Jim Hill
Page 2 of 3

Part of the problem here was that one of the key points of the Disney / Henson merger deal was Jim Henson's creative services. With Jim now gone, $150 million seemed like an awful lot of money to pay for Kermit & Co.

That's why Disney's attorneys began leaning on the Henson family to begin boosting the value of the remaining Muppet characters. And one of the easiest ways to do this was to restrict the Childrens Television Workshop's ability to license any of its Sesame Street Muppet characters.

To explain: The Childrens Television Workshop and the Jim Henson Company each own 50% of all the Sesame Street Muppet characters. So, in order for a product that's based on a "Sesame Street" Muppet character to be put into production, both the CTW and Henson's marketing staff have to give their okay. If one or the other company says "No" to an idea, that "Sesame Street" Muppet product can not legally go on the market.

What Disney wanted the Henson family to start doing was to refuse to allow the Childrens Television Workshop to create any new "Sesame Street" Muppet based products. Why for? Well, the reasoning behind this not-very-nice scenario is that -- if there were fewer Sesame Street Muppets toys available in stores -- consumers who were in desperate need of a Muppet fix would have no choice but to go to their local Disney Store, where they can pick up their official Disney authorized Muppet toys. Which would -- theoretically -- eventually give the Mouse a monopoly on all new Muppet products.

The trouble with this plan is that -- had the Henson family followed Disney's orders -- they would have eventually choked off a vital revenue source for the Childrens Television Workshop, the company that actually produced the "Sesame Street" television program. Since Jim had always been an ardent supporter of public television (as well as being one of CTW's founding fathers), there was just no way that the Henson family could ever get behind Mickey's blatantly greedy plan.

Disney's attorneys then tried another tact. They knew that -- since Jim has passed away in New York State, a state that was renown for its outrageous estate taxes -- that at least a third of that $150 million that the Mouse had agreed to pay out for the Muppets would now be lost. Swallowed up by the greedy state of New York. Mickey's attorneys supposedly offered to kick in an additional $40 million -- enough to take some of the sting out of the NY estate tax bill ... Provided that the Henson family eventually agreed to begin restricting CTW's ability to license new "Sesame Street" toys.

This was at this point that Jim's surviving family members really lost their enthusiasm for the initial Disney / Henson merger attempt. In their day-to-day dealing with the Mouse House attorneys, it had become all too clear to the surviving Henson family members what the Walt Disney Company was really about. Mickey didn't want to tell great stories, or make great movies or television shows anymore. All the Mouse wanted to make money -- by whatever means possible.

And if that meant forcing the Children's Television Workshop to slowly suffocate by restricting its "Sesame Street" licensing revenue flow (which would have eventually allowed the Walt Disney Company to snap up the rights to CTW's "Sesame Street" Muppet characters for pennies on a dollar), that was no skin off of the Mouse's nose.

Maybe this is how business is really done every day in Hollywood. But -- to the Henson family -- the whole thing just came across as too greedy, too sleazy. As if they would somehow be dishonoring their father's legacy if they actually allowed the Muppets to fall into Mickey's greedy three fingered hands.