234 Chapter Nine Case 9-1 Disney's America Theme Park: The Third Battle of Bull Run When you wish upon a star, makes no difference who you are. Anything your heart desires will come to you. If your heart is in your dreams, no request is too extreme -Jiminy Cricket On September 22, 1994, Michael Eisner, CEO of the Walt Disney Company, one of the most powerful and well-known media conglomer- ates in the world, stared out the window of his Burbank office, contemplating the current situation surrounding the Disney's America theme park. Ever since November 8, 1993, when The Wall Street Journal first broke the news that Disney was planning to build a theme park near Washington, D.C., ongoing national debate over the location and concept of the $650 million park had caused tremen- dous frustration. Eisner thought back over the events of the past year. How could his great idea have run into such formidable resistance? I la th W children dressed as Dalmatians had appeared in a parade that was filled with pro-Disney sen- timent. Eisner was particularly struck by the contrast between the two pictures: one show- ing an anti-Disney display from the National Mall protest and another of Mickey and Minnie Mouse being driven through the streets of Haymarket during the exuberant community parade. Despite the controversy depicted in the press, on September 21, Prince William County, Virginia, planning commissioners had recom- mended local zoning approval for Disney's America, and regional transportation officials had authorized $130 million in local roads to serve it. It appeared very likely that the project would win final zoning approval in October. At the state level, Virginia's Governor George Allen continued his strong support of the park's development. Over the past three weeks, however, Eisner had been ruminating over a phone call he received in late August from John Cooke, president of the Disney Channel since 1985. Although Cooke had no responsibility for Disney's America, he had more experience in the Washington, D.C., political scene than any other of Disney's highest-ranking managers and was one of Eisner's most trusted execu- tives. Cooke was not encouraging about the park's prospects. Quite familiar with many of the park's opponents, he believed they would not give up the fight under any circumstances. Given the anti-Disney coalition's considerable financial resources, the nationally publicized anti-Disney campaign could go on indefinitely, inflicting immeasurable damage on Disney's fun, family image. Cooke advised Eisner to think very seriously about ending the project. Since the mid-1980s, Eisner's business strat- egy was to revitalize Disney by broadening its le D THE CONTROVERSY COMES TO A HEAD pc th fri the de cha Eisner's secretary had clipped several news- paper articles covering two parades that took place on September 17. In Washington, D.C., several hundred Disney opponents from over 50 anti-Disney organizations had marched past the White House and rallied on the National Mall in protest of the park. On the same day in the streets of Haymarket, Virginia, near the pro- posed park site, Mickey Mouse and 101 local Не set had сер bel of c tha Source: This case was written by Elizabeth A. Powell, Assistant Professor of Business Administration, and Sarah Stover, MBA 1997. It was written as a basis for class discussion rather than to illustrate effective or ineffective handling of an administrative situation. Copyright © 2001 by the University of Virginia Darden School Foundation, Charlottesville, VA. All rights reserved. To order copies, send an e-mail to dardencases@virginia.edu. "The Masi p. 29 234 Chapter Nine Case 9-1 Disney's America Theme Park: The Third Battle of Bull Run When you wish upon a star, makes no difference who you are. Anything your heart desires will come to you. If your heart is in your dreams, no request is too extreme - Jiminy Cricket On September 22, 1994, Michael Eisner, CEO of the Walt Disney Company, one of the most powerful and well-known media conglomer- ates in the world, stared out the window of his Burbank office, contemplating the current situation surrounding the Disney's America theme park. Ever since November 8, 1993, when The Wall Street Journal first broke the news that Disney was planning to build a theme park near Washington, D.C., ongoing national debate over the location and concept of the $650 million park had caused tremen- dous frustration. Eisner thought back over the events of the past year. How could his great idea have run into such formidable resistance? children dressed as Dalmatians had appeared in a parade that was filled with pro-Disney sen- timent. Eisner was particularly struck by