago the Walt Disney Company was the most stable studio in town, piling up profits from animated hits like "Beauty and the Beast," successful television shows like "Home Improvement," and syndicated programs ranging from "Golden Girls" to "Live with Regis and Kathie Lee."
Today, the profits are still flowing but the stability seems a blurred memory. Of the four men who brashly took over the crumbling studios in Burbank in 1984, only one, Michael D. Eisner, chairman of the Disney empire, remains. Frank G. Wells, the president of the company, and Mr. Eisner's closest associate, died in a helicopter crash last April. Jeffrey Katzenberg, the studio chairman who oversaw movies for a decade, quit in a rage six months ago after Mr. Eisner bypassed him for a promotion. And Richard H. Frank, the studio's president and the man who was in charge of television, resigned three weeks ago after intense disagreements with Mr. Eisner.
Having been tightly controlled by four powerful men for so long, Disney is now in the grip of an uncertainty that seems almost Shakespearean: A great leader becomes fond of shuffling executives, seems threatened by any accumulation of power beneath him and avoids confronting the realities of mortality by failing to create a line of succession -- even after undergoing emergency heart surgery at the age of 52.
In reality, the situation is more complex. Mr. Eisner, one of the most brilliant and successful executives in Hollywood, and his three compadres, transformed a fading purveyor of family fare with less than $1.5 billion in yearly revenues into a global entertainment giant grossing more than $10 billion a year. The colossus they built is worth some $28.4 billion at current market prices -- twice Time Warner Inc. and 74 percent higher than Viacom Inc., the nearest competition. Along with the names they made for themselves, the foursome also made fortunes: Mr. Eisner alone has earned pay packages totaling $300 million since 1984 and has another $600 million in paper profits on stock he still holds.
But now his legacy is in the hands of an untested new Team Disney at a time when the entire entertainment business is undergoing profound changes. Unlike its rivals, Disney has decided to remain a provider of programs rather than buy or build a way to distribute that content. Nonetheless, there is constant talk about Disney's acquiring a television network, and in recent days, there has been speculation that Disney is exploring more sophisticated forms of entertainment like gaming (which it denies) and a camp for grown-ups the company is calling "The Disney Institute."
Given those pressures, some of Mr. Eisner's choices have been curious, colored perhaps by the impatience that comes with having been deserted by trusted colleagues. With the exception of Joe Roth, former chairman of 20th Century Fox studios, who assumed some of Mr. Katzenberg's responsibilities, Mr. Eisner has surrounded himself largely with business and marketing types who have scant experience in creative matters. The result has been a diminution in the creative ranks, with Mr. Eisner making plain that he holds unparalleled control over Disney's creative output. And loyalty and financial derring-do appear to matter more in the new regime than a creative track record.
SINCE Hollywood is a community whose executives, producers and agents often wish the worst on one another, it's not hard to find skeptics about the new Disney team. And sure enough, at least some of the Hollywood establishment say Mr. Eisner's solo act is a perilous one. "Can a $10 billion or $12 billion enterprise, with its efforts flung throughout the world, be creatively run by a single person?" asked one top executive from a rival studio. "It didn't get to be that business with one creative head."
Mr. Eisner denies that he has had trouble sharing power or grooming a successor. Disney's stated goal, he said, is to "sustain itself creatively beyond the presence of any single individual and revitalize itself even in the face of change." And he denies that he is sitting atop a Dumbo-sized morale problem. "I'm concerned about whether it's going to be nice the next day so people will go to our theme parks," he said. "Morale is extraordinarily high, and it's not as some would report otherwise."
But even some of the calmer heads within Disney question their leader's judgment. "All the creative directives come from one place," a top Disney executive said.
"No one's fueling the engine," a senior producer at the studio said. "There's no person putting it all together and making it work. The gap between Michael and the next heaviest contender is enormous now."
Or as a second producer put it: "I went into the dining room yesterday and it was bean counters, guys in suits. What a relief that Bette Midler was there. Like the old days."
It has been just over a year since "the old days" ended. Mr. Wells's helicopter went down on April 3, 1994, and with it, a happier chapter of Disney's history came crashing to a halt. The low point came on Aug. 24, shortly after Mr. Eisner underwent his quadruple bypass operation. Mr. Katzenberg, furious that he was being denied the president's job, left the company and helped start a rival movie studio.
