MEDIA WATCH: Trial of Katz vs. Mouse sullied all parties involved

Recently, Walt Disney Co. and its former studio chief, Jeffrey Katzenberg, settled a three-year-old lawsuit in which the latter claimed he was owed at least dollars 250 million as his contractual share of profits earned by projects he oversaw during his 10-year tenure with the company.

Recently, Walt Disney Co. and its former studio chief, Jeffrey Katzenberg, settled a three- year-old lawsuit in which the latter claimed he was owed at least dollars 250 million as his contractual share of profits earned by projects he oversaw during his 10-year tenure with the company. By all accounts, the legal brawl was especially nasty, pitting Katzenberg against his long-time mentor turned enemy, Michael Eisner, CEO of Walt Disney Co., who countered that Katzenberg had waived his bonus options.

The trial involved a company best known for its family entertainment engaged in a vicious, no-holds-barred battle with 'a modern morality tale of greed, jealousy and anger' (Chicago Tribune, May 5). In light of the recent settlement, CARMA reviewed the last few months' coverage of the lawsuit by the nation's leading media to investigate the trial's impact on its litigants.

The media coverage focused on the effect the lawsuit has had on Eisner's reputation. He was criticized for what was seen as a personal vendetta against his former protege, which prompted debate over flaws in his management capabilities. The Boston Herald (June 22) lamented, 'Walt Disney's movie empire deserves better from CEO Michael Eisner.'

Katzenberg, who left Disney in 1994 to co-found rival studio Dream Works SKG, received his own share of negative press. As part of its defense, Eisner and Disney alleged that several of Disney's live-action films overseen by Katzenberg were still several hundreds of millions of dollars in the red when he left the company ? a tough blow to Katzenberg's reputation.

The reputation of the Walt Disney Co. was also tarnished. The public trial placed the company in the awkward position of not only airing its dirty laundry in public, but also revealing 'creative' accounting practices.

Furthermore, the media pointed out that the trial placed Eisner and Disney in an awkward Catch-22 ? downplaying future growth and sales without jeopardizing shareholder confidence, because testimony that the company's products were lucrative would inflate the amount of money owed to Katzenberg.

The trial also brought attention to the fact that Walt Disney has not been performing well over the past year. Its profits are down and its stock recently hit a one-year low.

Several analysts noted that if a settlement had been reached long ago, it would have prevented the details of the matter from ever reaching the public. The Wall Street Journal (May 19) wondered, 'why the only media conglomerate with a brand name worth protecting would make itself available for this spectacle.' The New York Times (May 24) quoted an anonymous analyst as saying, 'It is embarrassing on both sides. This is the kind of thing that should have been compromised somewhere along the line.'

Although the undisclosed settlement was reported to be closer to Katzenberg's figures than Disney's, one has to wonder if the trial was worth it for any of those involved. It seems that this game of Katz and mouse did not produce a happy ending for any of the parties involved.

- Evaluation and analysis by CARMA International. Media Watch can be found at www. carma.com.

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