A Mouse Divided

With the surprise exit of Jeffrey Katzenberg, the boardroom theatrics at Disney are certainly more dramatic— and less clichéd—than many of Disney's recent live-action movies. As Hollywood awaits the next plot twist at Buena Vista, KIM MASTERS interviews the backstage players in Michael Eisner's real-life version of The Lion King

KIM MASTERS

It was two A.M. and Michael Eisner was alarmed. He had pains in his arms. So he went to a clinic, where an electrocardiogram showed no immediate cause for concern. Still, Eisner was worried. The chairman and chief executive of the Walt Disney Company was in Sun Valley, Idaho, at the very private annual conference of corporate titans sponsored by Allen & Company, the entertainment world's pre-eminent investment-banking firm. Big deals were being bandied about over tennis, but Eisner was talking to the other executives—Warner's Terry Semel, for one—about his dissatisfaction with his company's failing film strategy, which had consisted of making many inexpensive movies rather than a smaller number of features with more varied budgets.

To some, Eisner's complaints were surprising. He had always had the reputation for being involved in all strategy for Disney's film business. One executive asked a logical question: Why didn't Eisner just talk to Jeffrey? Jeffrey Katzenberg, chairman of the Disney Studios, had been attending the Sun Valley conference for years, though this was Eisner's first visit. "Jeffrey works for you," the other executive reminded Eisner. "Why don't you tell him what to do?" Eisner said he intended to do just that.

But after the electrocardiogram, Eisner's concern was keeping his health from becoming a topic of conversation at Disney: he didn't even want to submit the bill from the clinic to the company's insurance program. Meanwhile, his secretary called Michael Engelberg, his internist, to ask when he had gotten his last stress test, and schedule another. Engelberg, who also happened to be producing The Puppet Masters—a. troubled science-fiction project—for Disney, told Eisner to return to L.A. at once for tests.

The next day, back in California, Eisner went directly to Cedars-Sinai Medical Center, where he registered under an assumed name. After just minutes on a treadmill, he was rushed into emergency quadruple-bypass surgery.

A few weeks later, at a time when most heart patients would have been making tentative trips to the mall, Eisner announced a major reorganization of Disney. The footnote to the August 24 announcement: Jeffrey Katzenberg was out.

Katzenberg's departure set off a furious campaign of spin and counterspin—with Katzenberg scoring the early points. Entertainment billionaire David Geffen led the Katzenberg camp. "Five years from now," Geffen fumed, "this will go down as one of the dumbest decisions in the history of the entertainment business."

• Jeffrey," says Eisner, ;⅛ still the best golden retriever I ever met. •

Eisner's heart surgery was not his first intimation of mortality. Four months earlier, his number-two, Disney president and chief operating officer Frank Wells, had been killed in a helicopter crash. Now this. There seemed to be a curse hanging over Disney. A colleague grimly joked after Eisner's surgery that Katzenberg had better drive his beloved black Mustang in the slow lane with his hand on the horn.

Good advice, but by that time Katzenberg already had the pedal to the floor.

For a year or more, Katzenberg had been restlessly pondering his next move. For a decade, he had devoted himself to running Disney's film and television operations (a decade when the division grew from a struggling $244-million-a-year proposition to a $3.7 billion juggernaut). Yes, his recent live-action movies had been unsuccessful, but live-action reportedly accounts for only 10 percent of the revenue generated by Katzenberg's TV, film, video, and cable divisions. His salvation was animation. Each Disney animated hit brought in hundreds of millions in pure profit. The studio was also minting money on related new ventures: a made-for-video sequel to Aladdin, a smash version of Beauty and the Beast on Broadway. To top it all off, The Lion King was on its way to making almost a billion dollars in pre-tax earnings. Katzenberg had also taken steps to gussy up the film division by acquiring the tony Miramax and Merchant Ivory production companies, as well as luring talent such as director Tim Burton and Robert Redford.

If Katzenberg was flunking liveaction, Eisner wasn't pulling straight A's with the rest of the action. Theme-park attendance was flat. The disaster known as Euro Disney had contributed to a 63 percent drop in Disney's overall net income in 1993, and Disney's America—an attraction planned for suburban Washington—was a public-relations fiasco, mired in political controversy. Historians vociferously opposed the project, portraying all-American Disney as a cultural and environmental despoiler. Next to all that, Katzenberg looked good, and it seemed clear to him that if he had any hope of advancing to Wells's old job the time was now. Eisner didn't see it that way.

As far as he was concerned, Katzenberg "put a gun to my head" in his quest for advancement. That strategy wouldn't work with Eisner—not that any strategy would. If Michael Eisner was going to have a second-in-command, it simply wasn't going to be Jeffrey Katzenberg.

