Walt's successful leap into live-action films was not entirely the result of careful consideration and analysis, but rather a clever way to make use of profits quarantined in England following the Second World War.

Walt had expected foreign markets to re-open after the war, but post-war opportunities for American studios in the lucrative markets of England and France faced new political challenges. Both countries, as well as others in Europe, imposed restrictive barriers to limit the showing of American films in an attempt to revive their own film industries. To increase the cost to British movie theatres of showing American films, Britain imposed a 75 percent import tax and set a quota that 45 percent of films shown be made in England. In negotiations with the American State Department, France restricted the number of imported American movies to 110, to be provided by the major Hollywood studios, of which Disney was excluded.

In addition to restricting audience access to American films and thereby the potential to sell their products in the British marketplace, the British legislature passed a law prohibiting American film studios from repatriating receipts earned in their country as part of a larger effort to promote the stimulation of its war-torn economy. As a result, what had been earned in Britain was legally bound to remain there.

By the end of 1948, Walt was faced with the difficult challenge of what to do with about $850,000 of blocked funds in foreign countries, including England. This was money that, if it was made available to him, he could put to use to complete current projects and fund new ones.

Walt’s first consideration was to set up a cartoon studio, but decided that he already had what he needed in Burbank and would not be able to reproduce the talent and capabilities he already had. Disney film distributor RKO also had funds frozen in England, and suggested to Walt that he invest his frozen funds in creating live-action adventure films, with RKO agreeing to share the production costs of the first effort, Treasure Island.

Walt approved the establishment of Walt Disney British Films Ltd., and began making live-action films in England, starting with Treasure Island and followed by The Story of Robin Hood, The Sword and the Rose, and Rob Roy the Highland Rogue. The success of Song of the South had demonstrated that audiences were accepting of Disney live-action productions, even though it was combined with a number of highly entertaining animated sequences.

Walt was initially directed toward live-action films as a practical strategic solution to the studio’s unique financial circumstances. But when he traveled to England to observe the production of Treasure Island, he’d thoroughly enjoyed the challenges and the immediacy of live-action filming. When he returned to Burbank, he teased his animators: “Those actors over there in England, they’re great. You give ’em the lines, and they rehearse it a couple of times, and you’ve got it on film—it’s finished. You guys take six months to draw a scene.”

Walt was only half kidding. The high costs, long production times, and complications in creating feature-length cartoons made them a much riskier class of investments than live-action movies. Such talk made Disney animators nervous that Walt was going to abandon animation altogether. Walt saw it as a way to maintain his core business, which he still considered to be animation. When elite animator Milt Kahl questioned Walt as to why he was spending so much time away from animation, Walt allegedly quipped, “Well, I’ll tell you, Milt. I have to make a whore of myself to pay your salary. It’s as simple as that.”

Roy stated the studio’s interest in more business-like terms, noting: “We are not going into these things because we are feeling our oats or getting ambitious. We are doing it for common-sense business reasons, realizing the hazards of our basic cartoon business.”

Having completed filming of Song of the South and So Dear to My Heart, Walt had come to recognize that live-action features could be completed in less time and at lower cost than fully or partially animated features. The quicker a movie could be completed and released, the lower its production cost and the sooner a return on investment could be captured to repay lenders the money borrowed to fund the investment. Quick turnaround and lower costs was the key to improved cash flow and financial viability.

The year 1949 was a busy one for releases. The live-action So Dear to My Heart was released along with the first True-Life Adventures documentary, Seal Island, and the feature length animation compilation The Adventures of Ichabod and Mr. Toad. Of the fifteen shorts released, Donald Duck dominated, along with appearances from Pluto, Minnie, Goofy, and Chip ‘n’ Dale.

The mostly live-action feature So Dear to My Heart had its world premiere in Indianapolis on January 19, 1949. Walt began working with a screenwriter in 1945 with the intention of it being Walt’s first fully live-action feature. Production and filming occurred in 1946, but Walt was unhappy with the finished product, and made considerable changes by re-working some scenes in post-production. He was still not satisfied and struggled to improve its overall presentation. More than a year after filming was completed, Walt decided to add some animation sequences to add another dimension of imagination, as he had done previously on Song of the South.

