Disney, AOL chiefs fending off challenges
By Frank Ahrens
Washington Post
Both are sprawling media giants. Both have suffered plummeting share prices during the past two years. Both have high-profile leaders — once touted as visionaries — who are now the subject of speculation that they may be ousted.
Both have faced, or are facing, important meetings of their boards of directors at which major decisions are rumored to have been under consideration. Both have the swirl of palace intrigue about them.
After that, the similarities between AOL Time Warner Inc. and the Walt Disney Co. essentially end. Chief among them: AOL Time Warner is under Securities and Exchange Commission and Justice Department investigation, and Disney is not.
Yet top executives at each find themselves targets of shareholder concern as a result of the many troubles that have beset the world's dominant media companies.
AOL Time Warner chairman Steve Case faces pressure from institutional investors who have watched the company's stock plummet and have grown increasingly dissatisfied with the results of the 2001 merger between America Online Inc. and Time Warner Inc.
At Disney, Michael Eisner's 17-year ride as chief executive has gotten bumpy recently.
Disney stock also has dropped, the company's ABC Television Network is mired in third place in the ratings, and theme park attendance is off. There are reported grumblings among some board members — such as Roy Disney, the company's largest individual stockholder — and Eisner's leadership is being challenged by a stock activist who has been called a gadfly.
Honolulu-born Case, 44, is the last AOL man standing from the megamerger that turned the online service into the world's largest media company, putting such holdings as Warner Bros. movie studios and music, HBO, and Turner Broadcasting System under the same roof.
Case and former Time Warner CEO Gerald Levin engineered the union, meant to merge old- and new-media ways into a global superpower. Yet the deal is now roundly considered a failure, and Time Warner suits have taken over the company. Levin is gone, as is his No. 2, Robert Pittman, the company's former chief operating officer.
Time Warner executives are angered that America Online's slumping performance has dragged down its parent company's stock, voiding stock options and diminishing company value.
The company is further clouded by twin federal probes into AOL's accounting. There is a growing urge within the company to sweep away all the reminders of the deal.
Case may be the last reminder.
Accordingly, there's been a flurry of media speculation over the past weeks, most recently in the New York Times, that Case may be forced out.
Neither Case nor AOL Time Warner chief executive Richard Parsons were available for comment last week, said AOL Time Warner spokeswoman Tricia Primrose, who called the reports spurious.
"There's no basis to the rumors," Primrose said. "Steve Case isn't going anywhere." And she said there are no plans to drop AOL from the company name, as has been speculated.
Early last week, the company released a statement supporting Case. "Steve and Dick (Parsons) have a very strong relationship" and the company "benefits greatly from their teamwork and complementary perspectives," it said. "Any suggestion that Steve might leave AOL Time Warner, or that there is confusion between Steve and Dick's roles, or that there is any tension between Steve and Dick, is utterly untrue."
A company official said yesterday, after the company's board of directors' meeting, that board members did not even discuss Case.
Whether Case's ouster would help AOL Time Warner stock is another matter.
"Wall Street can't discern which decisions, bad or good, have been influenced in large part by Case," said Jordan Rohan, a media analyst with research firm SoundView Technology Group, which holds no AOL Time Warner stock. He said he doesn't think AOL's stock price would be affected if Case were to leave.
At Disney, Eisner, 60, has been chairman since 1984. He was lauded until a couple of years after the company acquired Capital Cities/ABC Inc. in 1996, which exposed Disney to the sort of cyclical media advertising slumps it had not experienced before.
Since the Sept. 11 attacks, attendance at the company's U.S. theme parks — Disney's revenue engines — has been off by about 10 percent. The threat of a U.S. war with Iraq is likely to further depress park visitation, analysts said. This fall's ABC prime-time schedule is important to the company: If it can move out of third place, its take at next May's annual "up front" — when commercial time for the 2003 fall season is sold — will rise accordingly, pleasing stockholders.
Disney's board meets Tuesday. Last week, Disney shareholder Herbert Denton, president of Providence Capital Inc., held a conference call for Disney investors. Though he has not stated he is encouraging a stockholder revolt, it is implied.
Eisner "is facing a difficult challenge, which he'll take probably two or three years to overcome," Denton told CNBC recently. "And the question is, is he the right man to do this? I don't have the answer, but if he is the right man, maybe at the end of two years, he's had enough time to accomplish the task, or — or he's not."
Disney officials were not invited to participate in Denton's conference call. Denton did not return a call seeking comment.
The company's stock, which traded at more than $40 a share in early 2000, closed at $15.98 Tuesday. An Eisner spokeswoman said he was unavailable for comment.
In recent weeks, Eisner and Disney chief financial officer Thomas Staggs held something of a mini-roadshow, visiting analysts and laying out Disney's plans. Many analysts lauded the Disney team's "refreshing candor," and at least one maintained Disney stock as a "long-term buy," even though Eisner admitted that his company had overpaid for the Fox Family Channel.
Eisner further pleased analysts by telling them Disney wasn't interested in operating a cable system or buying what it does not own of Pixar Animation Studios, the company responsible for movies such as "Monsters Inc." that is 62 percent-owned by Apple Computer Inc.'s Steve Jobs.