"Jeffrey wanted a job that I was not prepared to give him," he says flatly.

As Eisner and his board would later explain, it was a matter of skills. Katzenberg, they said, didn't have the business chops to take the number-two job. "Frank was engaged in highly complex and sophisticated negotiations of all kinds—internationally, nationally, with large corporations," says board member Irwin Russell. "He had a background as a very expert lawyer. And Jeffrey didn't have the background, training, or skills."

Interestingly, the Disney board had balked at giving Eisner the top job in 1984 for the same reasons. The board had reconsidered then and been amply rewarded. But this time, Eisner was making the call.

The issue, however, was this: Jeffrey Katzenberg maintains that Michael Eisner had promised him Frank Wells's job in the event of Wells's departure. And Eisner himself admits: Maybe he did.

One late-summer afternoon in 1993, Jeffrey Katzenberg was hiking down the Grand Canyon with an all-male posse of Hollywood executives and agents that he invited on his annual camping trips. "Last week, I blew Michael's mind," he confided to a top executive from another studio. He explained that he had sent Eisner a letter exercising his option to terminate his contract in a year, at the end of September 1994. At the time, he was completing the third year of a six-year contract. But the deal gave each party, himself and the Disney Company, the right to opt out of the contract after four years. Katzenberg was now exercising that option. If he followed through, he would lose more than $100 million worth of cash and stock. "He could not believe I would do it," Katzenberg told his friend.

Eisner acknowledges that he was absolutely astonished by Katzenberg's decision. "I said to Jeffrey, 'You really want to give up that?' I said to Frank Wells, 'There is no chance he will do this.'" Eisner was so astounded that months later he would sometimes interrupt a conversation to tell Katzenberg, "I can't believe you said no."

No doubt Katzenberg—chafing under Eisner's commandenjoyed tweaking the boss. His pleasure in Eisner's incredulity over his contract decision was only one example. Around this time he also confided cheerfully to some studio staff that Eisner was irked by his involvement in Dive!, the Century City restaurant he had created in partnership with Steven Spielberg. Katzenberg had gotten the company's consent to pursue the venture. But there were more complicated undertones: Mickey's Kitchen, Disney's attempt at a fast-food chain, had died quickly after two prototypes withered without notice. Dive!, however, is a near-theme-park experience, with sonar screens, deep-sea videos, pulsating music, and flashing lights, and there are plans for expansion into a chain.

'Eisner is a very tall little guy," says Geffen.

"Jeffrey is a very short big guy.'

Eisner acknowledges he thought Katzenberg showed "bad judgment" when he decided to open Dive!, especially when he became so involved in the venture. "I believe he knew I felt that way," Eisner says.

One independent observer, the chief executive of another entertainment company, says Katzenberg violated a fundamental law of corporate survival. "With people you care about in business," he says, "you've got to make sure that your self-interest is identical."

Steven Spielberg has a different opinion. "I know for a fact," he told me, "that from the inception of Dive!, Jeffrey was concerned about any issues Michael and Frank would have. He made it clear that if they had any objections whatsoever he would not have gone ahead. Not only did they approve Jeffrey's involvement, they told him they had gotten it cleared by the board of directors."

Even before Katzenberg stunned Eisner by opting out of his contract, the two men were discussing Katzenberg's future. The pivotal talk came in August 1993 as they walked the streets of Aspen during an annual Disney retreat. Only the two of them know precisely what was said, but this much is clear: Katzenberg said he wanted a bigger job. And he came away believing that Eisner had promised him Frank Wells's position if it ever became available.

At the time, of course, that was a remote possibility. Wells, in fact, was negotiating to renew his contract for seven years. According to Eisner, Katzenberg didn't let that stop him from trying to elbow Wells aside. Katzenberg, Eisner says, was after more than a promise that he would replace Wells in the event of his departure. He says that Jeff Katzenberg wanted Frank Wells's job as soon as possible. He was aware that Wells had deferred to Eisner, allowing him the company's top position, when the two were parceling out the executive jobs at Disney almost 10 years earlier. Eisner says that Katzenberg hoped that history would repeat itself. "I think he was hopeful that Frank would step aside once again," he says. "But he backed off immediately. It was unreasonable and he realized it very quickly."

Stanley Gold, a Disney board member who was Wells's friend and running partner, says Frank Wells told him of Katzenberg's request. "Frank was hurt," Gold says. "He said, 'That's a lot of chutzpah from Jeffrey.'"

Katzenberg denies that he ever sought Wells's job before Wells died. "The idea that I wanted Frank Wells's job is complete nonsense," he says. "He was singularly the most supportive, encouraging, and generous champion that I had during my years at Disney. In fact, I'm absolutely certain that if Frank Wells were alive today I would still be at the company."

