Disney image real loser in court case.

Settle, settle, settle.

Like a drum beat, the advice throbbed from Wall Street and Hollywood for months (or was it years?). Pundits urged Walt Disney Co. to end its fight with former studio chief Jeffrey Katzenberg over the bonus he was owed.

In the glare of a nasty court case, the Disney kingdom was laid open for scrutiny. Finally, the dispute was settled out of court last week for an undisclosed sum. Does it matter whether Disney paid $100 million, $250 million or more? The real damage has been done to Disney's image and that of its chairman, Michael Eisner.

Analysts, already worded by Disney's declining net income, have repeatedly lowered their earnings estimates. Privately, they've worded over Eisner's decision to fight Katzenberg in court when the company needed his attention.

New York magazine, which helped Eisner win his job as Disney chief executive in 1984, declared that his "extraordinary reign at the Wait Disney Company is coming to an end."

Don't count Eisner out. But something has changed. Like Humpty Dumpty, Eisner - or his public persona - may never be put back together again.

If the case hadn't settled, Eisner was due to be recalled to the witness stand this week by Katzenberg's lawyers.

Need we remind anyone how Eisner testified in early May? He acknowledged calling Katzenberg a "little midget" - not a phrase Disney would want aired again as 2,000 dwarfs gather this week in Portland, Ore. for the National Conference of the Little People's Association.

Knowing Eisner, he might have wanted to take the stand again to redeem himself. But how could he look good with Disney pursuing a legal strategy of poor-mouthing the future earning power of such hit animated films as "Beauty and the Beast," "Lion King" and other projects set in motion during Katzenberg's decade at Disney?

Truly, this was no-win litigation for Disney, which had more "face" to lose with consumers and shareholders than Katzenberg, who is now a partner in closely held DreamWorks SKG. The specter of having Eisner trash Disney's future - even to reduce lawsuit damages - was more than shareholders deserve.

At every turn, Disney seemed to lose important rulings from three judges who dealt with portions of the lawsuit, which was filed in 1996. Disney failed to disqualify Katzenberg's lawyers in 1997. The company also lost its arguments to withhold notes from deceased Disney President Frank Wells and embarrassing notes taken by Eisner's biographer for a book published in 1998.

In April, Disney lost a court argument to bar the public from the proceedings that would determine just how much it owed Katzenberg. In the early weeks of the trial, dozens of reporters flocked to court and immortalized Eisner's performance on the stand.

In mid-May, retired Superior Court Judge Paul G. Breckenridge Jr. ruled that Disney had, in fact, breached Katzenberg's employment agreement by refusing to pay a post-termination bonus, and said Disney would have to pay interest on Katzenberg's ultimate award.

With so many adverse rulings, it's a good bet that some Disney lawyers will walk the plank before Eisner ever does.

Personally, I'm looking forward to some of that masterful spin from Disney, which was missing during the trial. Surely some reporters will be invited into the inner sanctum to give us Eisner's view of things.

But coveted interviews might only be awarded to those who were mum during the trial, and that eliminates a lot of media. Most mainstream publications scolded - or scalded - Disney for prolonging the fight.

The New York Times likened the trial to "a car wreck on the 405." The opening paragraph of a Washington Post story referenced Eisner's "dark side."

Time magazine ran caricatures of Eisner and Katzenberg dressed in Uncle Scrooge costumes, tussling over a bag of gold coins.

"Are Disney's best days behind it?" asked Forbes.

In urging Eisner to settle the squabble, Business Week declared, "As CEO of a $25 billion corporation that's not performing up to par, Eisner has far better things to do."

And then there was the killer op-ed column in the 'Wall Street Journal: "Disney's goal in life should be to keep the public in the dark about how the sausage factory really works," wrote Holman W. Jenkins Jr. "The dispute has perversely highlighted a doubt already hanging over Disney's famous chief executive: Does the wonderfully creative and impulsive Mr. Eisner know when to throw in the towel?"

It's doubtful that Eisner - or the Disney board - shrugged off all the negative press. Indeed, Vanity Fair reported that two Disney board members - Stanley Gold and former Capital Cities/ABC Chairman Tom Murphy had urged settlement.

After Disney lost the "breach of contract" portion of the case, Gold visited the courtroom twice. His appearances drew attention, because he is a close friend and business associate of Disney Vice Chairman Roy Disney. Gold, who once practiced law with Frank Wells, helped bring the Eisner-Wells team to Disney.

New York magazine also played a role in 1984, when an article about Eisner impressed key Disney shareholder Sid Bass. According to Eisner's recent autobiography, "Work in Progress," the article helped persuade Bass to support Eisner's campaign to become chairman.

That article and the one the magazine published last week were penned by different men. Still, Disney must be agonizing over how to regain the high ground and restore Eisner to his perch.

If only they'd settled, settled, settled sooner.