By the late 1990s, Walt Disney shareholders could have whistled toward work — or retirement.
The company stood atop the entertainment world, growing strongly as its animation division churned out hits, its live-action films flowered, and its dusty video library turned into content gold.
Shares surged 8,943% from their 1984 low to their March 2014 peak, with the biggest run from '84 to '98.
But in the spring of 1984, all of that was far off.
A few years after the death of the visionary founder Walt in 1966, Disney (DIS) foundered under weak leadership and little sense of direction. Once the company's crown jewels, the animated movies had fallen by the wayside, and its live-action films — think of "Escape to Witch Mountain" (1965) and "Tron" (1982) — weren't much better.
In fiscal 1982, net income plunged 18% and fell 7% again the following year. The next year, corporate raider Saul Steinberg targeted Disney, which eventually paid him $32 million to go away.
The Disney board knew that it needed change. In September of 1984, Michael Eisner started as CEO and chairman, and Frank Wells as president.
"It was a fabulous management team. People were at their absolute best," said Chris Dixon, who covered Disney as a PaineWebber analyst at the time. "Eisner was terrific in terms of imagination and energy, and Frank, because of his long-term experience, added a little gray hair.
"The '80s were golden," said Hal Vogel, a long-time entertainment industry analyst and investor who wrote "Entertainment Industry Economics." "It was a very positive change and a very fruitful period.
One of the team's first smart moves, analysts say, was to recognize the cash potential of Disney's assets. By the early 1980s, the theme parks were generating 70% of company income, according to the website Funding Universe.
"They sensed correctly that they could raise ticket prices and not affect demand for the parks," Vogel said.
In fact, raising ticket prices by just $1 would yield $30 million more per year, wrote Kim Masters in "The Keys to the Kingdom: The Rise of Michael Eisner and the Fall of Everybody Else.
Disney got lucky with demographics, says Vogel, as children of baby boomers got old enough to appreciate the theme parks. But it was a stroke of genius, not luck, that led Eisner to see Disney's existing film stock as an asset to be tapped.
"Such a bounty has fallen into my lap. Every day a new asset falls out of the sky," Eisner said in Masters' book. Wells was said to have quipped, "Every time I open a door at this company, there's money behind it.
No company had thought of marketing videocassettes cheaply enough that parents could buy them for children to watch over and over, Masters wrote, and that brainstorm made video a "staggering source of revenue" for Disney. Its video library, more than those of most studios, was easily distributed overseas because the films didn't require a lot of sophisticated translation.
Eisner's recognition that old content had value changed the face of entertainment. It helped cable fill empty channels and gave rise to new business models such as Netflix (NFLX) and Roku.
Again, Disney was in the sweet spot. Consumers weren't the only ones looking for videocassette content; scores of new TV channels also needed it, and Disney had family-friendly films galore.
To create new movie and TV content, Eisner and Wells hired Jeffrey Katzenberg, who'd worked under Eisner at Paramount, as Disney Studios chairman.
Under Katzenberg's direction, Disney revitalized its animation division, turning out hits like "The Little Mermaid," which won two Oscars and grossed a record-setting $85 million; "Beauty and the Beast," the first animated film to be nominated for a best-picture Oscar; and "The Lion King," which took in a staggering $423 million in theatrical box-office revenues according to the website BoxOfficeMojo.
Katzenberg "lit a fire under people," said Bill Cotter, author of "The Wonderful World of Disney Television." Cotter worked for that Disney medium for years.
Thomas Sito, who helped animate many of the hit films of the Disney renaissance, including "Little Mermaid" and "Aladdin," believes another manager was also key to that revival: Roy Disney, Walt's nephew, who became head of the animation division in 1984.
Roy was personally invested in the revival of animation, which had been the Disney Co.'s heart and soul. Sito told IBD that when it came to making decisions about the quality of the products, Roy used to growl, "I have to care. My name's on the damn door.
The entire management team focused on bringing that sense of quality back to Disney films, Sito says. That was partly due to outside competition; former Disney animator Don Bluth had left and was producing popular animated films such as 1986's "An American Tail.
Katzenberg used to liken Disney's status as synonymous with quality family entertainment just as the Kleenex brand is to tissues.
"It was very exciting at the time, because as artists we always had faith in the art of animation and its ability to entertain," Sito said.
Disney's new successes also showed Hollywood that animation could be big business again. The Lucasfilm spinoff Pixar had enormous hits with "Toy Story," "Finding Nemo" and other films before being bought by Disney in 2006. And Katzenberg had hits like the "Shrek" films at DreamWorks Animation (DWA) after leaving Disney.
Eisner, who was president of Paramount Pictures when Disney tapped him for the CEO job, also knew that there was value in live-action, non-G-rated movie fare. Disney had established Touchstone Films in 1983, before Eisner started, and had even had a hit with the Tom Hanks comedy "Splash.
Eisner gave Touchstone lots of attention, and Touchstone hits such as "Outrageous Fortune," "Ruthless People" and "Pretty Woman" were box-office gold.
Eisner also expanded the moneymaking theme parks. He broadened Walt Disney World in Orlando, Fla., via a partnership with MGM for a studio-themed entertainment park, which opened in 1989.
But Eisner thought even bigger. Tokyo Disneyland had opened in 1983, and while it did well, it was considered a missed opportunity because Disney had leased its characters and name to a local concessionaire rather than owning everything in the park outright. Still, Vogel said, "It was quite lucrative, and Europe was the next logical decision." Eisner began working on establishing a Disneyland in Paris: Euro Disney, which opened in 1992.
Vogel lauds the decision to pursue global expansion. It spread Disney products to consumers around the world and reinforced the brand's iconic status.
More than that, Eisner's long-distance shift meant that every interaction that a consumer had with Disney sparked another. A theme-park vacation would remind children of a love for Disney films, and re-viewing an old favorite movie could send a parent to buy a toy with a character's likeness. Some 22% of Disney's revenue came from international operations by 1991.
All of those ventures were a prelude to one of Eisner's biggest steps: buying ABC/Capital Cities in 1996 for $19 billion. "Once they were successful in being able to expand and demonstrate they could take the company to the next level and scale it, the next step was buying ABC," Dixon said.
The acquisition got Disney a broadcast network along with TV and radio stations — plus ESPN, which at the time had 95 million worldwide viewers. "ESPN was the crown jewel," Vogel said.
The purchase was especially bold because it guaranteed Disney a network for its programs, Masters notes.
ABC could air new Disney programming, which could be resold as reruns to cable. Yet Disney remained focused on quality entertainment rather than on churning out lots of content to dump on the network, says Cotter.
The sense of rebirth touching the film animators reached the TV division as well, Cotter said: "The more you keep a feeling of fire and ambition under a creative crowd, the more they're going to rise to the occasion.
Disney's market cap increased from $2 billion to $53 billion from 1984 to 1996. Eisner could point to 18 new businesses into which he'd led the company since taking the reins, including professional sports teams, live Broadway shows and Disney stores.
"In the history of American business, this was a great group of people who complemented each other at the same time as expanding demand for American entertainment and rapidly developing technology delivered entertainment in new and different ways," Dixon said.