Eisner and Katzenberg may dispute whether Katzenberg actually asked for Wells's job that day in Aspen, but apparently Katzenberg had reason to believe that Eisner promised that eventually the job would be his. "He says I said to him, 'If Frank wasn't there, it would be a different story.' In other words, that I gave him the body language to believe that," Eisner says. "I can't say whether I did and it's unfortunate if this became a misunderstanding. I wish I had made the message clearer."

Clearly, Eisner wanted Katzenberg to stay at Disney. "Even today," he says now, "I wish he were in the company. There is no better executive in Hollywood at creating movies and television programs, and I'm disappointed I couldn't have him for that as well as for support in our record business, interactive business, and other future media. My fantasy, even today, is that we'll be back together again."

Katzenberg wanted to stay, too. Eisner, Wells, and Katzenberg considered additional responsibilities that would satisfy Katzenberg's appetite for advancement. Katzenberg pushed for expansion and acquisition. His most cherished hope was to buy a network—a notion that Eisner has apparently found more appealing since Katzenberg's departure, given the reports of Disney's joining the race for NBC.

"Michael and Frank had talked about reinventing the entire Disney enterprise for well over a year and a half," Katzenberg says. "And Michael continued to express that need to many of us over the past six months. I could not think of any single act that would have a greater impact on every facet of the Disney machine than the acquisition and synergies that would come from becoming a broadcaster. It would, in the very best way, redefine Disney into the next decade."

Eisner had long been shy of dramatic acquisitions. During the go-go years of the 80s, he was proud to say that Disney had "stuck to its knitting." Though the company explored possible purchases, he always fretted about overpaying. "Michael's really more conservative than Frank was," says board member Russell, who is also Eisner's longtime attorney. "That nobody knows. From a financial, business point of view, Frank was a very entrepreneurial executive, and Michael is a very reflective, conservative businessman. Michael is entrepreneurial, but when he spends a dollar, he has gauged very carefully what the value is going to be."

Meanwhile, Katzenberg was clamoring for action. "I made him responsible for the record company and the new interactive media," Eisner says. "We worked on Broadway together." Katzenberg didn't particularly want the struggling record company. He liked the theater business, but he was still restless.

Katzenberg says that he was devastated by Wells's death, that he had never fully expressed his affection and gratitude to him, though he had written him a note some months earlier acknowledging his patience and tolerance during the months that Katzenberg had spent agonizing over his role in the company. With Wells's passing, however, Katzenberg surely thought his opportunity had come sooner than expected—and certainly in circumstances that he had never imagined. Naturally, then, he was surprised and disappointed when Eisner, in the first staff lunch meeting on the day after the tragedy, handed out copies of a press release announcing that he—Michael Eisner—would assume Wells's responsibilities.

Katzenberg had all day to rage inwardly over the fact that Eisner had made this announcement without so much as a private conversation beforehand. And that evening, when the two met for their usual Monday-night dinner at Locanda Veneta, an Italian restaurant in Los Angeles, the topic still wasn't mentioned. The next morning, Katzenberg insisted on a lunch meeting with Eisner. In a private dining room, with portraits of Walt and his brother Roy bearing silent witness to the building storm, Katzenberg demanded an explanation.

Eisner was furious; he saw Katzenberg's decision to press for Wells's job as an ultimatum, a poorly timed one at that. When the two men parted, they had agreed that Katzenberg should move on.

But the dance was not to end there. Later that day, the two men decided to put questions about Katzenberg's future on hold until emotions over Wells's death had subsided. After that, Katzenberg went back to business as usual. "What impressed me is he was acting as though he had a full new contract," Eisner says. Eisner's compliment is handsome, but it omits a key point: during the months that followed, Eisner and his allies on the board were doing a slow burn as they observed what they believed to be a Katzenberg-orchestrated media campaign. As they saw it, Katzenberg was lobbying publicly for Frank Wells's job—and with none too much discretion or subtlety. "I said a couple of times, 'You're doing a massive lobbying job for a constituency that has only one vote,'" Eisner says.

'Roy for 20 years was treated like crap by the family. They

thought he was the idiot nephew'

After Katzenberg's departure, a board member said that he, in his excessive ambition, had gone increasingly out of control. "I thought Jeffrey was an extremely talented, hardworking, efficient executive for most of the 10 years he was there," says Stanley Gold. "But there came a point in time where Jeffrey's ego and his almost pathological need to be important overtook his good judgment."

"The word 'pathological' has often been used to describe me," Katzenberg concedes. "But up until now it was always about my insane dedication to my work and to Disney."

