Walt Disney Lost a Studio, Then a Character, and Kept Drawing

In May 1922, a young Walt Disney founded Laugh-O-gram Films, Inc., in Kansas City, Missouri, with $15,000 in starting capital. One of his first hires as chief animator was Ub Iwerks, a friend he had met in 1919 when both worked at the Pesmen-Rubin Commercial Art Studio. The two had already tried, and failed, to run a small art business together.

Laugh-O-gram's films cost more to make than expected. According to an archivist at the National Archives at Kansas City, writing in the agency's Prologue magazine, the company was constantly behind on payroll and bills. Employees were paid late and only in part. At one point, the archivist notes, Disney could not meet a potential client because he did not have a decent pair of shoes.

The company folded in 1923 and went through bankruptcy proceedings. The bankruptcy belonged to the corporation, Laugh-O-gram Films, Inc., not to Walt personally, but the loss was his. By August 1923 he had left Kansas City for California to start again.

In Los Angeles, Walt went into business with his older brother, Roy. Their studio produced short cartoons, and Ub Iwerks later followed him west to work on the studio's Alice Comedies.

By 1927 the studio was making a new series starring Oswald the Lucky Rabbit. Oswald was a hit, and he became the first Disney character to appear on merchandise, from candy to buttons. The studio produced 26 Oswald shorts in 1927 and 1928, distributed through Charles Mintz, who held the contract with Universal.

In 1928, Walt learned that the success was not his to keep. The rights to Oswald were held on the distribution side, not by his studio. Mintz took control of the character and hired away most of the studio's artists. The Walt Disney Family Museum describes it bluntly as a theft. Oswald continued without Walt, later in the hands of animator Walter Lantz.

Walt later recalled this period as a time when he and Roy were at their 'lowest ebb.' He had rebuilt once already, and now much of what he had rebuilt was gone.

Walt later said that the idea for a new character came to him on the long train ride from New York back to Hollywood after losing Oswald. That is his recollection, and it is how his family has told the story. What is better documented is what happened next. Ub Iwerks, who stayed with Walt, refined and developed the new mouse. Disney's official history credits Iwerks with sketching Mickey Mouse for the first time and animating the first Mickey cartoon, Plane Crazy, by himself in about three weeks. Walt's wife, Lillian, gave Mickey his name.

Success did not come right away. Plane Crazy and the second Mickey cartoon, The Gallopin' Gaucho, both failed to find a distributor.

The third attempt added synchronized sound. Steamboat Willie premiered on November 18, 1928, at the Colony Theatre in New York and became one of the first cartoons with synchronized sound. Mickey Mouse became the foundation of what grew into the Walt Disney Company.

Decades later, in 2006, Disney acquired the rights to Oswald from Universal, bringing the lost rabbit back to the company Walt built after losing him.