Mirror, Mirror on The Wall… Who is the fairest successor of them all?

SCRIPT: FADE IN as Michael Eisner, entertainment legend, leaps from the operating table after a quadruple-bypass operation. MINUTES LATER we CUT TO EXTERIOR SHOT: Eisner cavorts on the tennis court.

That’s the cartoon version that Disney’s corporate choreographers might have invented for their CEO, who until recently seemed as invulnerable as Simba the Lion King. But since this was life, Disney’s public relations team last week was limited to the semi-astonishing: within 48 hours after doctors sewed four arterial loops to the side of his heart, the head of one of the world’s largest entertainment companies was taking a short walk, meeting with at least one member of his board, and spending several hours dictating orders for senior staff members from his hospital bed.

Even that impressive plot line, however, was not enough to quell the concerns raised by Eisner’s brush with mortality two weeks ago, when he was rushed to surgery after a weekend with other media moguls in Idaho’s Sun Valley. The unexpected illness of Disney’s chairman unleashed a flood of speculation about the future of a company that only four months ago lost its second-in-command, Frank Wells, to a helicopter crash in Nevada. Last week there was some evidence that Disney executives may finally be coming to grips with the succession problem: a Disney board member said it was “under active consideration,” and according to one source, the company may solicit a list of outside candidates as early as this week. At the same time, friends of Jeffrey Katzenberg, head of the highly successful Walt Disney Studios and in many ways the logical choice for the job, were busy making Katzenberg’s case to anyone who would listen.

All the fretting was more urgent than it might have been because the recent management of Disney had been largely a Wells-Eisner fandango. Beginning in 1984, the pair had led Disney through a recovery that increased annual revenue more than $7 billion in 10 years. Wells was the detail-oriented negotiator who framed the deals for Disney’s acquisitions and tended to the nuts and bolts of the business. Eisner was the company’s intellectual incubator, dreaming up new projects, overseeing theme-park expansion and, in his own words, acting as the company’s main “cheerleader.” So close were the two men that each was said to dash into the other’s office as many as 15 times a day. On the weekend after Wells died, Eisner found himself picking up the phone to call his partner and ask when they should schedule the memorial service.

The double blow to Disney management comes at a time when the company is wrestling with several nagging problems. The biggest is its theme parks, which account for 40% of the company’s gross revenues. The Euro Disney park outside Paris, for instance, was losing so much money ($900 million in its first year alone) that it had to be rescued by a Saudi prince who agreed to invest $400 million in new equity. Even so, penny-pinching guests are still skimping on food, hotel rooms and merchandise, which is slowing Disney’s plans in the area for offices, shopping centers and an MGM film theme park.

The company is also facing a fire storm of resistance to its projected historical theme park in rural Virginia, which opponents claim will trivialize American history and disfigure the countryside with commercial development. Meanwhile, combined theme-park attendance was down 6% last quarter in Anaheim (lingering effects from fires and earthquakes) and Orlando (fear of Florida’s crime wave). At the same time, the studio’s expanding movie production to 60 releases a year may have created the danger that many will compete against one another, the way Angie and The Ref did when they were brought out within a week of each other this spring.

But Disney’s biggest challenge is finding its place in the scramble to bring entertainment to a future of interactive households. The company’s doctrine so far has been to concentrate on the “product” and leave the delivery systems, which can become obsolete, to others. But one of the risks of this strategy is that the companies that build the “hardware” could act as gatekeepers to Disney’s “software” — which partly explains why Wells was heading a task force looking into prospective mergers with cable, phone and TV companies when he died.

Those who argue that Katzenberg, 43, should ascend to help Eisner make these decisions point to his track record. As chairman of the company’s flourishing studio enterprises, which account for 43% of its gross revenue, he finds himself atop the hottest movie of the year and perhaps the most profitable in history (The Lion King), the No. 1 television show (Home Improvement) and the No. 1 Broadway production (Beauty and the Beast). “Pick up the recent edition of the annual report,” says a Katzenberg friend. “You’ll see Michael Eisner’s picture on page 2. Where’s Jeffrey? On page 27. He doesn’t like that. He wants to be up there with Michael.”

In fact, Katzenberg has hinted that if he does not get the job (his contract expires in five months) he will leave and probably head up a rival studio. Disney’s decision would seem obvious, except that Eisner and Katzenberg have had a complicated relationship over the past two decades. The even-keeled Eisner keeps the volatile Katzenberg at a distance, relegating him to the role of junior prodigy. All Hollywood is watching how the drama will be played out, and some players are ready with their lines. “Michael and Jeffrey’s relationship is like a 19-year marriage,” record producer David Geffen said last week. “It has had its share of ups and downs, but it’s absolutely committed.”