"When Moguls Attack!"

Don't mess with the Big Mouse: Disney's Eisner pays back archnemesis Katzenberg by whacking Dreamworks pilot.

Published May 19, 1999 4:00PM (EDT)

The other shoe has dropped. And it's not a little one.
It was just a matter of when -- not if -- chairman Michael Eisner would get even with nemesis Jeffrey Katzenberg for suing the Walt Disney Co. After all, headlines were made when Katzenberg's attorney forced Eisner to concede on the witness stand earlier this month that, yes, he did say about his former employee, "I think I hate the little midget."

Now Eisner's humiliation is going to cost Katzenberg big-time. Since this is the week when the six major television networks present their fall schedules to media buyers with all the appropriate fanfare, most Hollywood TV producers, executives and agents gathered together in this city's most expensive hotels, restaurants and watering holes usually find themselves knee-deep in the alphabet business (CBS, NBC, ABC, WB, UPN, FOX) with little time to focus on anything but their own fortunes. (Except for Drew Carey, the sitcom star who warmed up the crowd of advertisers and press at ABC's presentation in the New Amsterdam Theater Tuesday afternoon by daring to mention the ongoing trial. "I want to help Michael Eisner," Carey said, feigning sincerity. "So, in his defense, I saw Jeff Katzenberg at the 'Star Wars' premiere, and he is short.") Even so, they are buzzing about ABC's controversial decision not to pick up the pilot of what was considered a "sure thing" to make the 1999-2000 lineup: "Sugar Hill," a sitcom produced by veteran Gary David Goldberg and starring Oscar nominee Charlie Sheen.

First and foremost, the show was rumored to be good. (The Hollywood Reporter noted on May 13 -- four days before Disney pulled the plug -- that "Sugar Hill" was "getting high fives" at ABC.) It also had an impressive pedigree: Not only did Goldberg of "Family Ties" and "Brooklyn Bridge" fame have a huge ABC hit already with "Spin City" and was overdue for some strokes, but this was to be Sheen's small screen turn at a time when network TV is in dire need of star power to better compete with cable. Further cementing the show's near-certain prospects, ABC would have to pay a hefty financial penalty if the sitcom didn't get at least a midseason pickup.

So what earned Eisner's personal ire? "Sugar Hill" is produced by Dreamworks; Katzenberg is co-founder of that company. And Disney owns ABC. Reason enough, informed sources say, that "Sugar Hill" is now DOA at ABC.

It's understandable that Eisner would hit back at Katzenberg where it would hurt the most -- in the wallet -- since that is precisely where Katzenberg is targeting Disney. Talk about payback. On the one hand, Katzenberg in his lawsuit is demanding $500 million from the Mouse House for what he claims is an unpaid incentive bonus. On the other, his studio stands to lose that sum since a hit show on a major network can fetch as much as $500 million if it runs long enough to go into syndication. All month, there has been considerable eyebrow-raising around Hollywood about the fact that Katzenberg vs. Walt Disney Co. went to court just when ABC was deciding its fall schedule. And, as the trial descended into much-anticipated nastiness, a joke made the rounds that the Fox network now had enough footage for its latest TV special, "When Moguls Attack!"

By the end of this development season, it became clear that Dreamworks already had two shows locked in the ABC lineup: one of the network's biggest building-block hits, "Spin City," as well as one of its newest critic-pleasers, "It's like, you know ..." But Dreamworks also had several pilots in contention.

Usually, in the cutthroat world of high-risk, high-reward network TV, success breeds success. So, on the surface, Dreamworks could have expected a proverbial pat on the head from ABC. Instead, it got a knockout punch. "It's an interesting dynamic, to put it mildly," one veteran TV producer with ties to ABC noted dryly.

It's also no secret that, with ABC still lagging behind NBC, CBS and occasionally even Fox in household numbers or desirable demographics, Eisner has been personally involved in every aspect of network programming, including screening every pilot. (In fact, Eisner himself, who started as a 24-year-old junior executive at the network and rose to be a senior vice president before leaping to feature films, is known to joke that he has a sitcom viewpoint that hasn't changed since "Happy Days.") For that reason, Eisner would have come under considerable fire if he tried to take his revenge on Dreamworks by, say, suddenly canceling "Spin City" or even "It's like, you know ..." But networks pass with impunity on pilots all the time, including some that spew cash as easily as an ATM. (In fact, ABC has a history of doing that. Even before it was bought by Disney, the network said no to "The Cosby Show" and then again to "Third Rock From the Sun." Both shows went on to become big hits on NBC.) Especially these days, when the emphasis by parent companies like Disney or General Electric is on in-house or sister studio production at ABC and NBC: In other words, they want to keep the money inside the family.

In an ideal world, the network would take a hit from any source, even -- gulp! -- Katzenberg. But that's NOT how it works in Hollywood, a town known as much for the incestuousness of its professional relationships as it is for the vitriol of its personal feuds. Only a naif would think it wasn't a little easier in this case for Eisner to urge or even order ABC to pass on a Dreamworks sitcom.

