The Castle That Almost Got Sold Off: Disney's 42-Year Comeback

You've probably seen The Little Mermaid, Beauty and the Beast, or The Lion King. Maybe you've seen Toy Story, a Marvel movie, or Star Wars. The company behind all of them is Disney, and it feels like a castle that could never fall. But in 1984, Disney really did come close to being broken apart and sold off for parts, forever.

That year the stock had fallen from $82 to $52. Animation had released only three movies in thirteen years, and one project, The Black Cauldron, had been sitting half-finished in a drawer for almost a decade. A group of investors had done the math and decided Disney was worth more chopped into pieces and sold separately than kept running as one company. What happened next turned that nearly-broken castle into a company that, forty-two years later, owned Pixar, Marvel, and Star Wars, one of the biggest story empires on Earth.

The Castle Was About to Be Broken Up

Walt Disney died in 1966, and the company drifted for almost two decades after that. Walt's nephew, Roy E. Disney, had seen enough. He teamed up with a Texas oil family, the Basses, and a group of investors to stage a boardroom coup, ousting the sitting CEO, who happened to be Walt's own son-in-law. Within fourteen days, the board brought in two outsiders who had never worked at Disney before: Frank Wells as president, Michael Eisner as chairman and CEO. Eisner then called in his old partner from Paramount, Jeffrey Katzenberg, to take over the studios. On Katzenberg's first day, Eisner pointed down at the animation building's ink-and-paint department and asked if he knew what happened in there. Katzenberg admitted he had no idea. Eisner's reply: "Neither do I. That's your problem now."

Turning Cartoons Into Musicals

Katzenberg recruited Broadway songwriter Howard Ashman, paired with composer Alan Menken. Ashman arrived convinced there was a connection between animation and musical theater nobody else had spotted: in every great Broadway musical, the third song is always the leading lady sitting on something, a rock, a trash can, anything, singing to the world about what she wants. The rest of the story is everyone rooting for her to get it.

The Little Mermaid (1989) didn't do great box office at first; it only exploded once it hit home video the following year. Then Beauty and the Beast (1991, $330 million), Aladdin (1992, roughly $500 million), and The Lion King (1994, $750 million, still the highest-grossing hand-drawn animated film ever) opened one after another, resetting the box-office record for hand-drawn animation four years running. Songs stopped being decoration and became the skeleton holding up the whole movie's emotions.

After the Peak, One Man Was Left Holding Everything

On Easter Sunday 1994, Frank Wells died in a helicopter crash while heli-skiing. Three months later, Eisner had emergency heart bypass surgery. That same year, Katzenberg left the company, sued Disney over bonuses he said he was owed, and went on to co-found DreamWorks with Spielberg and Geffen. The animated films that followed (Pocahontas, The Hunchback of Notre Dame, Mulan, and others) never quite matched The Lion King's success again. In November 2003, Roy E. Disney resigned from the board and mailed a public letter to Eisner and several major newspapers, listing seven specific failures. It ended: "Michael, I believe it is you who should be leaving, not me." He and a partner launched a shareholder campaign called SaveDisney.com. At the 2004 shareholder meeting, 43% of votes withheld support for Eisner as CEO. In 2005, the company sent Eisner off a year early and handed the job to the sitting president, Bob Iger.

The Kid Who Got Fired, and Later Saved Disney

John Lasseter had dreamed his whole life of becoming a Disney animator, and he actually got the job. Then he pitched a short film built around early computer animation and was asked whether it would be faster or cheaper. He said neither: it was purely about pushing what storytelling could do. He was fired that same day. A few years later, Steve Jobs paid $10 million for a small team that included Lasseter and named it Pixar.

In 1991, Disney signed Pixar to make Toy Story, on brutal terms: Disney paid for it and kept all the rights, while Pixar's cut of the profits was under 10%. A late-1993 test screening nearly killed the whole project: Woody had been rewritten to be mean and insult-driven, and Disney halted production on the spot. Pixar's team got two or three weeks, working around the clock, to rewrite the film from scratch and save it. Toy Story opened in November 1995 as the year's top-grossing film. A week later, Pixar went public, closing its first day at a $1.5 billion market cap. Jobs became a billionaire overnight, his real first fortune.