Still, as the year drew to a close, the studio showed an increased loss of $93,899. Cinderella was now in production, and Walt was envisioning a return to elaborate state-of-the-art feature-length animation.

Bank of America was getting nervous about the continuing trend of increasing debt and the difficulty the studio was having in creating profits. Roy was once again pushing hard for austerity. To appease the bankers, Walt had no choice but to curtail his spendthrift tendencies and adopt a more rigorous disciplinary approach to cost management by defining and sticking to budgets. What he needed was another blockbuster box-office hit to throw off a lot of cash and relieve the financial pressure that was cramping his style.

Continued in "The Business of Walt Disney"!

For Walt, money wasn't the goal. He was glad to make money, but he wanted nothing to do with the financial end of his business, and what he knew about money boiled down to two ever-present realities: there was never enough to achieve all he wanted to accomplish, and there was always the need to involve others in order to get more. Making money was the unpleasant prerequisite to making magic.

Walt was the studio’s visionary and dreamer. He also understood and was involved in the financial aspects of the business, while leaving most of the operational business matters to Roy. Walt once said of Roy, “We started the business here in 1923, and if it hadn’t been for my big brother, I swear I’d have been in jail several times for check bouncing. I never knew what was in the bank. He kept me on the straight and narrow.” The role Roy played in Walt’s success and achievements is summarized nicely, if somewhat understated, by Merlin Jones: “Roy’s wisdom was to create a well-protected playpen for his younger brother—and then to stand back and watch him create.”

Roy was often frustrated by Walt’s dismissiveness about finances and his tendency to put the challenge to Roy to find the necessary funds. Walt just wanted to get things done based on his assessment that doing them would be worthwhile, and that somehow and at some point he would figure out a commercial angle, even if it couldn’t be seen right away.

In 1955, Disneyland was in the midst of construction, and Bank of America and ABC-Paramount were bearing down on Roy because of huge budget overruns and a growing lack of confidence in the project. Walt was well aware of the cost overruns, but he was determined to build the park the way he wanted it built. One day, designer Herb Ryman was driving with Walt from the studio to visit the park. Walt had asked Ryman to design a restaurant to be built at the end of Main Street, and Ryman was apologizing that after having worked on it for three weeks, he wasn’t getting anywhere. Walt seemed unconcerned. “Herb…you know the worst thing that can happen to you? You could go broke. I look at it this way. I’ve been broke five times in my life. One more time won’t hurt.”

Almost two months after Disneyland opened, Bruce McNeill, the general contractor for Disneyland, arrived in Roy’s office to announce the discovery of a drawer full of unpaid bills that totaled almost two million dollars. Roy was furious, and after an investigation, it was determined that the culprit was Walt, who had been going around ordering aesthetic changes to be made at the last minute without considering the costs. “Walt didn’t care about the cost at all,” said attorney Luther Marr. “It was a matter of what it looked like, the result. So Roy had to dig up some more money. I don’t know where he got it, because he had used up all the credit he could come by.”

By 1958 the financial situation was better than it had ever been. Roy was eager to see the company free and clear of debt, and informed staff that the studio was now “getting out of the hole” and further expansion plans would have to wait two to three years. He then left for Europe. According to Jack Lindquist, who was the advertising manager at Disneyland and would later become president of the park, Walt met with WED staff to announce his decision and discuss plans to build a 150-foot-high replica of the Matterhorn with a bobsled ride inspired by their recent climbing adventure Third Man on the Mountain, a submarine underwater adventure ride inspired by 20,000 Leagues Under the Sea, and a futuristic monorail transportation system. When Walt was told of Roy’s instructions to steer away from debt, Walt responded, “Well, we’re going to build them. Roy can figure out how to pay for it when he gets back.”

