See you in court, folks

As Disney unleashes 'The Hunchback of Notre Dame', a monstrous legal suit and an animation war threaten the Magic Kingdom.

The logos are ready, the posters are printed and the train has been painted: the formidable Disney machine is gearing up for its biggest ever marketing operation, the selling of its new animated feature, The Hunchback of Notre Dame.

Tomorrow, the Hunchback European Tour Train leaves London Waterloo on an 18-day voyage around Britain, promoting the film with a package that includes virtual reality experiences and a troupe of performers, The Festival of Fools, who will "recreate the atmosphere of the 15th-century Paris of Victor Hugo's classic romantic tale". In Hollywood meanwhile, Quasimodo himself hangs over the section of Sunset Boulevard where studios traditionally splash portraits of onetime and future stars. Painted down the side of a 15-storey building, he is a grinning purplish imp, plastered up near images of James Dean and Charlie Chaplin.

The Quasimodo character's chief animator, supervising a team of 16 people, was James Baxter, one-time student of the West Surrey College of Art, which he left early to join the Who Framed Roger Rabbit team in London. Baxter is now one of an elite group of animators emerging as Hollywood's newest highly paid stars - but he is no longer working at Disney. He has been hired by Jeffrey Katzenberg, the former head of Disney Studios, to work at DreamWorks, the new studio Katzenberg helped set up with Steven Spielberg.

Jeffrey Katzenberg is the man credited with bringing life back to American animated features. Last month, he filed a $250m dollar law suit against Disney Studios, where he was chairman until 1994. It was regarded as the final act in his falling out with his former friend and mentor, Disney boss Michael Eisner. Katzenberg has hired Bert Fields, the legendary Hollywood lawyer whose clients have included Michael Jackson and the Beatles. He claims that Disney failed to honour the terms of his contract, and that the company owes him a sum equivalent to the entire ticket sales of Disney's hit film Aladdin.

The Magic Kingdom may not exactly be trembling over Katzenberg's law suit. But it promises, at the very least, a public washing of the dirty linen of a notoriously secretive company which prides itself on an inflexible corporate bond. And Michael Eisner, famous for running Disney like a personal fiefdom, will not let $200m go lightly: "Don't Mess with the Mouse" is a Hollywood adage.

While power clashes between the giant egos of studio chiefs are legendary, it is rare for them to end up in the courts. Disney typically refuses to discuss even the financial breakdown of its animation, live action and other divisions. But the law suit specifically asks the company to open its books so that Katzenberg's lawyers can assess what he is owed on his 2 per cent "incentive bonus", promising a wealth of inside financial information.

Documents filed to the court have already produced some interesting numbers - among them the huge cash flow of $800m in revenues generated from the recent re-release, after a gap of 50 years, of Snow White. They also hint at the levels of studio executive pay, another closely guarded secret: Katzenberg himself appears to have earned $6m in bonus payments alone in 1991, the year he criticised Hollywood's lavish spending levels in a lengthy and now infamous memo.

In the long run, however, Katzenberg poses a different kind of threat to Disney which could extend far beyond the courtroom. DreamWorks has begun to amass a collection of animation talent - including James Baxter - that one day could conceivably challenge Disney's own. And having seen how Disney's virtual monopoly on animation features has proved so lucrative, a list of other studios is trying to break into the same market. DreamWorks and the other would-be employers are bidding up the price for top animators. "Like movie star talent, the hunt for the quality people has gotten much more fierce," says Tom Sito, who made the move from Disney to DreamWorks last year. "It used to be that Disney was it, if it wasn't Disney it was the Smurfs, and Disney knew it. Now there is serious competition."

The art of the animator is to act with pen and pencil. Computers are making huge inroads but old-fashioned drawing skills are still the high art of the medium, and those artists who possess them have never had it so good. In the 1980s Disney had animators virtually to itself. It was considered the only place in Hollywood that offered secure employment on feature animation. Even five years ago, the going rate for a journeyman animator, according to the cartoonists' union, was about a $1,000 a week. Now the average is two or three times that. Warner Brothers' animation division has increased from 40 people to 400 in the last nine months, and agents are more active: the powerful William Morris Agency has set up a division to represent them. Parents of five-year-olds write to the California Institute for the Arts, one of the prime training grounds for animators, asking how they can prepare their children for admission.