the contrast between the two pictures: one show- ing an anti-Disney display from the National Mall protest and another of Mickey and Minnie Mouse being driven through the streets of Haymarket during the exuberant community parade. Despite the controversy depicted in the press, on September 21, Prince William County, Virginia, planning commissioners had recom- mended local zoning approval for Disney's America, and regional transportation officials had authorized $130 million in local roads to serve it. It appeared very likely that the project would win final zoning approval in October. At the state level, Virginia's Governor George Allen continued his strong support of the park's development. Over the past three weeks, however, Eisner had been ruminating over a phone call he received in late August from John Cooke, president of the Disney Channel since 1985. Although Cooke had no responsibility for Disney's America, he had more experience in the Washington, D.C., political scene than any other of Disney's highest-ranking managers and was one of Eisner's most trusted execu- tives. Cooke was not encouraging about the park's prospects. Quite familiar with many of the park's opponents, he believed they would not give up the fight under any circumstances. . Given the anti-Disney coalition's considerable financial resources, the nationally publicized anti-Disney campaign could go on indefinitely, inflicting immeasurable damage on Disney's fun, family image. Cooke advised Eisner to think very seriously about ending the project. Since the mid-1980s, Eisner's business strat- egy was to revitalize Disney by broadening its THE CONTROVERSY COMES TO A HEAD Eisner's secretary had clipped several news- paper articles covering two parades that took place on September 17. In Washington, D.C., several hundred Disney opponents from over 50 anti-Disney organizations had marched past the White House and rallied on the National Mall in protest of the park. On the same day in the streets of Haymarket, Virginia, near the pro- posed park site, Mickey Mouse and 101 local Source: This case was written by Elizabeth A. Powell, Assistant Professor of Business Administration, and Sarah Stover, MBA 1997. It was written as a basis for class discussion rather than to illustrate effective or ineffective handling of an administrative situation. Copyright © 2001 by the University of Virginia Darden School Foundation, Charlottesville, VA. All rights reserved. To order copies, send an e-mail to dardencases@virginia.edu. Government Relations 235 brand into new ventures. Although promising at first, now the wisdom of some of the ven- tures seemed less certain. The worst example, Euro Disney, the new Disney park located out- side Paris, continued to flounder. The num- expertise and offer guests an entertaining, edu- cational, and emotional journey through time. They envisioned guests, adults and children alike, embracing a park dedicated to telling the story of U.S. history. Eisner had hoped the park bers for fiscal year 1994, due in just a couple of days on September 30, didn't look promising. would be part of the personal legacy he would Estimates said net income would be down to leave behind at Disney. As he told a Washington Post reporter, “This is the one idea I've heard $300 million from $800 million the year before, that is, in corporate locker room talk, what's mostly because EuroDisney lost $515 million known as a no-brainer."? from operations and $372 million from a re- lated accounting charge. The good news was that due to cost cutting, THE DISNEY'S AMERICA EuroDisney's losses were actually less than in the previous year, while the bad news was that CONCEPT AND LOCATION attendance was also down. Prince al-Waleed The idea of building an American history bin Talal bin Adulaziz of Saudi Arabia had theme park originated in 1991 when Eisner agreed to buy 24 percent of the park and build and other Disney executives attended a meet- a convention center there, thus relieving some ing at Colonial Williamsburg in southeastern of the financial pressure, but it seemed that the Virginia. The executives were impressed by negative press coverage of that park's troubles the restored pre-Revolutionary capital. Disney would never end. had already been thinking about locations for The Disney's America problem was particu- theme parks that were on a somewhat smaller larly bothersome, however. Eisner realized that scale than the company's massive ones. Visiting the controversy surrounding the park, coupled Williamsburg helped Disney make the connec- with the many other highly publicized prob- tion to a new park based on historical themes. lems of 1994, was damaging Disney's image. Disney's