Months later, not only has Mr. Eisner yet to name a clear No. 2. He has yet to completely replace Mr. Katzenberg.
Joe Roth, 46, veteran movie executive and producer, inherited the live-action films. Mr. Katzenberg's television duties went to Mr. Frank, up until last month, when he, too, quit and Dennis F. Hightower, 53, a marketing executive without television experience, took over. Animation -- Mr. Katzenberg's biggest obsession and Disney's best moneymaker in recent years -- has been left without a clear chain of command. Nominally, Roy Disney, a member of the founding family, is in charge. At least for now, Mr. Eisner keeps tabs on it himself.
In many ways, these are the three most crucial jobs in the company, after Mr. Eisner's. Though filmed entertainment provides only 43 percent of the company's profits, the characters it creates are what allows the company to offer new attractions in its theme parks and new consumer products.
"They integrate the value of their franchises better than anyone else," said Jeffrey B. Logsdon, a Seidler Companies analyst who remains bullish on Disney. "An animated product becomes a merchandising product that turns into a consumer product in a Disney store. And they turn a profit at every level."
Putting the easygoing Mr. Roth, best known for having brought "Home Alone" to market, in charge of live-action films was by far the safest choice Mr. Eisner has made yet, even though the new man has attacked the status quo. "Jeffrey did a fantastic job," Mr. Eisner said. "Over all, you can't criticize his performance. Joe has his own way of doing things. He's equally obsessed. I'm letting him do it his way."
Mr. Roth's first target was Disney's legendary arrogance.
Under Mr. Katzenberg, the company earned a reputation for cookie-cutter comedies, a general refusal to hire expensive stars and directors, and a doctrine endorsed by Mr. Eisner that more is better, which meant it distributed some 40 films a year. Miramax, a subsidiary, releases another 15 to 20 films a year. The rationale: Though it was no guarantee of quality films, cranking up the assembly line at least shored up the studio's library. Mr. Roth wants none of that thinking. "Every film has to have a reason for being," he said. "Every one has to have a life of its own, a possibility of playing overseas and not just to fill slots -- which, by the way, I was as guilty of as anyone else."
As the new studio chief, Mr. Roth pledges that each year there will be fewer Disney-style comedies, a handful of serious films, some big budget extravaganzas (a remake of "Mighty Joe Young," for instance, and "White Squall," a Ridley Scott adventure) and a big animated musical.
He would like to see the studio distribute no more than 30 films a year, and is willing to splurge more on expensive stars like Sharon Stone and directors like Mr. Scott, talent that Mr. Roth's frugal predecessor had shunned.
It may take a while to see if Mr. Roth's hunches pay off. For the next few months, the studio will be busy producing a strong slate of projects that Mr. Katzenberg approved.
The live-action films include a submarine drama, "Crimson Tide," starring Denzel Washington and Gene Hackman; "While You Were Sleeping," a comedy featuring with Sandra Bullock, which has stirred a strong early response among audiences; and "Judge Dredd," a futuristic Sylvester Stallone opus.
AFTER that, Mr. Roth's tastes will begin to show. For instance, he has approved an Oliver Stone film, "Nixon," with Anthony Hopkins as the late President. It is bound to be controversial given the topic and the director's insistence on controlling his own projects. Mr. Roth has also launched projects with Meryl Streep, Liam Neeson, Robin Williams, Whoopi Goldberg and the director John Hughes.
One of Mr. Roth's biggest tasks is ironing out Disney's uneasy relationship with Miramax, an acquisition that Mr. Katzenberg championed as a way to do movies for adults without sullying the company's reputation for family entertainment.
The company, owned by Harvey and Bob Weinstein, has made acclaimed pictures like "The Crying Game," and "Pulp Fiction." But it has also raised hackles inside the Magic Kingdom for paying $3.5 million for "Kids," a provocative film about teen-age sex, and for scheduling the release of a movie about a gay priest on Good Friday. (It backed down when the Catholic Church protested -- but only after reaping a windfall of free publicity.)
