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Company Town: SHAKE-UP AT DISNEY : A Whole New World : Katzenberg's Departure Sets Change in Motion


The imminent departure of longtime Walt Disney Studios Chairman Jeffrey Katzenberg is expected to bring revolutionary changes to both the style and structure of the movie and TV empire.

During Katzenberg's 10 years at the helm, the studio largely reflected his famous over-the-top energy and religious zeal for saving money. Meetings routinely started at 7 a.m. or earlier, and executives marched in lock step to tough business mandates.

Now, with the studio separated into three divisions, the singular image will fade. Disney also falls off the exclusive list of Hollywood studios that have maintained their stability.

In announcing Katzenberg's departure, Disney said animation will report to Walt Disney Co. Chairman Michael D. Eisner and board Vice Chairman Roy E. Disney. Live-action movies have been placed under the aegis of Disney-based producer and former 20th Century Fox movie chief Joe Roth and television and telecommunications under ex-studio President Richard Frank.

While the management shift is not expected to have a major impact on Disney's TV operations, there is widespread speculation and trepidation that Roth's appointment will lead to executive upheaval in the motion picture ranks--including production, marketing and business affairs.

"There's fear in the air here for the first time in 10 years," said a highly placed Disney executive. "Nobody has ever been afraid for their job, and now everybody is."

Adds another, "There's a sense of total depression. We're wondering where do we go from here?"

Katzenberg lunched with his successor in the studio's executive dining room Thursday. Conspicuously seated in the center of the rotunda, the two seemed to be sending a clear message that the baton was being cordially passed.

"This is the day after a very sudden, shocking set of events," said Roth, who also met with Disney divisional heads. "People have to deal with their feelings. Jeffrey was the father of the group. It's unrealistic to expect them to blink and say, 'OK, next.' "

Wall Street reacted calmly to the changing of the guard. Disney shares fell 50 cents Thursday to $42.75 in modest trading on the New York Stock Exchange. Sources said Disney launched an all-out campaign Wednesday to assure the investment community that the company is on solid footing, with Eisner personally calling brokerages and investors.

The mood was less sanguine at the Burbank studio. After a decade at the helm, Katzenberg said, the reality of leaving is traumatic. In contrast to the stoic demeanor he adopted Wednesday, when Eisner told him he would not be getting the company's No. 2 spot, Katzenberg came across as openly vulnerable.

"I'm an emotional basket case today," he conceded in an interview. "Since I lived my job, this was my shadow family--essentially the same one with which I grew up at Paramount--and I feel an overwhelming sense of loss."

If Team Disney voiced reservations about the changes, Hollywood's creative community was upbeat.

"Releasing Jeffrey Katzenberg on the industry will produce as much energy as the explosion of the first atomic bomb. It gives new people opportunities and established people the opportunities to reinvent themselves," said Joan Hyler, senior vice president of William Morris Agency.

Despite continued speculation that Katzenberg will land at Sony Pictures Entertainment or MCA Inc., there was no movement on that front Thursday. And Katzenberg seemed in no hurry to make his next career move.

Industry observers point out that it was nearly 10 years to the week that a similar scenario occurred at Paramount. When Barry Diller left the studio, Eisner was overlooked for the top job by his boss, parent company Chairman Martin Davis.

"This is a clear case of the abused child turning around and abusing his child," said a source who was at Paramount then.

Though Katzenberg and Eisner spent a good-natured hour together Thursday morning discussing the transition, loyalists of the departing studio chief insist that matters could have been handled more delicately.

"There was a real ugliness to it all," said one. "Whatever the board members happen to think of him, whatever ego clashes the two of them had, Katzenberg was the chief architect of an amazing rebirth of the studio. He met with (Eisner) on Wednesday morning and expected that to be the beginning of discussions about his future. Right after the meeting, he was handed a press release."

Others argue that things worked out for the best. "If Jeffrey had taken the next step, it would have been a good example of the Peter Principle: everyone rising to his level of incompetence," said a leading producer. "(Frank) Wells was a lawyer with great Wall Street relationships. That isn't Jeffrey . . . but I don't think Jeffrey knows that."

Though Roth has been affiliated with Disney as a producer for nearly two years under his Caravan Pictures deal, his anointment is viewed with concern by some studio executives.

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