I have been told by those who have worked with Michael Eisner that the press has never understood what a tough customer he really is. Disney was known for its tightfisted control over filmmakers, but somehow the rap had always seemed to stick more to Katzenberg.

A former Paramount executive who worked for Eisner when he was president of that studio from 1976 to 1984 says Eisner was more than a match for his boss at the time, the notoriously demanding Barry Diller. "He makes Barry Diller look like a goddamned cream pie," that former employee says.

The Diller era at Paramount is legend by now. Diller and Eisner were a potent combination, cranking out hits such as Saturday Night Fever and Grease. But another former Paramount executive says Eisner always maintained his independence. When Diller once instructed his executives not to talk to a reporter for a magazine story, that executive remembers, Eisner told this associate that he intended to disregard the order.

"He said, 'Fuck Barry Diller,'" that ex-employee says: "He always let Barry know, 'You don't own me.' ... He talked to the press and you know what Barry did? Nothing. Michael Eisner played poker with Barry Diller and won." (Barry Diller maintains he never told Eisner not to talk to the press. Michael Eisner doesn't recall the incident.)

Eisner's confidence may have its origins in his background of wealth and education. Eisner had a sense of equality— if not superiority—to Diller that Katzenberg, a college dropout, would not exhibit when he and Eisner formed a relationship at Disney that echoed the old Diller-Eisner configuration at Paramount.

"Michael and Barry are in some ways synonymous with Jeffrey and Michael, except Michael had [more] education and talent," says one longtime associate coolly. "And Michael knew that he could sit there and recite 'Elegy in a Country Churchyard' and Barry wouldn't know what he was talking about."

Those who knew Eisner at Paramount remember him as an impressive, complicated man who could exude extraordinary warmth while behaving with glacial coldness, a man of huge intelligence and tremendous commercial instincts who sometimes seemed absent to the point of eccentricity. "He is this big, cheerful bozo, but I swear on the Stanford-Binet scale he's a 150," says one colleague.

Diller says Eisner's mind has the exciting unpredictability of a pinball machine. "It hits lights all around the box," he says. "It's fun. It's genuinely lively."

Hollywood veterans say Eisner is a man with few close friends. (One longtime associate avers, "Michael used to tell me all the time, 'Never have a friend in this town.'") His inner circle includes producer Lawrence Gordon, now overseeing Kevin Costner's upcoming film, Waterworld. But even Gordon, who declined to be interviewed for this article, used to tell other friends that Eisner could be "mean as a snake." Gordon had his own war stories to prove it. Best known was the fight the two had after Eisner and Gordon tangled at Paramount when the latter was producing 48 Hrs., the film that would make Eddie Murphy a star. "Michael chopped him on budgets—he ground him," says another source who worked at the studio. "It was endless. I'd say, 'What are you doing? He's your friend!' And he'd say, 'This is how business is done.'"

The conflict deepened when the two men got into a complicated feud over a couple of films that Gordon arranged to produce elsewhere. Eisner, who declines to discuss this episode, reportedly felt that Paramount had a claim on the projects. (As so often happens in such disputes, both of the movies in question—Brewster's Millions and Streets of Fire—were failures.) "Michael threw him out and locked him out," says a former employee. "They didn't speak for years. Their wives were in business with each other. Their kids played on the same baseball team." These days, however, Gordon and Eisner are friends again.

Another story shows Michael Eisner's toughness even more clearly. It begins during the closing days of the Barry Diller era at Paramount, after the famously difficult Martin Davis took the helm of Gulf & Western, Paramount's parent company. When Diller unexpectedly quit to run Fox, Eisner was summoned to New York to meet with Davis. In theory, he was to learn whether he would get Diller's old job running the studio. Diller warned Eisner that Davis would take the opportunity to humiliate him and urged him not to go. Eisner went—but he went prepared for battle.

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On the day that Eisner was to learn his fate, he got a four A.M. call from Jeffrey Katzenberg, then Paramount's head of production. Katzenberg read aloud to Eisner from an early edition of The Wall Street Journal, which was already reporting that Eisner had been passed over for Diller's job. Davis was apparently unaware that Eisner's contract guaranteed him a shot at the post. Eisner showed up at Davis's office that day armed with a letter drafted by his lawyer—pointing out the breach, and demanding that the studio forgive certain loans and make payments that were due him. Eisner sat in Martin Davis's office, refusing to leave until he was given a check for the full amount—$1.55 million. He got it.

Eisner has another quality—hardly unknown in Hollywood—that is frustrating. Former associates say he has a way of appearing to say "yes" to those sitting across the table when he isn't quite as committed as he seems. One associate from Paramount days refers to it as "the elastic go." Later, Eisner's penchant for the elastic go may have contributed to the final rupture with Katzenberg.

