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DEALING FOR DISNEY

Film Unit Caught in Crossfire

With support for Eisner eroding, 'The Alamo' and other big-budget bets face close scrutiny.

March 02, 2004|Claudia Eller | Times Staff Writer

Disney hasn't forgotten "The Alamo" -- and neither has Wall Street.

While corporate directors and Chairman Michael Eisner deal with a building shareholder siege, Walt Disney Co.'s film unit -- a prime contributor to earnings lately -- is bracing for an uncertain spring because of some high-risk bets, including the once-delayed Texas epic.

In coming weeks, the Burbank company is set to release not only its $100-million production of "The Alamo" but also next Friday's $78-million adventure film, "Hidalgo." Both pictures were bumped out of last year's lineup because they weren't ready for audiences.

A week before the April 9 premiere of "The Alamo," moreover, Disney plans to open "Home on the Range," a traditionally-animated, 2-D comedy that cost about $110 million to produce -- a big roll of the dice, given today's strong audience preference for cutting-edge computer-generated cartoons.

Those and other spring pictures already are getting close scrutiny from investors, who are looking for any sign of weakness in a film operation that is coming off a record run at the box office.

"It was the studio that blew away everybody's first-quarter estimates," Sanford C. Bernstein & Co. media analyst Tom Wolzein said. "So now, what's next? Is it sustainable? That's basically what the market is asking."

An ill-timed stumble by the studio could undercut Eisner's argument that Disney has put its worst days behind and is poised for a period of steady growth.

On Monday, the Florida State Board of Administration, the fourth-largest U.S. pension fund, joined a dozen other large investors in promising to withhold their votes for Eisner's reelection to the Disney board at Wednesday's annual meeting in Philadelphia. At a meeting scheduled tonight in Philadelphia, the board is expected to plot its strategy for responding to the growing "no" vote.

In a pair of dueling letters, meanwhile, Disney's directors and dissident shareholders gave starkly different views of the company's future.

Former board members Roy Disney and Stanley Gold urged shareholders to use their vote to "send an unmistakable message that it is time for a change in the senior management and board of the Walt Disney Co. Tell the board you believe it is time to replace Michael Eisner."

The directors' letter, however, told shareholders their support "is important to keep the momentum of the Walt Disney Company going." By voting for the current board, it added, investors can ensure that Disney is not distracted from "realizing the full potential of our creative strength and enhancing shareholder value."

Despite the public crossfire, studio chairman Dick Cook and his first lieutenant, production chief Nina Jacobson, insisted in a joint interview that the demands to sustain success were no greater than usual.

"The pressure is there regardless of what's happening," said Cook, who will be making a presentation at the crucial shareholders meeting, where a large anti-Eisner vote would fuel calls for an end to the chairman's 20-year reign.

While acknowledging that Wall Street attention has "some impact," Jacobson agreed that being under the microscope doesn't add much to the usual jitters.

"We bite our nails on every picture," Jacobson said. "We did it last year, we're doing it now and we'll do it next year -- that's the nature of the business."

Disney strategy has been to balance risk by surrounding high-cost films like last year's "Pirates of the Caribbean," a smash hit, with lower-cost family pictures such as "Freaky Friday" and "Bringing Down the House," which were also nicely profitable.

This year, however, the managers found themselves with a more expensive mix. That's largely because the bigger films, according to the executives, happened to clump together.

Big-budget releases lined up for later in the year include producer Jerry Bruckheimer's summer action-adventure film "King Arthur," which cost around $120 million and "National Treasure," a $100-million picture starring Nicolas Cage as a modern-day treasure hunter. The schedule also includes a less expensive thriller from "The Sixth Sense" director M. Night Shyamalan and a modestly budgeted Bill Murray comedy at Christmas, along with Pixar's next computer-animated comedy, "The Incredibles."

Although the relatively heavy roster could lead to another record year, some observers are wary of high costs and the potential for flops.

"It would be difficult to expect that the fiscal 2004 theatrical releases would exceed the fiscal 2003 releases" in terms of box-office performance, said media analyst Jeffrey Logsdon of Harris Nesbitt Gerard.

"Finding Nemo," produced by Pixar, and "Pirates," a Disney movie produced by Bruckheimer, each amassed more than $300 million of ticket sales in U.S. theaters alone.

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