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A Clash of CEO Egos Gets Blame in Disney-Pixar Split

Eisner and Jobs had personal differences that affected their business relationship, sources say.

February 02, 2004|Richard Verrier and Claudia Eller | Times Staff Writers

Several months before last summer's release of "Finding Nemo," the chairman of Walt Disney Co., Michael Eisner, told his board not to expect a blockbuster and suggested that such a fate might not be all that bad.

Eisner said that although Pixar Animation Studios was excited about its film, he was not impressed by early cuts he'd seen, according to people familiar with the matter. Should the movie falter, Eisner said, Disney could gain negotiating leverage in contentious talks to extend its partnership with the highflying animation company.

Pixar, Eisner concluded, may be headed for "a reality check."

The computer-animated film would, in fact, prove to be a reality check -- for Eisner. The critically acclaimed "Finding Nemo" would soon make more money than any animated film in history. Advantage: Pixar.

Last week, Pixar Chief Executive Steve Jobs stunned Disney and Wall Street by abruptly ending negotiations with the Burbank entertainment giant to extend one of Hollywood's richest relationships, one that has produced five straight hits.

Disney executives and many independent financial analysts said Pixar simply was demanding too much, including sole ownership of the films the two had made under the existing pact, such as the "Toy Story" series and "Monsters, Inc."

But sources close to Eisner and Apple Computer Inc. founder Jobs said the stunning split was less about the math of the deal than the equation of the personalties. Associates say the two corporate titans, both famously strong-willed, let their personal differences cloud their objectivity in a partnership in which the spoils were evenly split.

Jobs, feeling perpetually slighted, crafted an offer that was so one-sided that some thought it appeared designed to infuriate Eisner.

"Pixar put a deal on the table that was almost insulting to Disney," said Jordan Rohan, media analyst for Schwab Soundview Capital Markets. "It seemed like Steve Jobs wanted to part ways with Disney."

As for Eisner, a person close to the chairman said he was pleased with the final version of "Nemo." His disparaging views of early cuts of the movie suggested to some in his own company that he did not value the enormous contributions of his longtime partner.

"The relationship went sour when Michael didn't treat Jobs and the Pixar machine as a giant creative engine, he treated them as second-class citizens," said former Disney board member Stanley Gold, who resigned last year with fellow director Roy E. Disney in a dispute with Eisner.

For the record, Disney officials contend that personal feelings played no role in the divorce between the two companies.

"No Disney executive allows personality to get in the way of doing what's right for shareholders," Disney spokeswoman Zenia Mucha said. "The breakup came down to differences in financial terms of the partnership and nothing else."

Officials at Pixar declined to comment.

Whatever the reason behind the breakup, Disney's brass seems to be shedding few tears -- at least in front of its employees, many of whom treasured the relationship with Pixar.

In an e-mail, Disney's new animation chief, David Stainton, picked by Eisner last year, had this to say to his troops:

"Given Pixar's demands, this is good news for the company. It is also a great vote of confidence for feature animation -- confidence in our talent, our slate, and our future. You all are awesome and ready for your close-up!"

Many inside and outside the two companies believe the partnership could have been salvaged had the two moguls checked their egos at the door.

Both men are used to getting their way, though their styles may differ. They also share another trait: Both are survivors.

Eisner has been at the helm of Disney for 20 years. He has weathered a number of storms, including poor performance of its stock, deteriorating ratings of its ABC television network, weak sales at its retail stores, and the defection of high-level executives who have found success elsewhere.

The Disney chairman is widely known as someone who will not give an inch in his business dealings, whether it's litigating over merchandising royalties for Winnie the Pooh or forcing cable operators to pay escalating fees to air Disney's ESPN network.

The equally tough-minded Jobs has survived his own share of setbacks. In 1985, the legendary Silicon Valley entrepreneur left Apple Computer, the company he co-founded in his father's garage, amid a power struggle over its direction. Like Eisner, he is guarded and intensely protective of his company's brand name.

Jobs recently demonstrated his maverick vision and shrewd negotiating skills in persuading executives at Universal Music Group and other labels to sell songs online with few restrictions through Apple's iTunes Music Store. Associates say he wins some battles sheerly on the force of personality.

"He is the best salesman in the technology industry, bar none," one Silicon Valley analyst said of Jobs.

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