After his Paramount payoff, Eisner and a fleet of his former subordinates were soon installed at Disney—a drifting company that was then encircled by takeover sharks. Frank Wells, his secondin-command, was, by some accounts, one of the few human beings who could command Eisner's respect. "Frank Wells was a Rhodes scholar," says a Disney insider. "He was the highest of the high goyim. He represented everything Michael wanted to be."

Wells could have won the top Disney job in 1984, when the company was forced to reorganize in the face of takeover threats. But he believed in Eisner and actually urged the board to hire him. Though he would have preferred to share the chief executive's job with Eisner, he deferred when Eisner insisted on taking the titles of chairman and chief executive for himself.

Wells was remarkable for his willingness to stand in the shadows while Eisner had the spotlight. "I've never known anyone like him—who could walk and talk in as many areas as gracefully and yet seemingly have no ego," said a wistful Disney division chief. "The man was so confident in himself that he didn't have to have these other things." Wells's influence made itself felt in every corner of the company's operations, he adds. "I don't think anyone can overestimate his impact," he says. "He wasn't behind the scenes. He was the scenery."

Obviously, the chemistry between Eisner and Wells worked beyond anyone's dreams. The company had one recordbreaking quarter after another. And while Wells and Eisner had their fights, there was always an underpinning of respect.

Eisner courted the press well in those first few years, and the coverage was almost uniformly favorable. How could anyone criticize a company with financial results that followed the trajectory of Apollo 11? When I had an appointment to interview Eisner in 1987, Disney's public-relations department called me ahead of time to ask about my hobbies and interests. I told them that I liked Jane Austen and the Washington Redskins. When I arrived at Eisner's office, he announced that he was rereading Pride and Prejudice and found it enchanting. A few days later, he sent me a small brochure with a handwritten note:

'Frank Wells was the highest of the high goyim. He represented everything Michael wanted to be.'

Dear "Janeite" Kim,

I thought you would enjoy The Jane Austen Map of England as I start my abandonment of Romanticism (goodby Hawthorne, Melville, Dumas and even good old Emily Bronte) toward realism and order and discipline. And I've already read 100 pages of Pride and Prejudice!

The letter was signed, "Neoclassically yours."

No one worked harder to whip Disney's filmed-entertainment division into shape than Katzenberg. It wasn't humanly possible to work harder. Katzenberg showed up at the crack of dawn and, according to legend, felt the hoods on cars that were already parked in the lot to see whether employees had just sneaked in ahead of him. He was renowned for making more than 100 phone calls, generally held to 60 seconds or less, every day. He was the relentlessly tough negotiator who argued with filmmakers about every detail and every dime. Most entertainment insiders viewed this as an extension of Eisner's style. But Katzenberg was so zealous in the execution that one high-profile producer thinks that now Katzenberg finally has gotten what he deserves. The producer recalls seeing Katzenberg cackle with glee after reducing one director to sputtering rage. "Here is a guy who would do everything his boss told him short of murder," the producer says. "He's now getting exactly what he gave."

A few years ago, cracks began to appear in the Disney fagade. The company ventured into big-budget projects such as Billy Bathgate and Dick Tracy with disappointing results. This prompted Katzenberg to write his now famous memo, a critique of Disney's film division in which he said that the studio was spending too much on overblown films. The memo annoyed Eisner; he saw it as Katzenberg's mistimed declaration of independence. "I think his friends did a real disservice to him," says a source familiar with Eisner's thinking. "Somebody said, 'Jeff, you're being dominated by Michael Eisner . . . You have to do it yourself.' And he writes that memo. It was the beginning of the end."

According to Stanley Gold, Eisner had urged Katzenberg to tear it up. "But Katzenberg went to the Xerox machine and sent it out," Gold says. "That did not pass unnoticed by the board."

And Gold contends that Katzenberg kept it up. He cites the executive's attack in July of this year on rival studio MCA/Universal. The issue was MCA's deal to sell cheap videos, such as An American Tail: Fievel Goes West, through McDonald's. At a video-industry convention in Las Vegas, Katzenberg gave a speech urging his audience to fight these sales (presumably by stocking fewer MCA videos in protest). The McDonald's sales were "a Faustian bargain that threatens the future of the video business," Katzenberg said. Customers would be reluctant to pay regular prices for videos, he continued, if they could "just walk across the street for a Big Mac with Fievel and fries."

Not surprisingly, MCA chairman Lew Wasserman was said to be infuriated by these comments. Disney and MCA have had their feuds over the years, with MCA president and chief operating officer Sid Sheinberg once famously remarking that Disney was poised to become "one large ravenous rat." But, according to Gold, Katzenberg had unilaterally decided to fire this particular volley. "That is a huge policy statement by the Disney Company that Jeffrey never cleared with Michael," Gold says. "And when questioned about it, Katzenberg says, 'From now on, when I speak publicly, I have to speak on important matters.' That's what got him in trouble. ... He had this need to be the most important guy in Hollywood. At the end of the day, he is the tragedy here."