attention soon shifted focus to Due to publicity about its highly visible cor- Washington, D.C. As the third-largest tour- porate problems, Disney's image as a business ist market in the United States and the center threatened to tarnish its reputation for family- of American government, the nation's capital seemed a natural location for an American his- friendly fun and fantasy. Personally, Eisner was particularly fond of tory park. The abundance of historical sites in the Disney's America concept. He had helped the area broadened its appeal as a center of develop the original idea and had personally American history. Disney's other parks were located on the fringes of developed urban championed it within the Disney organization. centers (Anaheim, Orlando, Tokyo, and He recalled the early meetings during which Paris). The parks gained advantages from several Disney executives, including himself, their proximity to urban centers, but due to had brainstormed an American history con- their peripheral locations, Disney was able to cept. He and the other executives had strongly acquire lower-priced land and ensure a safe believed that Disney had the unique capability environment for visitors, far from inner-city of designing an American history theme park congestion and crime. that would draw on the company's technical 2 s of d eS. le ed ly, y's to t. cat- its The Walt Disney Company Annual Report, 1995. See also Kim Masters, The Keys to the Kingdom (New York: William Morrow, 2000), p. 299. 2 William M. Powers, "Michael in Eisnerland: Disney's Chairman's Sense of Wonder, Will to Win Drive for Virginia Theme Park Plan," Washington Post, January 23, 1994, p. 11. 236 Chapter Nine Disney needed a location with easy access to an airport and an exit off an interstate high- way. Executives hoped to find land that had already been zoned for development as well as local and state politicians who would be open to economic growth. In Prince William County, located in the heart of Virginia's Piedmont region, Disney found all these things. Dulles International Airport was lo- cated just east of Prince William County. U.S. Interstate 66 (1-66), the main traffic artery con- necting Washington, D.C., with its western suburbs, could transport tourists straight from Washington's monuments and museums into Prince William County, a distance of about 35 miles. The political and economic context also made Prince William County attractive to Disney. Virginia had long been a pro-growth state, and its governors were constantly under pressure to bring in new business. Democratic Governor Doug Wilder would leave office in November 1993, having lost some notable campaigns to bring growth to Virginia's econ- omy. Polls showed that he would likely be re- placed by Republican George Allen, the son of a former Washington Redskins American foot- ball coach and a graduate of the University of Virginia. If elected, Allen would be un- der instant pressure to create state economic growth. Most Prince William County officials were also "pro-growth,” though not well pre- pared for it. The county's growing population of middle-class residents (up 62 percent since group, as well as the real estate division, identified 3,000 acres in Prince William County near the small town of Haymarket (population 483). The largest property was a 2,300-acre plot of land, the Waverly Tract, owned by a real estate subsidiary of the Exxon Corporation. Waverly was already zoned for mixed-use de- velopment of homes and office buildings, yet due to a weak real estate market, Exxon had never broken ground on the undeveloped farmland. For a modest holding price, Exxon was willing to option the property. Using a scheme that had worked years before in Orlando, the Disney real estate group bought or put options on Waverly and the remaining 3,000 acres without revealing the company's corporate identity in any of the transactions. THE VIRGINIA PIEDMONT The northeast corner of Virginia comprises the Piedmont region. The region contains countless significant sites related to U.S. his- tory, including, for example, the preserved homes of four of the first five U.S. presidents: Washington, Jefferson, Madison, and Monroe. According to Pulitzer Prize-winning histo- rian David McCullough, “This is the ground of our Founding Fathers. These are the landscapes-small towns, churches, fields, mountains, creeks, and rivers—that speak volumes."3 Thomas Jefferson loved the agrarian life he found on the farms east of the Blue Ridge Mountains. In his letters, he exulted over the region's "delicious spring," "soft genial temperatures," and good soil.4 The region is also home to more than two- dozen Civil War battlefields. The