A bigger cause of concern, outside the company and within, is Mr. Hightower, who has no television experience and has spent the last eight years abroad, far from the latest crop of American-made television shows. Disney's television fare, largely under Mr. Frank, was a formidable competitor with such hits as "Ellen," "Blossom," and "Empty Nest." Its biggest success, "Home Improvement," which is now in syndication, could eventually rival "The Cosby Show" in revenue.
Across Hollywood, Mr. Eisner's decision to bypass seasoned Disney television executives like Dean Valentine, president of Walt Disney and Touchstone Television; Randy Reiss, executive vice-president of Walt Disney Television and Telecommunications; and John F. Cooke, executive vice-president of corporate affairs of Walt Disney Company and former president of the Disney Channel, was viewed with amazement. Since the Hightower appointment, Disney has been roiled by reports of rare fissures in its television ranks and in-fighting in its ranks. Mr. Roth, for instance, is said to be miffed that Mr. Hightower had been given responsibility for home video, an area Mr. Roth ran successfully at 20th Century Fox.
MR. EISNER stands by his man. "Dennis Hightower is a very smart man," said the chief executive. "I'm really comfortable with him as the worldwide overseer of this." Though he may lack the experience of having confronted the major networks at the bargaining table, "he's very experienced sitting down with our partners in Luxemburg and Taiwan," Mr. Eisner notes.
And given how much home viewing habits are expected to change, both Mr. Eisner and Mr. Hightower argue that inexperience in the ways of the past should be no liability. Mr. Hightower, for instance, believes he also has Mr. Eisner's blessing to seize opportunities that may open up as cable and telephone companies vie to control access to the nation's homes. "I'm not further ahead or behind than anyone else," Mr. Hightower said. As he sees it, his mission is "to help the company create what will happen in the next millennium."
Wall Street has yet to see evidence of Mr. Eisner's long-term thinking on the animation business, which is closely watched because of its huge earning power.
"The Lion King," for example, is probably the most profitable film ever made -- already grossing about $740 million and earning as much as $1 billion in retail merchandising sales. Those figures do not even include sales of 20 million home video cassettes since the movie went on sale last month.
Yet the uncertainty about who actually runs animation -- Mr. Eisner? Mr. Disney? or perhaps Peter Schneider, the president of feature animation for the last nine years -- has left the division vulnerable to raids by rival studios.
Because of Disney's success, companies like Warner Brothers, Universal, 20th Century Fox, Turner and even Mr. Katzenberg's new studio, Dreamworks, are on the prowl for animators and artists.
One reason they have had little success raiding Disney's ranks thus far is that back when Mr. Katzenberg was the studio chief, he forced top animators to sign three- and seven-year contracts to guard against poaching, never dreaming the long-term contracts might someday work against his own interests.
Mr. Katzenberg left his former employer another farewell present: "Pocahontas." Due this summer, it should be the first of several big-budget musicals started on Mr. Katzenberg's watch that should cover Disney for the next five years. Other Katzenberg projects include "The Hunchback of Notre Dame," to be released next year, "Hercules," "The Legend of Mulan," about a Chinese peasant girl turned warrior, and "Tarzan."
MR. KATZENBERG, who would not comment, has never been shy about taking the lion's share of credit for "The Lion King" and other new releases. Indeed, he even inserted footage of himself on the home video versions of children's movies like "The Jungle Book," ostensibly to show how the movies are being created.
And while there is no question that Mr. Katzenberg contributed mightily to the success of the animation division, some say the artists and animators have been happier since the obsessive Mr. Katzenberg left. "It's the artists who make these movies and not the executives," said Peter Schneider, a dominant figure at the studio, picking his words carefully.
LAST week's announcement that Stephen F. Bollenbach, the chief executive of the Host Marriott Corporation, would become Disney's chief financial officer offered hope that profits might keep flowing, even if Disney's vaunted hit machine stumbles. Disney's stock popped 50 cents, to $55.125, on the news. Modest? Not really. It reflects a quarter-of-a-billion-dollar gain in market value when the company's 500 million shares are taken into account.
Mr. Bollenbach is a proven financial Houdini who has found hidden values in the companies he has helped run. Given his background at Marriott and before that at the Trump Organization and the Promus Companies, he can also help steer Disney further into the hotel and resort arena, not to mention gaming.