Katzenberg acknowledges that he may have offended MCA, which he now regrets. But he points out that Eisner was in the hospital while this speech was being prepared and delivered, and was therefore unavailable for consultation. He stands by his speech, which he says was intended to defend "the most vital, income-generating" part of the Disney Studios. "I defy Stanley Gold or anyone else to tell me that what I did wasn't singularly in the interest of the Walt Disney Company," he says. "But I guess Stanley is right—and it is a tragedy—that I was not sensitive enough to the issue of style in this case. But I only wanted what was best for the company."

Some Disney insiders say it David Geffen, Katzenberg's close ally and confidant, who encouraged him to make these gestures of independence and to conduct an unofficial press campaign. According to this argument, Geffen not only misread Eisner but added to his annoyance, since Eisner is not perceived as a big Geffen fan. "I see the villain of the piece as David Geffen," says a source at Disney who is not in either the Eisner or Katzenberg camp. "He is Iago. And he made a mistake."

"Jeffrey keeps his own counsel and does what he wants," Geffen responds. "I think he was unwilling to continue in this position." The problem lay not with him but with Eisner, he says. "Michael is not a guy who likes to share. He is not a generous person," he says. "Michael Eisner is a very tall little guy. And Jeffrey Katzenberg is a very short big guy."

To which Eisner replies, "I think Geffen is one of the most talented record entrepreneurs I know. And I don't understand why he is so involved in our business."

The Eisner-Katzenberg battle is viewed in two ways in Hollywood. One side portrays Katzenberg as predatory and hyperinflated, lunging avariciously toward Wells's still-warm seat. The other camp notes that Michael Eisner was not so grief-stricken after the death of Frank Wells that he lost the chance to consolidate his power and ignore any pledge he may have made to Jeff Katzenberg.

While Katzenberg's future was still unresolved, he began to hear from Eisner that he had "a Roy Disney problem." Disney is Walt's nephew, and he and Gold had organized the forces that assumed control of Disney in 1984. Before that, Roy had been on poor terms with the family for some time, actually quitting the company in 1977 partly because he felt the film studio—and his ideas—was being neglected.

If Roy Disney felt that he had never gotten enough respect at his uncle's company, how sweet he must have found Disney's dazzling resurgence. As soon as Eisner and Katzenberg were in place, Roy Disney began to lobby for more attention to animation. Eisner says he was interested from the start, but others who were there say he and Katzenberg were not particularly drawn to animation at first. Roy Disney pushed them to buy updated equipment and selected Peter Schneider to run the division.

But before long Katzenberg became enthusiastic, and then infatuated, with animation. Perhaps the turning point came when Disney started making Who Framed Roger Rabbit, probably the boldest experiment in filmmaking that Disney undertook in the Eisner-Katzenberg era. The film's director, Robert Zemeckis, says he watched Katzenberg become increasingly mesmerized by the animation process. "It was Jeffrey who spotted the real talent on Roger, and he wouldn't let those guys go," Zemeckis says.

Katzenberg was immersed in the project, which required teams of animators to work impossible hours for months in a London studio. Zemeckis remembers Katzenberg phoning the film editor to encourage him during the arduous cutting of the film. "The fact that an editor was made to feel that the chairman of a studio was interested in his well-being created enormous goodwill," Zemeckis says. "I've never seen anyone work as hard. We'd have these crises where we'd be in Jeffrey's office at four in the afternoon and he'd say, 'Everyone call your wives and I'm sending messengers for your passports, because we're going to London right now. You can buy a shirt there.' . . . It was very dramatic and everyone understood how important the film was and how serious Jeffrey was."

But as animation took off, Katzenberg began to hear that Roy Disney was feeling slighted, that he thought Katzenberg was grabbing the glory. In some cases, at least, Katzenberg deserved the credit. During Roger Rabbit, for example, Zemeckis says, he never saw Roy Disney until the film was essentially finished. Katzenberg, by contrast, performed a role that Zemeckis compares to that of Walt Disney himself, fine-tuning and editing down to the last detail. (Roy Disney was unavailable for comment for this article.)

Don Hahn, who produced Beauty and the Beast and The Lion King, compares Katzenberg's departure to the Dallas Cowboys' losing their coach: the team will survive—after a painful adjustment. "Jeffrey has seen animation as his passion, his baby, his life, and his breath. That's what's so sad," Hahn says. "I feel like I lost a friend just when I was having fun." Hahn says Roy Disney "has a passion for animation—he's just not in the trenches every day. ... I don't think he has the time, day to day, to get involved the way Jeffrey has."

