That Time When the Mafia Saved Walt Disney...sort of

[GreatGazoo]

Hard to imagine now but the studio that is now top of the heap started with no studio at all. In the 1920s it was legal for studios to own movie theaters so producers who did not own theaters had very little leverage and had to shop for the best distribution deal they could get.

The Disney brothers lost control of their first popular character, Oswald the Lucky Rabbit, to Charles Mintz and Universal. They created Mickey Mouse and made a deal with Pat Powers, an entrepreneur in the conversion to sync-sound, because it was one of the only deals being offered to them.

Powers claimed that the cartoons were only gaining popularity because he had used them to promote his new sound system for theaters. The deal had all the worst terms that are still used today, where it is impossible for the artist to make money, sometimes called a "Motown deal":

Powers got "thirty-five percent as distributor of Disney cartoons but also charged Disney all the costs for prints, processing, advertising, censorship fees, licensing, insurance, music rights, recording fees, print royalties and foreign dubbing. Powers claimed these costs totaled $17,000 per cartoon but the actual cartoon only cost $5,500 on average to make.

Powers tried to force the Disneys into a long-term contract by destroying their finances. Then he stole Ub Iwerks, their top animator. When the Disneys demanded to see Powers’ books, Powers replied they could if they signed a new deal with him or else he would take them to court if they decided to sign with someone else.

The Disneys shopped around for another deal going to MGM who became so convinced that animated mice were a good idea that they started producing "Tom & Jerry" but without the Disneys. Powers threatened to sue any studio that signed the Disneys -- he was cutting off all their escape plans.

According to legend, Frank Capra introduced the Disneys to Harry Cohn, of Columbia Pictures, who offered a $7,000 advance for each cartoon and established a fund of $25,000 to combat Powers if he tried to sue. Harry Cohn was the most openly mafia-connected studio head and is the basis for the character "Jack Woltz" (horse head in his bed) in The Godfather. Cohn lent Walt $50,000 to get started and the deal was made over objections from Roy that Cohn was not “overburdened with good intentions.”

Powers, who had been quite aggressive in cheating the Disneys and blocking their escape backed off completely. He knew what Cohn was capable of. Rules that applied to other studios did not apply to Columbia because the studio was part of the Chicago crime families.

Columbia distributed Disney product from 1930 through 1932 but Walt was unhappy with the accounting and treatment at Columbia. As he worked off the $50,000 loan, Walt secretly negotiated a deal with UA and a few years later moved to RKO. Capra said later, “Disney and Cohn, the vulgarian, spoke different languages. Cohn mistook Disney’s sensitivity for weakness. Crudely and stupidly, he badgered and bulldozed until he lost Hollywood’s richest gold mine. Disney took his enchanting films to RKO for distribution. And later, as all true geniuses must, Walt established his own production and distribution set up.”

Leaving a mafia-controlled business isn't easy. Harry Cohn's brother, Jack, who ran the New York office of Columbia threatened Roy Disney that “You are going to lose plenty as a result of this deal.”

While no physical harm came to the Disneys, Columbia's accounting got even more inaccurate and put the Disneys in financial jeopardy again. Walt saw Harry Cohn years later in the Riviera and Cohn showed no sign of hard feelings. Indeed Columbia had become one of the biggest producers of television by using the brand it created for its cartoons, ScreenGems. Following Disney's exit, Columbia had brought in his old nemesis Charles Mintz and during a strike in 1941 when Mintz had lured away Disney animators.

Reading between the lines of this and other stories about the Disneys you can see how bold they were. They somehow managed to negotiate their way through 6 majors studios, retain control of their IP and eventually buy every studio that is still around + ABC + ESPN, etc, etc.