A Disney spokesman denied any linkage. "That is an absurd premise. Nobody does things to spite themselves," said John Dreyer, Disney's head of corporate communications. "There is a harsh reality in this business," argues a senior Disney executive, "that no matter whatever is played out among people, the bottom line is if there is a hit show you really believe in, you'll take it because it means you'll make money."

Oh, by the way, did we mention their voices were gleeful?

Still the situation is complex enough to raise several disturbing questions. Were Disney shareholders, already a battered bunch since the stock has slumped, denied a potentially money-making piece of business because of the personal animosity between the company chairman/CEO and his ex-employee? Or is this yet another in what has been a seemingly endless Katz-and-Mouse game to destroy Disney's pristine image, Eisner's vaunted reputation and ABC's synergistic credibility?

The fact is that both are impossible to prove. But the rule of thumb in the entertainment business is that, where there's smoke, there's usually scorched earth. And far more frequently than in Washington or on Wall Street, rumors in Hollywood turn out to be true. Dreamworks had no official comment. But a source said several executives associated with "Sugar Hill" asked Katzenberg to personally engage in the usual last-minute lobbying that studios routinely do with the networks before schedules are set in stone. Katzenberg apparently declined. Only in the movies is it heroic to champion lost causes in Hollywood.

No one disputes that Dreamworks has a complicated history with ABC. Back in the fall of 1994, the year that Katzenberg abruptly left Disney and founded Dreamworks SKG with partners Steven Spielberg and David Geffen, an early investor in the start-up studio was none other than ABC, then owned by Capital Cities. The $100 million deal for first-look programming allowed fledgling Dreamworks to compete alongside the major studios in the costly arena of TV production, where deficit financing is one of the harsh realities.
Then, six months later, ABC abruptly changed ownership when Eisner and Capital Cities announced their $19 billion merger. Needless to say, the news was unsettling to Dreamworks and, specifically, to Katzenberg, who at the time was battling behind the scenes with Disney for the money he believed he was owed. Then, in the spring of 1996, Katzenberg filed his lawsuit.

It was an uncomfortable, nearly impossible, situation, complicated still further by the fact that Dreamworks was fiercely competing with Disney in the lucrative field of animated feature films at the same time that the fledgling studio was trying to sell its TV shows to ABC. On a personal level, too, things were hellish. At the same time that Katzenberg and Eisner were locked in mortal combat, Katzenberg and ABC president Robert Iger, who'd made the initial investment deal in Dreamworks, still considered themselves good friends.

Nor was it only Katzenberg and Eisner who were involved in the feud. It's known that Disney vice chairman Roy Disney, Walt's nephew, fiercely resented Katzenberg during his studio tenure for collecting the kudos on such Disney blockbusters as "The Lion King" even though Roy was the titular head of animation. Geffen's personal dislike of Eisner is legend throughout the industry (even erupting at one point during an interview published in Los Angeles magazine). And Spielberg dashed Disney's long-held plans to bring "Peter Pan" to the big screen when he directed "Hook" for Sony Pictures Entertainment.

Want still more? ABC's entertainment president, Jamie Tarses, went through a well-publicized break-up from husband Dan McDermott, the head of Dreamworks television. And after Ted Harbert jumped, before he was pushed, from atop ABC entertainment when he decided the executive suite wasn't big enough for both him and Tarses, he signed a production deal with Disney's archenemy -- Dreamworks. (Ironically, his first outing is now ABC's newest hit show, "It's like, you know ...")

Presently, the Los Angeles trial of Katzenberg vs. Disney is in recess while the judge considers the first of three phases: whether Katzenberg is entitled to receive interest on the as-yet-undetermined sum of money Disney may owe him. If the judge rules for Katzenberg, then Disney will be under considerable pressure to write a check as quickly as possible since the meter will be running. If not, then Disney could conceivably delay putting pen to paper until doomsday (or its appeals are exhausted, whichever comes first).

Katzenberg, who has been in court every day since the trial began, used the time off to travel to London, where he was beyond the reach of the Hollywood press as of Monday. Eisner, whose only subpoenaed appearance was a full day of grilling on the witness stand, is not expected to return. On Tuesday, he was expected in New York, where the head mouseketeer has made it something of a mini-tradition to sit in the audience in relative anonymity (not counting Disney security) for his network's annual presentation to advertisers.

Interestingly, the next phase of the trial, known as "valuation," may not be argued by Katzenberg's lead attorney, Bert Fields. Hollywood's top litigator, who roughed up Eisner so effectively on the witness stand, is due in court on June 30 for another high-profile trial that may get even nastier: comedian Garry Shandling's $100 million lawsuit against his former manager and friend, Brad Grey.