Because Mr. Bollenbach played a starring role at Host Marriott and because he has at least one friend on Disney's board -- Gary L. Wilson, a former boss at Marriott -- the appointment stirred immediate speculation that he would ultimately add the president's title to his other credentials. The son of a milkman, Mr. Bollenbach has a masters degree in business administration and is a native Californian who looks the part of Hollywood mogul in at least one way: he drives a Ferrari Testarossa.
For his part, Mr. Eisner seems fully aware of the questions raised about Disney's executive turmoil -- but succession is another matter. Numerous successful corporations, he told shareholders six weeks ago at their annual meeting, often lose track of their mission.
"Instead of the daring, nimble companies they once were, they become prisoners of their own success," he said. "Their pace becomes sluggish, their breathing labored. Decisions are made by committee, and every bet must be a sure thing."
It will not happen to Disney, he insisted. "The company is healthy. The brand is healthy. I am healthy," he said. The Prince Charming of Wall St.
For all the turmoil at the top at Walt Disney, the company's shares have marched upward with the chipper determination of Disney's seven dwarfs. The stock closed at $55 on Friday, 30 percent higher than a year ago and way ahead of the 12 percent rise in the market.
Wall Street was certainly wowed by the $740 million that "The Lion King," has already grossed. The movie drove Disney's net income up 270 percent in 1994, to a record $1.1 billion. And because "The Lion King" is only now going into home video, investors can expect the next few quarters to be as thrilling.
Beyond that, though, Disney may warrant caution. The shares trade at a princely 22 times fiscal 1995 earnings -- much higher than comparable entertainment companies like Time Warner or Viacom. John Tinker, a media analyst at Furman Selz Inc., recently removed Disney from his list of recommended stocks, primarily because of its price.
He also frets that Disney has lost some of its key animators, noting that if Michael D. Eisner, Disney's chairman, cannot recruit talented replacements, the company may not be able to count on a Lion King every summer.
Mr. Tinker admits that Disney once gave him its "Grumpy Award" for his sourpuss views. But given the stock's price and Disney's heavy reliance on blockbuster animated films, prospective investors would do better to be grumpy than dopey. MARK LANDLER
Photos: The new team (left to right): Richard H. Frank (Bart Bartholomew for The New York Times), Dennis F. Hightower and Joe Roth. (William Coupon/Onyx. Filmstrip)(pg. 1) Graph: "EISNER'S LEGECY" shows percentage change of Disney's stock since Michael Eisner took over in September 1984. (Source: Datastream)(pg. 12) Chart: "A Year of Turbulence" Management changes at the Walt Disney Company during the lat year, initiallty dismissed by the market, have caused increasingly large reverberations in the company's stock price. DISNEY'S PRESIDENT DIES April 3, 1994 -- Frank G. Wells, president of Disney, dies in a helicopter crash. Its the first significant change in the senior management structure in nearly a decade. But market reaction is muted because Mr. Wells has had a lower public profile than Michael D. Eisner, Disney's Chairman. FILM STUDIO HEAD RESIGNS Aug. 24, 1994 -- Jeffrey Katzenberg, long-time chairman of Disney Studios, resign one month after Mr. Eisner undergoes emergency heart surgery. Widely seen as the creative force behind Disney's film and television fare, Mr. Katzenberg leaves because he has not been offered Mr. Wells' job. The departure has been rumored for weeks, cusioning the blow to Disney's stock. Mr. Katzenberg's job is split between Joe Roth, former chairman of 20th Century Fox, who becomes head of the movie studios, Richard H. Frank, who is given responsibility for television, and Mr. Eisner, who takes on oversight of animation. TELEVISION CHIEF RESIGNS March 10, 1995 -- Mr. Frank resigns because of reported differences with Mr. Eisner. He id replaced by Dennis F. Hightower, a Disney executive with experience in publishing, music and software, but not television. The continuing disarray causes the stock to slump the next trading day. NEW C.F.O. HIRED April 4, 1995 -- Stephen F. Bollenbach, chif executive of the Host Marriot Corporation, is named chief financial officer of Disney. Considered an astute financial manager, his experience as a fellow chief executive positions his to succeed Mr. Eisner in a crisis, and offers a stabilizing influence on Disney's management. Disney's market value rises, while Host Marriot's stock tumbles 7.6% in heavy trading, losing nearly $100 million in value. DYLAN LOEB McCLAIN
