Disney faces new fall season with renewed push from ABC. (Media & Technology).

A crowd of advertising executives in Broadway's New Amsterdam Theatre roared with laughter as comedian Jimmy Kimmel introduced his new show coming to Walt Disney Co.'s ABC television network.

"I could be the best thing to happen to this network since Mike Ovitz joined the Disney empire and took all your money," Kimmel said, referring to the $140 million severance pay Disney gave its former president after ousting him in 1996, 15 months into the job.

Disney Chairman and Chief Executive Michael Eisner, seated in the seventh row, stretched his long legs into the aisle and didn't crack a smile.

"I got the joke, but I guess I don't find the topic all that amusing," Eisner said at an ABC-hosted party that evening, following the unveiling of ABC's fall 2002 lineup.

ABC is struggling. The network ranked fourth last season among advertisers' prized audience: 18-to 49-year-olds. It will lose $850 million in cash flow during its next two seasons amid an advertising slump and concern about its lineup, analysts predict.

Grey Global Group Inc.'s Mediacom unit, which oversees $11 billion in ad spending, graded ABC's fall slate a D -- the lowest of the six U.S. networks -- because of poor scheduling and shows like "Bachelor II," which depicts singles searching for a mate.

Mediacom forecasts that "Bachelor II" and two other shows -- "MDs" and "That Was Then" -- will fail. "ABC is Disney's principal problem," says Tom Wolzien, senior media analyst at Sanford C. Bernstein & Co. "It's bleeding money, and history suggests that it will take years to turn around."

Iger In trouble?

Given ABC's lousy showing, some investors and analysts speculate that Disney President Robert Iger's job may be in jeopardy. In Januaiy 2000, Eisner elevated Iger, a 20-year ABC veteran who gave the green light to TV hits "Twin Peaks" and "NYPD Blue," to be his No. 2.

Eisner says he and Iger work well together. "There have only been me and Frank (Wells) and me and Bob," Eisner says. "The rest of the time it was me alone or one thing that didn't work -- and that was my mistake," he adds, referring to Ovitz.

Burbank-based Disney's slide started in May 2000, when the "Who Wants to Be a Millionaire" quiz show peaked in popularity. The latest blow came on Aug. 1, when Disney reported a 7.1 percent drop in net income for the third quarter ended June 30 as revenue slid 2.8 percent, to $5.8 billion. Staggs said fourth-quarter results are likely to fall below year-ago levels.

"Iger is in great disfavor right now because he's bombed at turning around the network," says Porter Bibb, who runs Technology Partners (Holdings) LLC, a merchant banking and consulting firm in New York.

Disney's shares have dropped about 30 percent since the beginning of January 1997. Last week, the stock was trading at around $14.

Among the things that will turn Disney's fortunes, Eisner says, is cost cutting. At the network, ABC employees were forced to take up to 25 percent pay cuts.

But several cost-cutting moves have fallen short. In 1999, Eisner melded Disney's production team with ABC's. The strategy had the potential to pay big dividends: Disney would keep the money its hit TV shows fetched when they aired in syndication as reruns.

Instead, the plan backfired as programming executives passed on shows like "Survivor" and as none of ABC's shows struck it big.

In August 2002, Disney returned to soliciting shows wherever it can find them, reaching a two-year agreement under which AOL Time Warner's HBO unit creates new programming for ABC.

'It's a huge task'

Disney gets a quarter of its $25 billion in annual revenue from advertising, mainly in its TV business. Two years ago, "Millionaire" helped ABC top the ratings. The network began airing the show four nights a week and failed to replenish its schedule, instead renewing aging comedies like "The Drew Carey Show" and "Dharma & Greg."

"They bet the farm on 'Millionaire'," says Nicholas Trnitt, an analyst at Strong Capital Asset Management, which holds almost 700,000 Disney shares. "They definitely overplayed their hand."

ABC's prime-time ratings have tumbled 34 percent in the past two seasons. In January 2002, Disney fired ABC programming chief Stuart Bloomberg, a 22-year veteran who'd overseen such popular programs as "The Wonder Years" and "Home Improvement."

Disney promoted Susan Lyne, the head of ABC's movies and miniseries, to president of its ABC entertainment division. Lyne, 52, says her job is daunting: Not only is ABC No. 4 behind NBC, CBS and Fox among 18- to 49-year-olds, but also, the networks as a group are losing about 4 percent of their audience to cable TV annually.

"It's a huge task," Lyne said. "We're clearly a challenged network. All we're trying to do is lay the groundwork for a turnaround. It won't happen in one season."

Lyne is getting support from up high. Iger, a former TV reporter and weatherman who has rearranged his days -- which already start at 4 a.m. -- to spend more time on programming.

Eisner chimes in too. He wants to air more comedies and focus the 8-9 p.m. slot on family programming, called the ABC Happy Hour.

Iger is pragmatic when it comes to producing results. "We're going to need time," he says. "My heart is into it. It keeps me awake at night, and I'm usually a very good sleeper."