Walt's nephew quits Disney, ridiculing a Mickey Mouse organisation

It is hardly unusual for the Walt Disney Company to be accused of being "rapacious, soulless, and always looking for the quick buck". But when the man making the accusation is Roy Disney, nephew of Walt and the founding family's chief standard-bearer within the corporation, something pretty traumatic is going on.

Mr Disney, who was head of the animation division and sat on the governing board, resigned from all his positions with the company over the weekend in what can only be termed a blind fury. The object of his wrath was Michael Eisner, Disney's 61-year-old chairman, who has run the world's best-known entertainment conglomerate for the past 19 years through a run of spectacularly good years and, more recently, a run of spectacularly bad ones.

In a three-page resignation letter made public yesterday, Mr Disney accused Mr Eisner of causing a "creative brain drain" of talented managers, and a severe loss of morale for everyone else, with his "consistent micro-management". Mr Eisner had plunged the ABC television network into a "ratings abyss". He had jeopardised the flagship theme park business by trying to build new ones "on the cheap".

And, wrote Mr Disney, Mr Eisner's abrasive style had injected an uncomfortable degree of uncertainty into key corporate relationships, such as with the computer animation company Pixar and the film company Miramax. "The company has lost its focus, its creative energy and its heritage," he wrote. "Michael, it is my sincere belief that it is you who should be leaving and not me."

Clearly, a lot of squeaking is going on at the company the entertainment newspaper Variety likes to call the Mouse House. But it was not clear yesterday whether the letter from Mr Disney was a broadside intended to drag Mr Eisner out the door with him, or whether it was the last indignant gasp of a man who had already fought his battles against Mr Eisner and lost.

The two men have been at loggerheads for two years. Last year Mr Disney tried unsuccessfully to talk the board of directors into voting Mr Eisner out of his job. The struggle resulted in Mr Eisner getting rid of one board member who sided with Mr Disney and undermininganother, Stanley Gold, who resigned yesterday.

In recent weeks, Mr Eisner has orchestrated another coup against his enemies: a new stipulation that board members must withdraw when they pass the retirement age of 72. Mr Disney is 73, while two of his surviving allies, the former Disney chairman Raymond Watson and the former ABC chairman Thomas Murphy, are 76 and 77 respectively.

News reports yesterday suggested the trio might have been required to resign almost immediately. It is a scenario that looks an awful lot like a corporate Night of the Long Knives, and makes Mr Disney's resignation look like a last-ditch exercise in public mud-hurling rather than an effective strategy to get rid of his nemesis.

It would be a mistake to dismiss Mr Disney too hastily, however. He resigned from the company once before, in 1984, and on that occasion it was a clever strategic manoeuvre that culminated in the firing of Ron Miller, Walt Disney's son-in-law, as chief executive, and his replacement by Mr Eisner. When the transition was complete Mr Disney was reinstated to the board.

The Disney-Eisner relationship in the intervening years has in many ways mirrored the fortunes of the company itself. What was, in the early 1980s, a marginal relic of children's entertainment was built up by Mr Eisner and his number two, Frank Wells, into a entertainment industry behemoth so powerful that cultural critics such as Frank Rich of The New York Times feared for the future of the planet. Disney pumped out one animation hit after another, such as The Little Mermaid, Aladdin, Beauty And The Beast and The Lion King, as well as building the Euro Disney theme park outside Paris and buying ABC television.

While the company was doing well, Mr Disney was Mr Eisner's biggest fan. But then things started to fall apart. The first big blow, mentioned in the resignation letter as the watershed moment, was Frank Wells's death in a helicopter crash in 1994. In retrospect, in the analysis of Mr Disney and many other Disney-watchers, it is now clear that Mr Wells was the only colleague that Mr Eisner was ever prepared to treat as an equal, and who had the capacity to encourage his best instincts while deterring him from making mistakes.

Within months of Mr Wells's death, Disney's studio chief, Jeffrey Katzenberg, resigned because he was not promoted to the vacant number two position. He went off to co-found DreamWorks with Steven Spielberg and David Geffen instead.

Mr Katzenberg subsequently sued Mr Eisner for unpaid back royalties and showered him with embarrassments in a memorable trial in which he forced the Disney chief to admit he had called him a "midget" and "the ball on the end of my pompom". Mr Katzenberg received a reported $250m legal settlement, and took further revenge on Mr Eisner by using his likeness as the basis for the computer animated green ogre Shrek.

The man Mr Eisner picked instead of Mr Katzenberg for the number two spot turned out to be a disaster of his own. Michael Ovitz, until then the king of Hollywood talent agents, lasted barely a year and walked off with a severance package worth more than $100m.

In the late 1990s, one corporate disaster followed another. While competitors such as Viacom and Time Warner went on a spending spree and built up media empires far outshining Disney's, Mr Eisner seemed almost frozen. He badly misjudged the internet revolution and its power as a marketing tool for the rest of the Disney empire. Having passed up the chance to buy Yahoo!, he cobbled together a portal called the Go Network, which promptly fizzled and died.

He built new theme parks in Tokyo and on a vacant piece of land next to the original Disneyland in California, but as Mr Disney suggested in his letter, they failed to attract anywhere near the anticipated crowds. In the television sector, ABC found a hit with a US version ofWho Wants To Be A Millionaire?, but squandered it through overkill (at one point it was screened four times a week) and by failing to use its revenues to generate new hit shows.

Although the company's financial fortunes have improved modestly, there have been complaints that Mr Eisner is too aloof. The Disney board was twice voted the worst in America by Business Week, partly because its luminaries at various times included Mr Eisner's personal lawyer, his architect and the headmaster of one of his children's schools. His talented studio chief, Joe Roth, walked out in 2000 to form his own company, Revolution Studios. Since then, the head of Disney's theme parks, Paul Pressler, has left to head Gap, and one of the leading lights behind Disney's sports channel ESPN has quit to join a rival.

Flops and missed opportunities: The catalogue of Eisner errors

Missed purchasing opportunities

Michael Eisner could have bought Viacom in the mid-1980s, but did not, and so lost out on MTV, the music video station, and Nickelodeon, which caters to children. The two cable assets are together worth $25bn (£14.5bn) today. He also passed on the Hanna Barbera cartoon library, which Ted Turner bought and used to found the popular Cartoon Network.

The Internet disaster

Unlike Time Warner, which merged with AOL, Disney decided to make no major Internet purchases, only to regret it afterwards. Having passed up the chance to buy Yahoo!, Mr Eisner invested instead in the problem-laden portal Infoseek. That became the basis of the Disney Go Network, which lasted just over a year before being axed in early 2001.

Theme park blues

Disney opened its California Adventure theme park next to the original Disneyland in 2001, hoping to persuade families to spend several days more in smoggy Anaheim. But the new park was small, thin on attractions and failed to generate anticipated revenues. It is now offered as a free bonus to anyone buying admission to the main park.

Animation struggles

Disney has been struggling in the area it once monopolised because of tepid performers like Atlantis and outright disasters such as last year's Treasure Planet. Pixar, the computer animation company behind Toy Story and, most recently, Finding Nemo, remains a bright spot, but Pixar is looking to sever its ties to Disney - largely because of frictions created by Mr Eisner.

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