Eisner Eyes A Graceful Exit

In setting his retirement date for September 2006, Walt Disney Co. CEO Michael Eisner says he's giving the board a comfortable transition period to find a new leader. But the move may actually give him more power over his exit and influence on finding a successor.

Media and Wall Street executives concur that Eisner's move dissipates much of the power of dissident shareholders who for the past year have been campaigning for his ouster. And since he won't have to concentrate so mightily on keeping his job, he can spend the next two years burnishing his legacy and supporting the man he favors as Disney's next CEO, COO Bob Iger.

Although he's retiring, Eisner won't be leaving the company. Media and Wall Street executives believe that Eisner will try to become chairman of Disney, a title stripped from him during last spring's shareholder battle. This could become a sticking point if board members decide they don't want Iger. Outsiders may not want to work under a chief as strong-willed as Eisner.

"If Eisner is made chairman, you won't get the best people," says Sanford Bernstein media analyst Tom Wolzien. "Anyone who really wants to run the show won't want to work in Eisner's shadow."

Eisner could have a tough couple of years ahead of him. Morgan Stanley media analyst Richard Bilotti estimates that only Disney's cable networks—led by ESPN and Disney Channel—will be showing strong revenue growth. He sees the studio's revenues dropping 17% next year because its DVD release schedule is too heavy with movies that flopped in theaters this year. No growth is seen in 2006 either. ABC may recover, but slowly. Once a recovering economy boosts the travel industry, Disney's theme parks will grow only about 4% annually starting in 2006. He sees consumer products as a completely stagnant business.

There's a list of usual suspects for the job. Those include strong executives at other media giants, including Time Warner Entertainment & Networks Group Chairman Jeff Bewkes, ex-Viacom President Mel Karmazin, Viacom Co-President Les Moonves (who is vying with Tom Freston to succeed Sumner Redstone) and News Corp. President Peter Chernin (who recently renewed his contract).

There's also a host of former Disney executives who have gone on to greater successes elsewhere and could be considered, including Comcast Executive Vice President Steve Burke, The Gap President and CEO Paul Pressler and eBay CEO Meg Whitman.

Eisner's move certainly dilutes the power of protesting shareholders who have sought his ouster for the past year. Led by Roy Disney, nephew of Walt Disney and a major shareholder, the shareholder group protested Eisner's management of the company, citing the ratings plunge at ABC, the fizzled $5 billion takeover of Fox Family Channel and the fracturing of a movie co-production deal with hit factory Pixar.

The shareholder group dealt an angry rebuke of Eisner at the company's latest shareholder meeting by withholding votes for Eisner's reelection to the board, but the group has no real power over the company.

Eisner's survival of that fight allows him to try to stage a more graceful exit. "He's trying to leave on his own terms," says a former high-level Disney executive. "He's trying to rewrite history."