Chapter 19: New Millennium, New Challenges (Cont’d)
Excerpt from Jim Henson: Storyteller, an authorized biography by Jay O’Brian
On Monday February 14th, 2000, Valentine’s Day, Jim was making the usual rounds, and handing out cards and candy to the employees. He checked in on the production of
Aida and screened the first cut of
The Avengers, a film which brought multiple Marvel superheroes together in a mirror of DC’s
Justice League. He met with Judson Green to go over plans for the long-shelved WestCOT and reviewed the promising over-winter numbers for the new Disneytown in Hamilton, Ontario, and looked through options for new Disneytown locations.
He hadn’t been planning on visiting Imagine, Inc., that day, even though returns on Genie were dwindling and the upward growth had stalled and started to retract. Instead, he was intending to focus on transition planning for his soon-to-be-officially-announced retirement. Life, however, had other plans for him.
The NASDAQ had opened low that morning, but he hadn’t put much thought to it. But then it kept dropping, fast. It would keep dropping, finishing down 8% by the closing bell. By the end of the week, it would be down over 25%. Internet companies, the “Dot-Coms”, were the worst hit, dragged down by the realization that their speculation-based growth projections, built upon the promise of infinitely growing ad revenues, were built on sand, particularly for wholly web-based companies that had no real physical products on the market. But even hardware companies were hit, and the Dow Jones itself was dragged into a Bear Market by what would in hindsight be called the “Dot-Com Bubble”.
Unfortunately, this included Imagine, Inc., whose valuation had been closely tied to Genie and the Disney.net and MGM.net websites. With online advertising revenues dropping, the Disney and associated websites were losing valuation. While the original core specialty hardware and software side of Imagine, Inc., was holding firm – the DIS stations and AVE virtual environments and Animatriarch software retained a strong industry presence – the bubble-burst hit Imagine, Inc., hard, and through it, Disney.
“At least we’re not Warner,” said Stan Kinsey, referring to the rival studio that had recently merged with Leap in one of the most ill-timed mergers in corporate history. Leap-Warner stocks had plummeted, ultimately losing over 50% valuation, dragged down by a plummeting Leap. Leap-Warner would end up being acquired by Comcast in a hostile takeover in 2003. A similar hit to Sony would drag down Time-Atlantic, in which they had a strong minority stake, leading eventually to the merger with Columbia in 2009, creating the largest media company in the world, even outstripping Triad.
Even so, the heavy reliance on Imagine, Inc., to feed the chimera of Market Valuation took its toll, sending Disney stocks sharply lower over the next couple of years. The parks and studios and TV presence would pad the blow, however, with Disney stock bottoming out at $28/share in early 2001 after a brief peak of $46 in early 2000. Only the solid control of the company by the Disneys and Hensons kept them secure from any sort of takeover attempt or proxy battle. But most critically, it caused Jim to have to delay his retirement as Chairman to early 2001 rather than at the end of the fiscal year in October, as he worked with Rich Nanula and Stan Kinsey and the board to shore up the faltering stocks. There was only so much that they could do in the face of a global contraction. Creatively, he started delegating more and more to his Creative Associates, particularly Joe Ranft and Glen Keane, so he could focus on the finances.
Still, the event served as a useful distraction and a reminder to Jim about how the biggest illusion that a successful studio could make was not the techno-wizardry of effects nor the storytelling magic of a well-crafted film, but the “Illusion of Value” as Jim had started to dub the strange ways in which potential success and the often self-assessed worth of properties, both real and intellectual, would translate into how much people and companies were willing to pay for a small slice of a company. The Dot-Com Bubble had reinforced in Jim the realization that the corporate “game” was a game indeed rather than anything much based in reality. If a clever bunch of nerds could convince Wall Street, however temporarily, that their website was going to be a sure-fire moneymaker, then they could sell what amounted to a bunch of computers and programmers in a small office park for what an entire film studio complex might have gone for on the open market.
Furthermore, the rise of the digital economy made something else apparent to Jim: that the days of physical media were coming to an end. Already Woz and Brian had excitedly showed him an early digital video camera, demonstrating how they could take real time digital video and turn it into a digital movie file. This file could then be duplicated infinitely, making distribution an infinitesimal investment once enough theater chains had the digital projectors to play it. This realization hit Jim like a freight train. As he’d once dared to predict with the Camcorder, filmmaking was about to become a cottage industry. Within 20 years anyone would be able, with a relatively small investment, to make a feature length film and distribute it anywhere around the world instantly. This held profound implications.
Currently, only a studio could produce a serious blockbuster film seen by millions. You had to hire cast and crew, assemble sets, arrange location shoots, and finance it all. Even the time and materials required to physically capture the images on literal film, process the negatives into physical film stock, physically hand-cut and hand-edit the hundreds of reels, and then physically reproduce the final cut into the hundreds to thousands of copies to distribute all over the world, was a monumental investment in time and resources. And it also meant that you had near complete control of distribution. To “pirate” a film you either had to sneak a Camcorder into the theater or physically steal the reels.
In this coming future of digital films, one could click-and-copy as many copies of a film as one had hard drive space to store it. One could effectively email or post to the net to distribute. How did one control distribution, prevent piracy, or even prove ownership in such a world? Already the all-digital CG animated films were vulnerable to such “leaks”, and they’d drastically stepped-up security at Animation to prevent such an occurrence.
How did one justify the costs of making a hundred-million-dollar film when one leaked file could be all over the net in hours? The time-in to time-out balance was completely off.
These, Jim decided, would be questions for someone else to answer. Instead, another consequence of the coming Digital Economy struck him: if you had a reliable high-speed internet connection, you could make and distribute content anywhere…even from, say, a hilltop in rural New Mexico.