Quick decode: what does an acquisition actually mean? Buying a company isn't like buying a building or a warehouse full of machines. It means bringing another group of storytellers, and their whole culture, into your own house. When Disney bought Pixar for $7.4 billion in 2006, it deliberately let Pixar keep its own campus, its own email system, its own culture. Lasseter kept running Pixar while also commuting to Disney Animation two days a week. The morning the deal was announced, Jobs took Iger to a bench and told him privately that his cancer had come back, giving him thirty minutes to decide whether to back out. Iger chose to go ahead. Jobs lived another five and a half years.

Marvel and Star Wars Moved Into the Castle Too

In 2009, Disney paid $4 billion for Marvel. At the time, Marvel's most famous heroes were already licensed out to other studios: X-Men at FOX, Spider-Man at Sony, Superman and Batman at DC. What Disney was really buying looked, to a lot of people, like a pile of leftovers. In 2012, Disney paid another $4 billion for Lucasfilm and got Star Wars.

Quick decode: what is IP, really? IP just means who legally owns a character or a story, and whoever owns it gets to decide which doors it opens. Iron Man alone can open several doors at once: a movie, a roller coaster at a theme park, a shelf of toys, a T-shirt. Buying Marvel wasn't about buying comic books. It was about buying a warehouse of characters that could keep opening new doors for decades. By 2025, the Marvel Cinematic Universe had earned nearly $32 billion at the box office worldwide, more than Star Wars and James Bond combined.

The New Problem: Streaming

For years, Disney made huge money from its cable channel ESPN and from movie tickets. Then Netflix forced the entire industry to switch to streaming. In 2017, Disney walked away from a Netflix content deal that had been making it money for years with almost no effort, in order to build its own streaming service instead. Disney+ launched in November 2019 with 10 million signups on day one, but getting there cost the company roughly $13 billion in losses between 2017 and 2022, only turning a profit in the past year.

One of the show's hosts, Ben, described watching the Obi-Wan Disney+ series: "that kind of shatters how I think about Obi-Wan." Netflix, by comparison, doesn't mean anything specific to anyone; it's just the button you press when you want to watch something. Every new sequel or spinoff risks the one thing Disney spent decades building: the sense that "Disney made it" means it's worth watching.

In 2026, the Real Money Isn't in Movie Theaters

By the time this episode was recorded, Disney was pulling in $94 billion a year in revenue and $13 billion in profit, with theme parks generating almost 60% of operating income and movie theaters accounting for just 3% of total revenue. A company built on telling stories now makes most of its money by letting people physically walk into them.

A Few More Fun Details

• Peter Schneider, taking over the animation department, joked: "I knew I could do no worse than The Black Cauldron. You can't fall off the first floor."
• Before Disney ever got ESPN, it had already been sold four times, passing through an oil company, a tobacco company, and a real estate firm.
• Disney once genuinely owned an entire NHL hockey team, an MLB baseball team, and a 1936 British ocean liner called the Queen Mary.
• In 1978, George Lucas made a widely reviled TV special called the Star Wars Holiday Special. Almost nobody has ever seen it, and it never damaged the Star Wars mythology at all, proof that a real classic can survive almost anything.

Worth Thinking About

• If your favorite story gets bought by a giant company and turned into a theme park ride or a shelf of merchandise, is that good for the story or bad for it?
• Marvel makes roughly the same kind of sequel almost every year: safe, reliable, and (some fans say) a little tiring. If you ran the studio, would you choose the "safe sequel" or the "new story nobody can promise will work"?
• In a movie theater, everyone watches the same screen. On a streaming service, a recommendation algorithm decides what each person even gets to see. If an algorithm can decide whether you ever come across a movie in the first place, how is that different from everyone sitting together in the same theater?