HOLLYWOOD -- Walt Disney Co. shocked Hollywood and Wall Street yesterday by announcing that longtime studio chief Jeffrey Katzenberg, who's widely credited with successes such as "The Lion King" and other hits, is leaving when his contract expires at the end of September.
Mr. Katzenberg had been engaged in a highly publicized campaign to be named second in command to company Chairman Michael D. Eisner and had threatened to resign if he was passed over. That exacerbated tensions between the two executives and apparently led to yesterday's announcement.
Mr. Katzenberg's departure leaves Disney without one of its chief creative forces. Mr. Katzenberg helped revive Disney's wildly profitable animation division and broadened the studio's reach in live action film and television, and even shepherded the hit animated feature "Beauty and the Beast" to Broadway.
Disney moved yesterday to quickly fill the void by announcing that Mr. Katzenberg's duties will be taken over by two veteran executives. Longtime producer Joe Roth was named chairman of Walt Disney Motion Pictures, and studio president Richard Frank was named chairman of newly created Walt Disney Television and Telecommunications.
Mr. Katzenberg -- a protege of Mr. Eisner for nearly two decades -- was opposed by members of Disney's board of directors, who thought he was not right for the job. Ironically, his hands-on approach as a creative executive was deemed too similar to Mr. Eisner's, several sources said.
"You can't have two chefs in the kitchen," said longtime Disney board member Ray Watson.
Mr. Watson and others insisted yesterday that Mr. Eisner has the full board's support in his plan to strengthen management at the divisional level, leaving vacant the president's job held for 10 years by Frank G. Wells, who died in a helicopter crash in April.
After Mr. Eisner underwent emergency quadruple bypass surgery in July, however, Wall Street and Hollywood speculated that the 52-year-old chairman would reconsider that plan. In an interview yesterday, Mr. Eisner said he never changed his mind. "The job that [Katzenberg] would have wanted does not exist in this company," he said. "We're going to strengthen the company through the divisions."
Besides promoting Mr. Roth and Mr. Frank, Mr. Eisner announced that Sanford M. Litvack, Disney's executive vice president for law and human resources, will take on more day-to-day supervision of internal administration as well as dealings with governments, communities and other corporations.
Sources said Mr. Katzenberg's most serious opposition came from Vice Chairman Roy O. Disney. Mr. Disney, who oversees animation, is said to have felt that Mr. Katzenberg took too much credit for the success of features such as "The Lion King" and "Aladdin."
Mr. Katzenberg has been hailed as one of Hollywood's most talented executives, and is likely to be offered an array of jobs. Yesterday, Sony was the most commonly mentioned candidate. Mr. Katzenberg denied having conversations with any possible employers, however. Yet it was a blow for the 43-year-old executive, who learned his fate late yesterday morning. News of his departure left some Disney employees heartsick.
"This is all Michael. He never tried to make it work," said one stunned studio executive, who said morale has sunk with the news. In light of Mr. Katzenberg's loyalty and hard work, employees were asking each other " 'If this is how Jeffrey is treated, what are they going to do to me?' " the executive said.