Has Disney Gone Mad?

With a major controversy over Tim Burton’s Alice in Wonderland and a studio that’s in chaos under a new boss, Hollywood wonders if Disney has gone down the rabbit hole. Plus, VIEW OUR GALLERY of the Alice in Wonderland premiere.

Chris Jackson / Getty Images; Joel Ryan / AP Photo (2)

"But I don't want to go among mad people," Alice tells the Cheshire Cat.

"Oh, you can't help that," the Cat replies. "We're all mad here."

Tim Burton's Alice in Wonderland is set to open next Friday and "mad" seems to be the operative word. Theater owners are mad, as in angry, about Disney's decision to shorten the period between the film's opening and its release on DVD (to three months instead of the usual four or more). And some chains have even threatened to boycott the movie because they fear that this strategy will train people to wait for movies on DVD or on-demand rather than seeing them in theaters.

Click the Image to View Our Gallery of the Alice in Wonderland Premiere

That's a huge concern to many studio executives, too. They know there is still no way to launch a big movie without a splashy theatrical opening. While they are eager to sell their movies on every kind of device, they don't want to kill off theaters just yet.

And some feel that Disney is being needlessly aggressive with Alice. And that controversial decision is just one of several recent studio moves that strike these Hollywood veterans as… a bit mad. As once screenwriter succinctly puts it: "Nobody knows what the hell is going on over there."

Sweeping change has come in the past few months as Robert Iger, who became CEO nearly five years ago, has conducted a thorough purge at the movie studio. In September, he fired Dick Cook, the well-liked, old-school studio chief. In his place, Iger installed Rich Ross, who had enjoyed great success at the Disney Channel (overseeing hits such as High School Musical and Hannah Montana), but who had no real experience in or connections to the movie world. After that came more dismissals that included seasoned publicity and marketing executives. And Disney has made it clear that it is looking to fill certain key jobs with outsiders without studio experience.

“Rich Ross is an odd choice to begin with,” says one talent representative. “And not only did he plug in a guy with no experience—I mean, zero—but he plugged in a guy he didn’t even know.”

Many in Hollywood figured that Ross, the new studio chief, had enough success in cable television to be a reasonable choice. But then Ross installed producer Sean Bailey as his head of production. Bailey, whose credits include Gone, Baby, Gone and the upcoming Tron Legacy, is well-liked but has no experience as a studio executive.

"Rich Ross is an odd choice to begin with," says one talent representative. "And not only did he plug in a guy with no experience—I mean, zero—but he plugged in a guy he didn't even know. Usually it's one or the other… If you're going to hire a guy who's not one of your cronies, at least hire somebody who's done it."

In his few months on the job, Ross has made some decisive moves. He's canceled several movies, including the big-budget Captain Nemo: 20,000 Leagues Under the Sea. And the studio dropped a sequel to Wild Hogs and the Sandra Bullock comedy, The Proposal. The world may seem safe enough without Wild Hogs 2, but the original grossed more than $250 million worldwide; And Bullock's Proposal took in $315 million. To many in the industry, walking away from pre-sold ideas is heresy.

But Disney is reinventing the business. It's not looking to make many movies and those that do get made will be properties that can be turned into merchandise—lunch boxes and T-shirts—and sold across many platforms. (Another consequence of this digital revolution: ABC News, which is part of Disney, was asked to cut roughly 20 percent of its staff and make do with new gizmos.)

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Some of those who were swept out see this not so much as a forward-looking strategy as an opportunity for Iger to vent long-simmering resentment. In Hollywood, the film tribe has always looked down on the television tribe and Iger comes from TV. "He's always had this chip on his shoulder about the studio," says a former Disney insider. Now that Roy Disney is not around to protect the old regime, he says, Iger was free to attack. (Disney, who suffered from stomach cancer, died in December.)

But it's not just disgruntled former employees who harbor doubts about Iger's re-making of the studio. "I think there is a big risk when you wipe the slate that clean, that quickly," says the chairman of a rival studio. "You run the risk that even very devoted filmmakers start to get concerned." He says filmmakers such as Steven Spielberg and Jerry Bruckheimer, both of whom have deals with Disney, expect their movies to be marketed by experienced executives and not caught up in a re-engineering process.

Certainly the team behind Alice in Wonderland wasn't pleased to find that the movie was part of a new initiative. "We were concerned that we were the first experiment out there on this new plan," says producer Dick Zanuck. He says those concerns have dissipated since most theater owners have now agreed to play the movie. Still, Odeon—one of Europe's largest chains—says it won't show the film on its screens in Britain, Ireland, and Italy. And AMC may still be a question mark in the U.S.

Disney could still negotiate its way out of a threatened boycott, but it's possible that the film's grosses could be hurt. Disney has tried to calm the waters, saying that it does not intend to expedite DVD releases on all its movies. But most in Hollywood see this as a turning point. Zanuck expects earlier releases on DVD or on-demand to happen "throughout the industry."

The studios don't object; they think they may in fact make more money in some cases if they can sell movies sooner after their theatrical openings—closer to the gigantic advertising spends and publicity sprees. One studio chief said that it makes sense to speed up the release of a DVD if it gets it into stores in time for the holiday gift-buying season. And in such cases, he says, theater owners have sometimes quietly agreed to an expedited schedule.

But with Alice in Wonderland, this executive doesn't understand Disney's hurry. "June is not the greatest time to be selling videos," he says. "People are not running into stores then." And he says it's not clear that Disney will sell more DVDs by starting sooner—especially since, thanks to Disney's deal with Redbox, Alice will also be available to rent for a dollar.

Either Iger is embracing the future in a visionary fashion or he's laying the groundwork for a debacle (though a debacle wouldn't be obvious for some time, since films like Toy Story 3 and the next Pirates of the Caribbean were already set in motion by the old regime). At this point, Hollywood is expecting a debacle. But many in the industry are part of the old guard that may simply dislike having its conventional wisdom disregarded.

And while it's true that Iger no longer needs to worry about Roy Disney, he does have to be mindful of Steve Jobs, who is Disney's biggest individual shareholder. "Jobs runs the place and to him, it's all about getting content to his iPads and iPods," says a top executive at another studio. "He thinks different. It's all about crashing down the barriers."

Looked at the business through that lens, preserving the old movie model may not seem such a critical part of Iger's mission.

Plus: Check out more of the latest entertainment, fashion, and culture coverage on Sexy Beast—photos, videos, features, and Tweets.

Kim Masters covers the entertainment business for The Daily Beast. She is also the host of The Business, public radio's weekly program about the business of show business. She is also the author of The Keys to the Kingdom: The Rise of Michael Eisner and the Fall of Everybody Else.