Disaster movies, animated executives and talk of job losses: Is Disney losing the plot?

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The Independent Culture

It is turning into a miserable summer for Michael Eisner, the irascible and increasingly embattled chief executive of Disney.

He has just lost his second film studio chief in 18 months. His company's lavish live-action extravaganza, Pearl Harbor, has been demolished by the critics and will be lucky to break even at the box office. The latest Disney animated feature, Atlantis, has done similarly tepid business after its first week in cinemas.

Moreover, the company's newest southern California theme park has been such a disaster that Mr Eisner has been forced to approve unprecedented heavy discounts for the summer season – a time of year when crowds usually have to be turned away, not offered special inducements to visit.

None of this might matter were it not for the fact that Disney has been losing its lustre, in both the entertainment and the corporate worlds, over the past several years.

Having failed to make a major acquisition in six years, it has slipped in the rankings of major media conglomerates from its traditional number two spot, behind Time Warner, to number four, behind Viacom and Universal Vivendi as well. It largely missed out on the internet revolution, and its online company, the Go Network, was written off and dismantled earlier this year.

Its film division – boasting a roster of production companies including Miramax, Hollywood Pictures, Touchstone and others – is currently ranked at number three, behind Paramount and Sony, after several years at number one, or number two at worst.

Throughout the company, there is talk of job losses (25 per cent of the fabled animation division, for starters), salary cutbacks, Disney store closures and more.

More than ever, questions are being raised about Mr Eisner's leadership after 17 years in the hot seat. In the past few days, financial analysts have gone on the record to decry his repeated "bad judgement", his self-aggrandisement on the one hand and obsessive micro-management on the other, and his widely reported habit of yelling at senior corporate executives, a clutch of whom have chosen to walk out over the past couple of years.

The latest to depart is Peter Schneider, the second studio chief to resign in 18 months in an industry where studio chiefs simply do not resign. (They usually get fired instead.)

Mr Schneider, widely criticised as a poor choice because of his lack of experience in film production, was the pointman on Pearl Harbor, which cost a staggering $140m to make and roughly the same again to market and distribute. Conceived as a historical romance to match the popularity of Titanic, it has taken only $160m at the US box office, is losing business fast and has endured near-ridicule from the critics for its wooden plot and even more wooden dialogue.

Mr Schneider will now return to his first love, theatre, as a Broadway producer.

The news at Disney's California Adventure theme park, built right next to the original Disneyland, is equally grim. Since opening in February it has seen between 9,000 and 12,000 visitors a day – well below the 19,000 projected. Apparently visitors already forking out a small fortune to visit Disneyland proper have been disinclined to pay the same amount again ($43 for adults, $33 for children) to patronise the second park, which has only one-third of the rides.

Yesterday, the company said that California residents would enjoy hefty discounts this summer (a family of four will pay $66 instead of $152). "I don't think anyone would have expected this," Tim O'Brien of the magazine Amusement Business told the Los Angeles Times. "I wouldn't call it desperate, but it's close."

There was one more upbeat piece of news yesterday, as company executives confirmed they would start a new cable TV station next year aimed at pre-school children. Even this venture, Playhouse Disney, is not without controversy, since it looks like a hurried piece of corporate catch-up. Disney had turned down the chance to buy two other children's cable channels, the Cartoon Network and Nickelodeon, both of which have gone on to be huge moneyspinners eating into Disney's market.

Some analysts suggested yesterday that the toddler market was not so much a new frontier as the only niche left.