Walt Disney Co. chief executive Michael D. Eisner, who survived a takeover bid and a shareholder rebellion aimed at his ouster earlier this year, announced plans yesterday to retire in 2006, ending more than two decades atop what may be the world's best-known entertainment company.
Eisner transformed Disney from a cartoon and amusement park company into a media giant, with television and radio stations and broadcast and cable television networks that produce programs seen in 51 countries. The corporate giant operates cruise ships and three movie studios and sells DVDs, dolls and mouse-eared electronic gadgets found in homes around the world.
Over the next two years, Eisner will attempt to position Disney for a future that may look very different, as distribution firms such as the cable giant Comcast Corp. and News Corp.-owned satellite television company DirecTV become ascendant, forcing content providers such as Disney to adapt. Disney is testing new technology to beam movies direct to homes, bypassing the cable and satellite concerns, and is considering entering other profitable media businesses, such as video games. But the most radical of Disney shareholders seek to dismantle the company, returning it to its core businesses of animation and theme parks.
"I think over the next two years as I create an environment for this transition, I'm going to work harder than I ever have," Eisner said in an interview yesterday. As for what he would do in retirement, Eisner said: "I don't know. I haven't thought about that." In a letter to the board, he joked, "I'm going to Disneyland!"
Some analysts speculated yesterday that he may want Disney's chairmanship after he retires, which they said might prevent the company from attracting top chief executive talent, owing to Eisner's reputation for micromanagement. Yesterday, Eisner would say only that he was focused on the last two years of his employment as chief executive.
"It has been a fantastic Disney ride for the past twenty years," Eisner wrote directors. "Ups and downs to be sure, but filled with great satisfaction in building this wonderful creator of classic American culture into one of the premiere entertainment oriented companies in the world.
"My affection for Disney will never retire," he wrote. Eisner said he will depart when his contract ends on Sept. 30, 2006, coinciding with the conclusion of Disney's fiscal year.
Possible successors, according to analyst and industry speculation, include a number of Disney insiders, and chief among them is President Robert A. Iger. "The board knows and Bob knows that he has my confidence," Eisner said yesterday.
Analysts added consumer products division Chairman Andrew P. Mooney; Anne M. Sweeney, recently named president of Disney-ABC Television; and George W. Bodenheimer, president of Disney's highly successful ESPN networks, to the list of potential successors.
Outsiders whose names have surfaced in recent months include News Corp. President Peter Chernin; Viacom Inc. co-chief operating officers Leslie Moonves and Tom Freston; Comcast Corp. chief operating officer Stephen B. Burke, a Disney veteran; and Mel Karmazin, who left his president's job at Viacom in June.
Eisner critics applauded the announcement, but some said they hope to see a cleaner break. Among the most outspoken were several state pension funds, which own millions of shares of Disney stock and fueled the shareholder rebellion against Eisner.
"We believe he should resign from the board as well," Sean Harrigan, president of the California Public Employees' Retirement System, said in a statement. "It is not clear to us how a two-year lame duck chief executive will benefit shareowners, and his continued presence on the board would prevent the company from the clean break that is needed to restore investor confidence."
Eisner was named chairman and chief executive in 1984. After Disney President Frank Wells died in a 1994 helicopter crash, Eisner moved to consolidate power. He pushed out his ambitious studio head, Jeffery Katzenberg, by refusing to promote him to the No. 2 position. He then endured a 14-month flameout by hiring personal friend and super agent Michael Ovitz as president. The exits of both men cost the company hundreds of millions of dollars in payouts and settlements. Eisner became known as a micromanager.
Under Eisner, Disney bought the ABC and ESPN television networks, partnered with Pixar Animation Studios to create animated blockbusters such as "Finding Nemo," produced television hits such as "CSI" at its Touchstone Studios and ramped up its live-action motion picture studio, setting a box-office record with $3 billion in ticket sales in 2003, led by "Pirates of the Caribbean: The Curse of the Black Pearl." A string of 2004 duds, however, such as "The Alamo," has hurt studio receipts this year.
In his letter, Eisner said Disney had $1.7 billion in revenue in 1984 and is projected to pull in $30 billion this year. In that time, the company has added nearly 100,000 employees, built seven theme parks and nearly 30,000 hotel rooms, and put 800 movies in theaters. For the first nine months of fiscal 2004, Disney's revenue was up 16 percent over the same period last year.
"Eisner turned Disney from a sleepy little company into a huge media conglomerate," said media analyst Tom Wolzien, with Sanford C. Bernstein & Co. "The question is, did it lose its way for the last years of his tenure or just for a little while and got back on track?"
During his tenure, the company's stock price peaked at $44 per share in early 2000, then nose-dived, bottoming out at less than $14 per share in 2002 before starting a comeback.
The steady stock decline was compounded by the terrorist attacks of Sept. 11, 2001, which crippled attendance at the company's theme parks in California and Florida. Company earnings declined at the same time that the Disney-owned ABC television network headed toward the bottom of the ratings and the animation division produced a run of box-office clunkers, such as 2002's "Treasure Planet."
Compounding the animation problem, Disney and Pixar ended their 13-year distribution deal earlier this year, a collaboration that produced hits such as "Toy Story." Eisner told Disney shareholders that Pixar demanded too much from a new deal, saying he already offered the Steve Jobs-owned company too much.
Critics pointed to Disney's inability to make its own animation hit and said the loss of Pixar would severely hurt the company -- the five Pixar films distributed by Disney have raked in $2.6 billion in worldwide box office receipts since 1995.
"People blamed computer graphics" for the demise of Disney's animation studio, Wolzien said. "But computer graphics were not the problem. The problem is they lost their ability to tell stories to multiple age groups."
Throughout, Eisner was one of the country's best-paid executives; in the mid-'90s, he earned nearly $250 million in salary, bonuses and stock.
By 2003, anti-Eisner rumblings reached a peak and internal dissent ripped the board. Directors Roy E. Disney, a nephew of Walt Disney, and his financial adviser, Stanley P. Gold, quit the board late last year to protest Eisner's management and what they called a complicit board of directors.
They led a shareholder rebellion that culminated at the company's annual meeting in Philadelphia on March 3, where 43 percent of Disney shareholders expressed no confidence in Eisner's leadership. The night of the vote, the company stripped Eisner of his chairman's title and gave it to presiding director George J. Mitchell, also a target of the rebellion.
At the same time, Eisner and the board were fighting off a $56 billion unsolicited takeover bid by Comcast, which withdrew its offer in April.
Eisner said yesterday the rebellion did not spur his retirement.
"The noise from the outside did not have anything to do with this decision," he said. "If anything, the noise from the outside only stimulated me to try harder."