How Walt Disney's First Cartoons Drove Him To Bankruptcy

Welcome to 100 Years of Disney Magic, a series examining the history, achievements, and legacy of Disney Studios over the last century.

The Walt Disney company is now a centenarian. First founded as the Disney Bros. Studios in October 1923 — a partnership between Walt and his older brother Roy — the animation company would go on to change the media landscape in ways that would have shocked even the forward-looking, ever-ambitious Uncle Walt himself.

The studio is a cultural behemoth, thanks to its years of box office dominance, cross-media strategy, and massive library of highly valued IPs. Disney was the first studio to have two billion-dollar movies in one calendar year in 2010, and then was to have a total gross of $3 billion at the domestic box office in 2016. After buying up Pixar, Marvel, and Lucasfilm, the company officially acquired the juggernaut 21st Century Fox, a studio with roots going all the way back to the birth of the motion picture industry. The $71.3 billion deal was unlike anything we've ever seen before. 

Whether you're a Disney Adult, a True Believer, or a Jedi, chances are there is something under the studio's banner that is close to your heart. And your wallet: Disney reported in 2022 record revenues for "Parks, Experiences and Products segment." Billions and billions of dollars earned through theme parks, cruise ships, and licensing deals. Money talks, and this cashflow is saying "we love Disney."

And it all started, not under the gleaming spot lights of Hollywood glamour, nor the hustle-and-bustle of a busy metropolitan center like New York City or Chicago — but in the dry, midwestern urban center of Kansas City, Missouri. 

Walter Elias Disney was born in Chicago, Illinois in 1901. The fourth child of god-fearing parents Elias and Flora Disney, he stayed in the big city for a short time. It was his next home, a farm in Marceline, Missouri, that would have a profound, unforeseen effect on his personality, values, and destiny.

The Disneys joined the small, rural community in 1906, moving into a humble home on a picturesque farm. Upon arrival, young Walt was taken aback by the idyllic charm — lush, green fields complete with dreamy weeping willow trees. The town itself featured sturdy buildings and a tight-knit community that — coming from Chicago — must have felt like one big extended family. The effect was, as Gabler puts it, "enchanting."

The pastoral charm of life on a midwestern farm was powerful during Walt's formative years, and its influence can be seen on his never-ending pursuit to celebrate the American Ideal — which, whether it be in his films or theme parks, often is rooted in the small-town, rural communities of yesterday. This can be seen in his movies, his hobbies, and the concepts for his original theme park, Disneyland. Gabler argues:

It was as if Marceline were a template for how life was supposed to be, and he were trying to re-create the town, no doubt attempting in the process to recapture its sense of well-being, freedom, and community, essentially recapturing what he would call the most blessed passage of his childhood. Marceline would always be a touchstone of the things and values he held dear; everything from his fascination with trains and animals to his love of drawing to his insistence on community harked back to the years he spent there.

Walt's affection for Marceline was self-aware. He reflected on this period of his life fondly, and associated it with when he discovered a love of drawing. Walt would spend his later years honoring it. According to Thomas, Walt built an exact replica of the Marceline barn on his California estate. Disney returned to the small town in 1960 to have a school named after him. It was not Walt's birthplace, nor was it where he spent most of his childhood. But Marceline, in his heart, was home.

Disney landed a job with a slide company, Kansas City Film Ad Company, which introduced the young illustrator to the relatively new art of filmmaking. As Thomas writes in his biography, Walt Disney did not seek out animation — the business of "cartoons that moved" found him. Originally, the plan was for Disney to take on the cartoonist job with Film Ad to help supplement his venture with Iwerks; however, once he got a taste of animation, he was hooked. He would even turn down the dream offer of being a cartoonist for the Kansas City Journal because he was enjoying this new line of work so much. Film Ad produced one-minute animated advertisements that aired before motion pictures. The position offered Disney an opportunity to learn about animation and basic live-action filmmaking, while also honing his own, mostly self-taught, skills as an artist. 

Disney saw the potential in the medium and showed great aptitude for it. The Kansas City studio was using an admittedly primitive form of animation that involved photographing paper cutouts, but by studying E.G. Lutz's "Animated Cartoons" as well as Eadweard Muybridge's groundbreaking motion studies series, Disney was able to at least improve the realism of the art. The young man was so intrigued by the medium that he convinced his boss, A. Vern Cauger, to lend him a camera so he could experiment after work hours in a studio Walt pieced together in a garage. 

Disney created his own humorous shorts wherein his hand "drew" a comic gag at very rapid speed. (This is a common theme in early animation history, when the medium was stuck on the idea of animations being rooted in drawings — as seen with "The Enchanted Drawing" in 1900 and "Gertie the Dinosaur" in 1914). Disney took his new shorts to the Newman Theater Company and sold them, — though, unfortunately, not for much money because Disney forgot to calculate a profit margin. Regardless, this marked the beginning of Disney's first animation studio venture: the Newman Laugh-O-grams.

Ultimately, Laugh-O-grams died a prolonged but steady death over its short existence. Walt did his best to keep the enterprise alive by cutting expenses, laying people off, and even skipping meals — but other than the occasional influx of cash from investors, Disney was never really able to make any money. Remember, his Newman deal was at cost, so even when he was selling pictures for the local theaters, he wasn't turning a profit. He desperately needed a proper distribution deal that would take his animations outside of the immediate area, and although one New York prospect was a solid lead, Disney just didn't have the resources or time to make it happen. By the summer of 1923, Walt Disney had to admit defeat: With the money gone, investment channels exhausted, and no real new prospects, the ambitious young man had no choice but to close up shop. For someone like Walt, who was so confident in his endeavors and knew of his own potential, this must have been a major blow.

Walt's decision to declare bankruptcy was likely influenced by the artist's isolation at the time. His family had moved away from the area. Roy, who looked out for Walt's wellbeing essentially his entire life, had relocated to California in order to recover from tuberculosis, while the rest of the family basically left for greener pastures by November 1921. Disney scholars largely see Walt's attitude towards building up his Laugh-O-gram "family" as a way to cope with loneliness. With no money to pay animators, Disney was effectively on his own.

On the advice of his family, Walt decided it was time to leave Kansas City (leaving poor Iwerks to sort out the bankruptcy petition). After raising ticket fare by going door-to-door selling photography services, he headed to Los Angeles. He had almost nothing to his name, short of some drawing materials, a small sum of cash, bagged lunches, threadbare clothing, new shoes, and a used suit gifted to him from a family friend — all packed in a cardboard suitcase. 

Yet, he headed to Hollywood with a newfound determination to succeed. And as we all know now, that optimism was not misplaced. 

Join us next week for 100 Years of Disney Magic Part 2: The Birth of Disney Brothers Studio.