(FORTUNE Magazine) – Can you name the first feature-length animated movie?

If you said Snow White and the Seven Dwarfs, congratulations. Now the bonus round: Name the second one.

No, not Pinocchio. And not Dumbo, either. The second full-length cartoon was a little-remembered 1939 flick by the name of Gulliver's Travels. It came not from Disney but from the studio's chief rival in those days, the Fleischer brothers, animators of Popeye and Betty Boop, and drew the following review in the New York Times: "Gulliver lacks...the wit, the freshness, the gaiety and sparkle...of the Disney factory." The Fleischers produced one more feature, a flop called Hoppity Goes to Town, and then cleared out of the animated-movie business for good.

That's the way it's been ever since for Disney. Hollywood, a town that's made more copies than Xerox, has yet to produce a consistent challenger to Disney in feature-length animation--a failure that's all the more remarkable because Disney's cartoon franchise may be the most lucrative in all moviedom. It's not that studios haven't tried--they have--but either their movies haven't been up to the standards set by Disney, or their marketing campaigns have been limp, or both. As a result, no other studio has sustained a track record in animation past a movie or two.

That may soon change: The big Hollywood studios are putting finishing touches on more elaborate and expensive animated features than ever before. Next year will bring 'toons from DreamWorks, Paramount, and Warner Bros.

But the first film out of the gate--and the one all the other studios will be eyeing nervously--debuts this month: On Nov. 21, Twentieth Century Fox will unveil its $53 million cartoon opus, Anastasia. Based on the legend of the survival of the Romanov heiress, the film is the culmination of four years of work overseen by a handful of Disney expatriates. But to Fox, Anastasia is more than a movie; it's the first step in the creation of an animation franchise. The studio is spending some $20 million to promote the film--more than a typical movie's marketing budget--and it has lined up an estimated $200 million more in promotional support from partners like Burger King and Hershey.

Disney is counterattacking, of course, surrounding Anastasia with stiff competition for the family film audience: On Nov. 14 the studio will rerelease 1989's The Little Mermaid to theaters; on Nov. 21 its Hercules and George of the Jungle will return to discount theaters; and on Nov. 26, Flubber, the studio's remake of The Absent-Minded Professor, will premiere. (Disney executives say the scheduling of the four movies is coincidence. Uh-huh.)

But while there is no shortage of speculation about whether Disney or Fox will take the Thanksgiving holidays, there is a bigger, scarier question confronting both studios--and the other studios that have staked millions on animation: What if the appetite for animated feature films is waning? Since 1994's smash hit, The Lion King, which grossed $315 million in the U.S. and became the fifth-highest-grossing movie of all time, Disney's animated movies have receded from being cultural events to being, well, just plain movies. This past summer, the studio's heavily hyped Hercules topped out at $97 million at the box office. As Roy E. Disney, Walt's nephew and the chairman of the studio's animation division, puts it, "Hercules was a damn good movie, and it did very good business--an awful lot of people want to do $100 million, and we'll do twice that [including overseas grosses]--but it just really didn't catch on the way most of us thought it would. It just proves that it's a pretty tough market."

A little perspective may be in order here: Just over a decade ago it would have been astounding for an animated film to make $200 million worldwide--and unthinkable for that to have been considered a disappointment. When Michael Eisner arrived at Disney in 1984, the company was primarily interested in tending its theme parks, rereleasing its classics, and spitting out a mediocre new cartoon every few years. Indeed, since the last movie Walt worked on, 1967's The Jungle Book, the studio had put out only five animated movies: The Aristocats, Robin Hood, The Many Adventures of Winnie-the-Pooh, The Rescuers, and The Fox and the Hound, all of which--how best to put it?--sucked. Their animation was nowhere near Disney's classic standards, their songs were unmemorable, and they contained little of the studio's trademark wit and flair. Things got so bad that one of the studio's best animators, Don Bluth (remember that name), led 16 of his fellow animators in walking out of the studio, citing no particular grievance, just a belief that cartoons could be made better elsewhere.

Eisner's arrival marked the beginning of a new era in Disney animation. After he was hired to lead a creative revival at the company, Eisner turned to Roy Disney, a board member and major shareholder, and asked, "So, what would you like to do?" Disney impulsively asked for the feature animation department, figuring that it was a huge asset that wasn't being exploited and that he was one of the few folks around who knew anything about the medium. Disney set to work with the studio's chairman, Jeffrey Katzenberg.

Yet even with a man named Disney at its core, the division stumbled. The first movie Disney green-lighted, The Great Mouse Detective, was cute and charming, but it underperformed, grossing $24 million in the summer of 1986. "It was a pretty good little movie, I thought," Disney says. "The problem was, we didn't pay much attention to the selling of it." And then there was that title, so bland that one disgruntled animator posted a memo suggesting similar names for the studio's classics (among them: The Wooden Boy Who Became Real and Two Dogs Fall in Love).