In 1991, I wrote a long feature about Beauty and the Beast, and during the research Katzenberg showed unusual restraint by allowing me to wander at will through the studio and talk to the animators as they drew. Animators are notoriously gossipy and outspoken. Some were annoyed with Katzenberg for getting too involved and demanding changes that seemed arbitrary, but most appreciated his obvious love for the medium—and some even conceded that the dumb jokes that he had put into the film actually worked.

Before I finished writing my article, Katzenberg called me to make a request. He all but pleaded with me to mention Roy Disney in the story. But I had never seen Disney, nor had I heard any of the animators mention his name. I refused.

With the success of The Lion King, Roy Disney apparently was more displeased than ever over the perception that Katzenberg was the genius behind Disney animation. "I think he treated Roy badly," says an Eisner sympathizer. "Roy for 20 years was treated like crap by the family. They thought he was the idiot nephew and that's the way Jeffrey treated him. Jeffrey did not have time for people who could not help him that minute."

Disney was frequently out of the country, staying in his refurbished castle in County Cork, Ireland. He wasn't available for the extensive publicity blitzes that the studio planned around the opening of the animated film. But Katzenberg tried to focus the spotlight on him. Roy Disney was visible, for example, in the Elton John television special created for The Lion King.

Clearly the effort was in vain. When Lion King opened, Katzenberg called Disney to congratulate him on the film's success. He later told friends that he was stunned when Disney replied, "Thank you," without a word of appreciation for Katzenberg's efforts. Meanwhile, Katzenberg spent three weeks telephoning 600 individuals who had worked on the film, thanking them for their efforts.

"To this day, I still don't understand what I did to offend Roy," Katzenberg says. "Nor have I ever heard from him about what more or less he wanted of me. If I am guilty of anything, it is misjudgment. Because I honestly believed that I was doing exactly what Roy wanted, which was to put my heart and soul into the cornerstone of the company's heritage."

After Wells died, according to Stanley Gold, the Disney board discussed the issue of succession. Perhaps Disney's grievances colored the impressions of the board, but, according to Gold, no one believed Katzenberg was right for the job. "Everybody who spoke that day said, 'He's not the guy you want in the job. He's not collegial. He's not a guy who can foster the teamwork we need around here.' There was an acknowledgment that Jeffrey was a talented guy but this was the wrong role for him." Nonetheless, everyone hoped that Katzenberg could be accommodated.

If Katzenberg made one fatal error, it was neglecting to court Disney's board. Perhaps he could never have won them over, but when the time came, it seems, Katzenberg didn't have an advocate in the group.

Eisner's nostalgia for having Katzenberg as a junior partner was apparent in an interview that he gave the Los Angeles Times before his heart surgery. In an article exploring the succession question, Eisner seemed to say that he wanted Katzenberg to stay put in the filmed-entertainment division. "He is still the best golden retriever I ever met," Eisner said. Katzenberg sympathizers viewed it as a slap: after Katzenberg had put in 10 successful years running the Disney Studios, Eisner was still referring to him as if he were the underling he had been in the Paramount days.

Caught up in the press of business, Eisner and Katzenberg decided to resolve Katzenberg's fate in August. Katzenberg continued to weigh changes that might reinvigorate the company while wondering whether Eisner might actually give him a chance to put his plans into practice.

Then came Eisner's surgery.

Eisner's illness was the first shock for Katzenberg. The second was discovering that no one had called him to tell him that Eisner was in the hospital. While many others had been informed, Katzenberg found out about the surgery only coincidentally when he called Eisner's house on Saturday morning to tell him how Angels in the Outfield had opened that weekend. In Disney's inner circle, Katzenberg was the last to know. At that moment, Katzenberg knew his days at Disney were probably over.

After Eisner went home to recuperate, the Katzenberg question came into focus more clearly than ever. As the speculation mounted, Katzenberg retreated to his new multimillion-dollar Charles Gwathmey beach house in Malibu. Finally, on a weekend afternoon in August, Katzenberg headed over to Eisner's house for a meeting. Katzenberg realized that no matter what he thought had been promised, Eisner clearly did not want to give him the job. Katzenberg had decided to resign. He declared his intentions to Eisner, but the meeting ended inconclusively. According to Katzenberg, Eisner asked him to prepare his proposals for the company. He decided to write a four-page memo outlining his ideas.

On August 24, Eisner called Katzenberg into his office. Katzenberg was ready to present his memo, but instead Eisner told him that he was about to release a four-page announcement on the future of Disney. It briefly discussed the departure of Jeffrey Katzenberg.