The irony for Disney is that it was Katzenberg, while he worked for them, who was principally responsible for reviving the animator's art. The years between the death of Walt Disney in 1966 and 1984, when Eisner and Katzenberg moved to the company, are considered the dark ages of animation. In the 1970s, Disney's animation division was regarded as so moribund, it is said, that they considered closing it down. Instead Katzenberg, the former Paramount executive with no known interest in the art, is credited with turning it around. He emerged as a perfectionist who, like Walt Disney himself, would opt for hugely expensive retakes of scenes that did not work.

What followed was the production of a string of hugely profitable animation features, including Beauty and the Beast and Aladdin. And in 1994 Disney turned out The Lion King, its most successful film ever, which made $300m in US ticket sales alone. In Katzenberg's 10 years as head of Disney's filmed entertainment division, its revenue went from $244m to $4.8bn. But that same year Katzenberg and Eisner's partnership fell apart. When Disney president Frank Wells died, Eisner failed to appoint Katzenberg to fill his shoes. It was then that Katzenberg left to join Spielberg in forming DreamWorks.

Katzenberg set out to build up DreamWorks' studio the best way he knew how - by hiring star talent. What followed was compared by Harvey Deneroff, editor of the industry newsletter Animation Report, to the scene in Citizen Kane where Kane launches the success of his own newspaper by simply buying up the staff of its chief rival. In a mini-exodus, DreamWorks acquired not just Baxter, the talent behind Quasimodo, but the animators of Iago the Parrot in Aladdin and Sebastian the Crab in The Little Mermaid. It pinched Tom Sito, head of story on Pocahontas, reportedly scheduled to be a director on Fantasia Continued, Disney's new updated version of the classic. Katzenberg came calling, unsuccessfully, for Andreas Deja, famous for being the animator of Scar, the sinister uncle lion in The Lion King.

To stem the impression of a brain drain, Disney began publicly announcing contract renewals for leading animators. It has been luring new animators with sign-up fees of up to $25,000. There is a limited pool of animation talent, and animated film directors are now earning rates of $15,000 a week, comparable to their live-action counterparts, with contracts worth several million.

DreamWorks' challenge to Disney is more than just a bidding war. Steven Spielberg is the producer of two animated films, An American Tail and The Land Before Time, which have successfully competed with Disney at the box office - a rare accomplishment. His animated television series, Animaniacs, has been hugely successful. But increasingly, questions are being asked about what DreamWorks will actually produce with its growing pile of talent and the massive high-tech "entertainment campus" Spielberg is promising to build for his new studio.

"Everyone is desperate to see a product," said Sarah Bayles, editor of Animation magazine. "Gee, I would like to be paid to sit there and have nothing come out. It's very hard to find out anything that's going on in there or to see anything." The company's first animation feature, The Prince of Egypt, is not due for release until 1998. It will be co-directed by Brenda Chapman, head of story on The Lion King, and will have songs written by a co-writer from Pocahontas and The Hunchback. It also delves into a more adult theme, covering the early life of Moses. But it was not meant to be the cartoon answer to Spielberg's Schindler's List. The DreamWorks team is said to be in the process of lightening the project up.

Animated films typically take about three years and several hundred people to produce. By 1997, other Disney challengers will be putting their first films on the market. Long-time Disney rival Don Bluth is producing Anastasia for Fox, very loosely based on the story of the woman claiming to be the last daughter of the Tsar. CNN owner Ted Turner's company is producing Cats Don't Dance, a Thirties-style musical about a cat trying to make it in a dog-eat-dog world. It promises to contain the final piece of work from the late Gene Kelly, who did the choreography. Warner Brothers' animated feature division has returned to King Arthur for its debut, The Quest for Camelot, and this Christmas, the studio has Michael Jordan, the American basketball star, playing opposite cartoon characters in Space Jam.

Disney has huge resources to fall back on and its biggest asset remains its name, the stamp of a family movie. Eisner runs an extremely tight ship, and Disney have successfully timed the release of their own films to kill the efforts of rivals, observers say; in addition, the company is unequalled in cross-merchandising through amusement rides and toy products. But while Disney has the aura and the unique brand name, Katzenberg's reputation commands respect. "Wherever Katzenberg went and landed," says Harvey Deneroff, "Disney would have a serious rival."