The box-office failure of The Great Mouse Detective was bad enough. Worse, across town at Universal, Disney refugee Don Bluth had a hit on his hands: An American Tail, the story of an immigrant mouse named Fievel, raked in $47 million, then the highest gross ever for an animated movie in its initial release. Savvily packaged and nurtured by its executive producer, Steven Spielberg, the movie was an object lesson in how to sell a cartoon feature: It had a well-timed ad blitz and tie-in campaigns with family-friendly brands like McDonald's and Sears.

Stung by The Great Mouse Detective, the Disney marketing team pushed its next movie, Oliver & Company, hard. The movie outgrossed Bluth's follow-up film, The Land Before Time--albeit just barely--providing Disney studios with both a financial and psychological victory. "That was very rewarding, because it kind of said, 'Yeah, okay, we are back in this business,' " Roy Disney says.

Disney hit its stride with The Little Mermaid. Not only was the marketing in place, but the film was spectacular. The studio had recruited the Broadway team of Howard Ashman and Alan Menken, who worked with Disney's artists to produce a brassy musical that became an instant classic. The picture grossed $83 million, far outpacing Bluth's new movie, All Dogs Go to Heaven.

The next few years were heady ones for the Disney studios. Following The Little Mermaid, the studio put out a quiet flop, 1990's The Rescuers Down Under, and then another classic, 1991's Beauty and the Beast, which capped a $145 million run with an Academy Award nomination for best picture, the first for an animated film. Then came 1992's Aladdin, a romp whose thin story was camouflaged by striking visuals and an inspired voice-over performance by Robin Williams, and which grossed $217 million. And then the tidal wave hit. In the summer of 1994, The Lion King opened and surprised everyone by taking in $41 million in its opening weekend. For some reason, the story of a young lion who enlists a wart hog, a meerkat, and his cubhood sweetheart to avenge his father's murder touched a nerve in audiences. The movie took in $767 million worldwide. Above that figure, it sold 58 million videocassettes worldwide, becoming the best-selling video of all time. It sold millions more in merchandise, much to the surprise of Roy Disney. ("We all thought there wasn't much merchandise you could get out of the movie," he says. "We said, this is just a bunch of damn animals.") And it is about to be a Broadway musical. Precise figures are elusive, but company executives don't dispute estimates that have put Disney's revenues from the movie at well over $1 billion, and counting.

The Lion King is an example--albeit an extreme one--of why animated filmmaking can be so lucrative. For one thing, cartoons are endlessly recyclable. When Disney reissued its 1961 101 Dalmatians in the summer of 1991, the film grossed $60 million, and the studio didn't have to pay a dime to make it. Then there's the stuff: Disney movies have sold more merchandise more consistently than any other series of movies, with the possible exception of Star Wars--and those royalties flow directly to Disney, not to actors who get paid for the use of their likenesses. Animation's lack of live actors also insulates the studio from the escalating costs of star salaries. These are not insignificant matters: Consider that between licensing royalties and his cut of the box office, Jack Nicholson made more money from Batman than Warner Bros. did, and the economics of animation look very appealing indeed.

Small wonder, then, that as Disney prospered, other studios began to make forays into animation. But they have found it hard to match the quality of Disney's animation or the energy of its marketing. Disney may spend up to two years on the plotting of a movie before a single frame is drawn--an effort that can only truly be appreciated when watching a poky, turgid cartoon from one of its rivals. (Anyone remember Ferngully: The Last Rainforest? No?) And while Disney starts beating the drums for its movies up to a year in advance, hyping them with splashy premieres and mammoth advertising campaigns, other studios have been unwilling to invest heavily to promote an animated film. Tellingly, since Disney started its streak with The Little Mermaid, only two animated movies from other studios have hit it big, and both were based on characters with huge built-in audiences: Beavis and Butt-head Do America, and the semi-animated Space Jam, which showcased two of the most recognizable stars on the planet, Bugs Bunny and Michael Jordan. No studio has yet been able to venture out, sans brand-name recognition, and draw an audience to an animated movie on the strength of the movie alone.

Bill Mechanic hopes to be the first to change all that. Mechanic, chairman of Twentieth Century Fox, is the guy who gave the green light to Anastasia--a title that, save for Russian royalty junkies, has no brand-name recognition whatsoever. Mechanic is no naif, though: He has a solid background in the medium, thanks to the nine years he spent heading up Disney's home-video and overseas distribution businesses. Indeed, he says that when he was weighing his job offer from Fox in 1993, he wasn't sure if he could bear to leave Disney's animation behind. But then he heard something that changed his mind. It turned out that he might be able to hire "the only independent animator I would ever back": Don Bluth. After The Land Before Time, Bluth had split with Spielberg and Universal, and he was having trouble raising money to make movies independently. With the blessing of Fox's boss, News Corp. CEO Rupert Murdoch, Mechanic approached Bluth about setting up an animation studio. Bluth jumped at the chance. Four years and $100 million later, the two men and their respective teams have two products to show for their efforts: A state-of-the-art animation facility in Arizona, and 88 minutes of celluloid that they're praying will capture the imagination of you and your kids.