The attractions were built at a cost of $5.5 million. They opened in June 1959 with the fanfare of an hour-and-a-half nationally televised special featuring Vice President Richard Nixon taking the inaugural monorail ride with Walt.

On one occasion during a staff meeting with Walt in attendance, Marc Davis presented the plans for a new attraction called Nature’s Wonderland. As told by Gabler in Walt Disney,

Davis opened by saying that there were two ways of executing the project—an inexpensive one and an expensive one. “And Walt got all the way up from his seat and walked around to the front of the room where I was,” Davis remembered, “and put his hand on my shoulder and he said, ‘Marc,’ he said, ‘you and I do not worry about whether anything is cheap or expensive. We only worry about if it’s good.’”

On another occasion, Walt was asked and accepted the honor of staging the ceremonies at the Winter Olympics in Squaw Valley, California, in 1960. The plans included a thousand-piece band for the grand opening and entertainment every night. When the Olympic organizers began to complain about the proposed costs, Walt declared: “Either we’re going to do it the right way, or Disney will pull out.”

Charles Shows was creating a film about the African lion, but was unable to locate the footage he wanted for the opening scene, a close-up looking down on the lion’s open mouth. Shows writes:

I told Walt that I hadn’t found the opening shot I wanted, but that I had thought of a way of getting it—easily. And I was sure he’d like the idea when he heard how little it would cost. “I’ll take a camera crew up to Griffith Park Zoo,” I told him, “back up a big lion against some bushes, move in tight, and get a close-up shot of the old boy’s tonsils.”

But Disney didn’t react as I had expected. “You do,” he growled, “and you won’t be here tomorrow.”

I thought he was kidding, but the stern look on his face told me he was not.

“We tell moviegoers that these nature films are shot in Africa,” Walt made clear, “and by God, not one foot of phony film is going into my nature pictures.”

I got the picture!—and I didn’t get the zoo lion’s picture.

Once more, I realized that it was honesty like this that makes Disney films worldwide favorites.

Walt clearly understood and appreciated the role of money and the need for business discipline and responsibility over time periods spanning decades to create value. What he loathed to do was accept the knee-jerk assessment of others, particularly of risk-averse accountants and bankers, as to where the lines should be drawn. Joe Potter recalled a meeting he attended to discuss the acquisition of corporate sponsors for EPCOT: “Once in a planning meeting Walt was mad because a finance guy was present. Walt said to the finance man, ‘What the hell are you doing here?’ He made him leave. He wanted creative people there only.”

Roy noted that Walt had good reason for his animosity toward finance guys:

Bankers, bookkeepers and lawyers frequently tried to put the brakes on his free-wheeling imagination and were the bane of Walt’s existence. As his business manager, I was no exception. “When I see you happy, that’s when I get nervous,” he used to say. Since Walt would spare no expense to make his pictures better, we used to have our battles. But he was always quick to shake hands and make up.

It wasn’t that Walt didn’t value financial insight but rather that there was a proper time and a place for it. Disney researcher Harrison “Buzz” Price, who began working with Walt and Roy in 1953, noted: “It is a fiction that Roy was only the numbers man and Walt was the artist. They were both bird dogs analytically. ‘Why?’ ‘Why?’ ‘What?’ ‘How much?’ Walt was just tenaciously interested in that stuff, along with Roy. Both of them were smart as hell.”

Roy’s son, Roy E. Disney, verified that his father and uncle had a different perspective on business matters when it came to money. His father’s attitude was that “if you don’t have the money, you can’t make the thing in the first place. Walt’s attitude about it,” he said, “which was very astute, was ‘if I make something that people want to see, we’re going to do fine.’ So his business sense was centered on creating, while Dad was sort of the flip side of that, which was one reason why the partnership worked so well.”

The real difference in approach was that Walt was focused on creating something unique and outstanding that people would want to experience and be a part of, which would draw revenue to pay back the investment in the creation and launch of the product. Roy’s more traditional approach was to create a budget from prior earnings and develop to the pre-established constraints established for the project, and hope for the best.

Continued in "The Business of Walt Disney"!