U.S. Civil War was fought largely over the issue of slav- ery, pitting northern states against the southern states that had seceded from the union. Just 1980) paid the highest taxes in the state of Virginia due to a dearth of economic develop- ment within the county. The Virginia legisla- ture set an ambitious goal in 1990 to attract 14,000 jobs and $1 billion in nonresidential growth to the county to fund more and better schools and county administrative services, in addition to reducing residential taxes paid by each family. In the spring of 1993, Peter Rummell, presi- dent of Disney Design and Development, which included the famous Imagineering 3 Richard L. Worsnop, "Historic Preservation," The CQ Researcher, October 7, 1994, p. 867 4 Rudy Abramson, "Land Where Our Fathers Died," Washingtonian Magazine, October 1996, p. 62. 236 Chapter Nine Disney needed a location with easy access to an airport and an exit off an interstate high- way. Executives hoped to find land that had already been zoned for development as well as local and state politicians who would be open to economic growth. In Prince William County, located in the heart of Virginia's Piedmont region, Disney found all these things. Dulles International Airport was lo- cated just east of Prince William County. U.S. Interstate 66 (1-66), the main traffic artery con- necting Washington, D.C., with its western suburbs, could transport tourists straight from Washington's monuments and museums into Prince William County, a distance of about 35 miles. The political and economic context also made Prince William County attractive to Disney. Virginia had long been a pro-growth state, and its governors were constantly under pressure to bring in new business. Democratic Governor Doug Wilder would leave office in November 1993, having lost some notable campaigns to bring growth to Virginia's econ- omy. Polls showed that he would likely be re- placed by Republican George Allen, the son of a former Washington Redskins American foot- ball coach and a graduate of the University of Virginia. If elected, Allen would be un- der instant pressure to create state economic growth. Most Prince William County officials were also "pro-growth,” though not well pre- pared for it. The county's growing population of middle-class residents (up 62 percent since group, as well as the real estate division, identified 3,000 acres in Prince William County near the small town of Haymarket (population 483). The largest property was a 2,300-acre plot of land, the Waverly Tract, owned by a real estate subsidiary of the Exxon Corporation. Waverly was already zoned for mixed-use de- velopment of homes and office buildings, yet due to a weak real estate market, Exxon had never broken ground on the undeveloped farmland. For a modest holding price, Exxon was willing to option the property. Using a scheme that had worked years before in Orlando, the Disney real estate group bought or put options on Waverly and the remaining 3,000 acres without revealing the company's corporate identity in any of the transactions. THE VIRGINIA PIEDMONT The northeast corner of Virginia comprises the Piedmont region. The region contains countless significant sites related to U.S. his- tory, including, for example, the preserved homes of four of the first five U.S. presidents: Washington, Jefferson, Madison, and Monroe. According to Pulitzer Prize-winning histo- rian David McCullough, “This is the ground of our Founding Fathers. These are the landscapes-small towns, churches, fields, mountains, creeks, and rivers—that speak volumes."3 Thomas Jefferson loved the agrarian life he found on the farms east of the Blue Ridge Mountains. In his letters, he exulted over the region's "delicious spring," "soft genial temperatures," and good soil.4 The region is also home to more than two- dozen Civil War battlefields. The U.S. Civil War was fought largely over the issue of slav- ery, pitting northern states against the southern states that had seceded from the union. Just 1980) paid the highest taxes in the state of Virginia due to a dearth of economic develop- ment within the county. The Virginia legisla- ture set an ambitious goal in 1990 to attract 14,000 jobs and $1 billion in nonresidential growth to the county to fund more and better schools and county administrative services, in addition to reducing residential taxes paid by each family. In the spring of 1993, Peter Rummell, presi- dent of Disney Design and Development, which included the famous Imagineering 3 Richard L. Worsnop, "Historic Preservation," The CQ Researcher, October 7, 1994, p. 867 4 Rudy Abramson, "Land Where Our Fathers Died," Washingtonian Magazine, October 1996, p. 62.