This is, however, an unusual moment to be releasing an animated feature, a time of both uncertainty and possibility. When Anastasia received its green light, Disney's movies were still on a steady upward trajectory, but since The Lion King, the studio's grosses for traditional animated musicals have leveled off to around $100 million apiece. A certain degree of drop-off after The Lion King was expected; nobody plans for a megahit every time out. And the studio's movies are still doing exceptionally well. But there is a sense that Disney's product has slipped in audience appeal. For instance, Martin Brochstein, editor of The Licensing Letter, estimates that Hercules moved about as much merchandise as The Hunchback of Notre Dame, a disappointment that left many licensees stuck with unsold gargoyle figurines.

There is no end of explanations for the leveling of the studio's grosses, some favorable to Fox, some not. The notion has been floated that as Roy Disney puts it, "we're at the point where the word animated doesn't have the magic it did just a few years ago." It is true that Disney's animated movies used to be a special treat, and now that they arrive at the rate of one per year, that specialness is wearing thin. But perhaps there is another explanation: Disney's work in traditional animation has fallen into a rut. The elements that seemed so fresh with The Little Mermaid, from the story (the individualist, accompanied by a colorful sidekick, who overcomes all odds) to the songs (the production number; the ballad; the big first-reel number that has come to be known in Disney-ese as the "I want" number--"I want to leave the ocean/leave this village/not be a hunchback, etc."), have come to seem routine. Asked if Disney has fallen into formula, animation executive vice president Tom Schumacher responds tartly, "We have not yet made a film that breaks form completely, like The Usual Suspects. And in fairness, we don't make animated versions of The Crying Game. We don't do that." But Roy Disney acknowledges that the animation team recently held a retreat with Michael Eisner in Vermont to address charges of staleness, including "sidekick questions." Disney adds that the studio's upcoming slate of films--including Tarzan, Atlantis, and Fantasia 2000--will have "a variety that may have not felt like it was there for the last several years."

Mechanic is hoping that audiences have tired not of animation, but of Disney. "I think the Disney movies are extremely well made," he says, "but they're clearly not speaking to the audience." Anastasia, he adds, is well positioned to take advantage of a Disney slide: "It's probably better to release Anastasia when there's a downtick," he says, "because it will stand out."

Certainly, the film itself stands out from Disney's recent output. A screening of a work print last month found that, while the movie does contain some of the familiar Disney elements--it features an "I want" number and the requisite spunky heroine--in both tone and content, it is a departure from form. The film, employing a statelier pace and a richer palette than Disney's recent work, tells the story of Anastasia, an orphan who teams up with a con man to discover whether she's the last surviving member of the Romanov royal family, all the while fleeing from the undead Rasputin and his albino bat sidekick, Bartok. Albino bat aside, the movie is subtler and more adult in approach than Disney's work. It also doesn't hurt that Anastasia, whose face is a blend of the features of Meg Ryan (who provided her voice) and Audrey Hepburn, is, um, well, a babe. The movie does have flaws both large (its action and romance segments don't always blend smoothly) and small (one song rhymes stroganoff with Romanov), but they didn't seem to bother the little girl who, at a recent screening, kept leaping from her seat to do enthusiastic pirouettes.

The Fox team is hoping that millions more little girls will be dancing in the aisles of theaters on Thanksgiving weekend, and that their parents, brothers, and older siblings will be in the theater too. The studio began an advertising blitz last Christmas, has cut four different versions of the movie's big single for four different radio formats, and has licensed more than 200 products. Mechanic thinks the movie is good enough to live up to the hype. "If you said to me I had to put my job on the line for any movie, I would put it on this one," he says.

It probably won't come to that for Mechanic. But that doesn't mean the movie isn't important to him, both personally and professionally; its failure, he says, would be "a huge disappointment." (Not that Fox would give up on animation; it's already well along on its next feature, the science-fiction adventure Planet Ice, scheduled for 1999.) Mechanic won't be alone in scrutinizing Anastasia's grosses: At least three other studios are watching anxiously to see if he can draw a crowd to a cartoon that doesn't feature Bugs Bunny, Butt-head, or the Disney label. Paramount doesn't have much to worry about with its Rugrats movie--the Nickelodeon show on which it's based is one of the top-rated ones on cable--but the other two are riskier, both commercially and artistically. Warner Bros. (whose parent, Time Warner, is the parent of FORTUNE's publisher) is still putting the finishing touches on Quest for Camelot, an ambitious retelling of the King Arthur legend. And the most intriguing movie in the pipeline is next November's Prince of Egypt, the first animated feature from DreamWorks--a studio that boasts two of the prime movers behind the animation revival, Spielberg and Katzenberg. But Prince is far afield from mice and mermaids: It's a musical based on the life of Moses, and of all the upcoming animated movies, it looks to be the one that will either fail spectacularly or push the medium forward into a whole new realm. Animation is a pliable art form, equally able to render the stories of Belle and Beavis, Aladdin and Anastasia. But can it handle the book of Exodus?