Walt Disney Chief Executive Michael Eisner isn't exactly whistling while he works on improving results in his movie division. Despite a string of hits such as Enemy of the State and The Waterboy, Eisner has partly blamed the live-action business for lower 1998 earnings and for an 18% drop in fiscal first-quarter profits. "Either the films and marketing cost too much," Eisner wrote to shareholders in December, "or the audience rejected our ideas."

Flops such as Mighty Joe Young have prompted Disney to revamp its studio operation. Animated film chief Peter Schneider was put in charge of Disney's family film unit. Eisner aims to cut by one-third the production and distribution budget, which was $1.5 billion last year. The company will seek deals with other studios to share the costs of big-budget action films, and Disney will make more lower-priced family films.

Studio chief Joe Roth has embraced big-budget films in the past. But he says he's comfortable with the new plan. "We're still going to make big-budget films, we're just not going to do as many of them."

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