Katzenberg was ejected from the company with a vehemence that astonished observers. The announcement wasn't a smoothly orchestrated exchange of mutual respect and regrets; instead, it was apparent that Katzenberg had learned of his own demise only a couple of hours before the rest of the world.

It was a simple story, in a way. Yet there was something unnerving in watching a man work so hard and achieve so much and then come to such an unceremonious end. "It's so clearly about ego rather than accomplishments," says a top executive at another studio. "All Jeffrey wanted is what a son wants from his father. The father was not prepared to give it to him. And then he said he didn't deserve it anyway."

Reactions inside and outside the company were powerful. Some felt Katzenberg had finally gotten a spoonful of his own medicine. Others thought Eisner had revealed his own coldness and selfishness. A few thought Disney's live-action movies might finally improve after Katzenberg's departure, but many feared that the company, on balance, would suffer. Tom Pollock, chairman of rival Universal, has been critical of Disney's high-volume strategy, but he calls Katzenberg's dismissal a mistake. "Strategies can change. Good executives to implement them are hard to find," he says. "The company is poorer without Jeffrey."

Katzenberg had devoted himself to the studio with such unalloyed passion— his identity was so enmeshed with the studio's—that many in the entertainment community could not imagine Disney without Katzenberg. "Basically, Jeffrey was Disney to me," director Zemeckis says. And Ray Stark, the Tyrannosaurus rex of movie producers, says Katzenberg's success at Disney exceeded the visions of Walt himself, adding with typical archness, "I have a great deal of respect for Mike Eisner and I hope his next move is not to give the gate to Mickey Mouse."

Barry Diller dismisses the hand-wringing over the Katzenberg saga. "There are no casualties here," he insists. "This is only about the eventual unfortunate disintegration of a relationship."

But in some sense both men are casualties. "For Michael and Jeffrey, it is a very traumatic event," says Gold. "These are people who are trying to find some magic answer to a problem that doesn't have a magic answer. This is a series of events that unfolded."

Once the rupture came, Jeffrey Katzenberg, a man once reviled by some filmmakers as a tightfisted megalomaniac, garnered substantial support from that quarter. Most notable was Steven Spielberg, who told the Los Angeles Times that Katzenberg's departure was Eisner's "Machiavellian loss."

The day after those words appeared in print, Eisner summoned Katzenberg to his office. He was convinced that Katzenberg was generating a maelstrom of bad press that exceeded anything that Eisner expected. He was surprised to find that the episode merited a cover story in Newsweek that depicted Katzenberg's departure as one of the worst of Disney's problems. He was appalled to read in that article a description of himself, sobbing in the hospital in the aftermath of his surgery. Eisner denies that this ever happened.

Not all the coverage cut Katzenberg's way: Eisner's homeboys on the Disney board sent the message that they didn't think Katzenberg was right for the number-two job. A Wall Street Journal piece called Katzenberg "creative but unpolished." But Katzenberg was scoring enough points that a furious Eisner now demanded a cease-fire. Katzenberg told a friend that this meeting with Eisner was the worst in their years together, and quickly asked his supporters to decline further interview requests. But he also consulted Bert Fields, one of the toughest lawyers in the entertainment business, about his severance from Disney. The battle of words may have subsided, but those weren't the only weapons in the arsenal.

Michael Eisner has his work cut out for him. He has appointed Joe Roth, former chairman of the Twentieth Century Fox studios, to replace Katzenberg. Roth is capable and affable, but the four movies he has produced at Disney under his Caravan Pictures banner were not unmixed successes. The Three Musketeers was a break-even proposition, but Angie and I Love Trouble, a vehicle for Julia Roberts, were bombs. His only win has been Angels in the Outfield—a solid hit but hardly a blockbuster. Considering Roth's spotty record, Eisner undoubtedly will want to keep an eye on his new protege.

Then there are the theme parks. Disney's America. Euro Disney. And the record division and the new theater enterprise, which do not seem to report to anyone just now. And there seems to be a little confusion about animation: Eisner told me he will take Katzenberg's place in nurturing the films; he told The New York Times that Katzenberg's shoes would be filled by Roy Disney.

In the wake of quadruple-bypass surgery, Eisner seemed to be asking a great deal of himself. Katzenberg is eager to give him a vote of confidence. "There is no question that Michael Eisner's plate is full and he has extraordinary challenges ahead," he says. "But no one should be so foolish as to bet against him winning. He always has and he always will. I for one will bet on him every time."

An executive who used to work for Katzenberg says he would make the same bet about his former boss. "Jeffrey is not self-pitying," he says. "And once he gets through this, he will be so angry that it will give him an energy that he hasn't felt in years. I see a day, 25 years from now, when I'll be attending the opening of Katzenberg-land."