But it's one thing for Fields, who is defending Grey, to try to discredit a celebrity like Shandling, whose public persona is that of a loser anyway. It's another thing entirely to poke fun at the perennially most powerful man in Hollywood (though this year, Eisner was replaced by News Corp. chairman Rupert Murdoch on the just-published Premiere magazine pecking order). Strange, then, that suddenly, in the midst of the courtroom banter between Fields and Eisner, a dwarf other than Dopey and Sneezy was making news in connection with the hallowed name of Disney.

Through the morning and, after breaking for lunch, well into the afternoon, the 70-year-old Fields -- whose claim to fame is that he has never lost a trial for clients like Tom Cruise, James Cameron, Warren Beatty and Dustin Hoffman -- tried to trip up Eisner at every twist and turn of a labyrinth of facts. Using as arsenal not only Eisner's pre-trial deposition but also subpoenaed notes from Eisner's autobiography (published last fall to lackluster sales), Fields elicited only a mind-numbing series of "I don't knows" and "I don't recalls" as they hopscotched from exhibit this to memo that, hour after hour.

By 3 p.m., even the journalists were no longer able to stifle their yawns. And just when it appeared that Eisner and Fields were in danger of becoming an Abbott and Costello act ("What page are we on?" "Which memo are you looking at?"), the lawyer shuffled the papers on his podium, paused for dramatic effect, and asked Eisner: "Did Mr. Katzenberg grate on you?"

It was as if a rush of cold air had swept through the stuffy courtroom (actually, a mock courtroom inside the offices of the two law firms representing both sides, since this is a private proceeding being heard before a retired judge). Journalists, and even the judge, leaned forward expectantly in their chairs.

Eisner hunched lower. Katzenberg stared at his boss. Fields continued, asking Eisner if the part of Katzenberg's 1988 Disney contract giving him a "super-bonus" on top of a dizzying array of discretionary bonuses, incentive bonuses, stock options, stock grants and a $5 million Malibu beach house had irked him for the next five years.

"A lot of things irked me on various occasions," Eisner replied uncomfortably. "I don't think it irked me for five years."

With that, Fields started reading from a document in which Eisner was saying about Katzenberg's super-bonus, "It continued to irritate me for five years."

Eisner quickly moved to downplay the strength of the words being repeated back to him. "I wouldn't say I stayed awake nights worrying about it," the Disney chairman explained.

The journalists had begun to smile.

Then Fields launched a rapid-fire series of questions, all based on Eisner's book notes as transcribed by co-author Tony Schwartz. After each attack, Eisner's face grew redder and redder.

"Did you say Mr. Katzenberg was the 'tip of your pomp-pom'?"

"Did you say Mr. Katzenberg was your 'retriever'?"

"Did you tell Mr. Schwartz that you 'hated' Mr. Katzenberg?"

More than one journalist began to worry that Eisner, who had had quadruple bypass surgery in 1994, might require medical assistance.

Then Fields dropped his not-so-small bomb. "Did you say, 'I think I hate the little midget'?"

The throng of media was at first stunned into silence. Then they came to life. Several reporters began laughing so hard they couldn't write. Now all eyes turned to the 5-foot-4 Katzenberg, who sat granite-faced. Then the eyes moved to the 6-foot-3 Eisner, who in a menacing voice spit back, "I think you're getting into areas that are ill-advised."

Later, Fields would tell reporters, as proof of Eisner's total arrogance, that he had never been threatened by a witness he was questioning.

"If you pursue this line of questioning, it will put in the public record those things that shouldn't be in the public record," Eisner said ominously, adding that it would be worse for Katzenberg than for him.

"But didn't you say on more than one occasion that you 'hated' Mr. Katzenberg?" Fields insisted.

"I did not hate Mr. Katzenberg. I still do not hate Mr. Katzenberg. And if I said it, it was probably out of humor, or gross impropriety," responded Eisner, the fluorescent lighting now shining full-force on his glistening bald spot.
"But it's not in your client's best interest to pursue that line of questioning."

"Didn't you say to Mr. Schwartz about Mr. Katzenberg, 'I don't care what he thinks. I am not going to pay him any of the money,'" Fields countered.

This was the bullet, and Eisner looked as if he had been hit. He said in a bare whisper, "I would say again: in anger, if I said that. That's all."

With that, Fields ended his questioning. The judge immediately ordered a break. The journalists ran out of the room to call their editors. Even normally staid business affairs executive Helene Hahn, who had followed Katzenberg from Disney to Dreamworks, could not stop giggling as she burst into what looked like a jig.

And when the day was over, America Online teased its court coverage with the headline: "Disney's Eisner: Midget-Hater?"

If only the sitcoms on ABC were so funny. Suggested a top TV producer, not completely in jest, "Maybe Bert should run their comedy development division."

By Nikki Finke

Nikki Finke is Salon's Hollywood correspondent and the West Coast editor for New York magazine.

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