The Great Depression and a Lucky Rabbit
In Europe, Britain was undergoing a syndicalist revolution. This greatly affected the American stock market as their greatest trade partner was now in a potential civil war. And then, it happened. On April 20th 1925, the New York Stock Exchange plunges, starting a period which we call "The Great Depression".
The Great Depression had an almost instant effect on Walt Disney. As unemployment rates reached an all time high, this meant less people turning up to theaters to watch movies, let alone silent cartoons. Walt's "Alice Comedies" were no exception, the revenue generated by said shorts were not enough to keep Disney and Winkler afloat. That and Winkler giving her position to her husband Charles Mintz, Mintz was not a big fan of Disney and often made it clear that the Alice Comedies were abysmal. In 1927, Mintz requested a new character to distribute via Universal Pictures, Walt and his new colleague Ub Iwerks, whom he hired in 1924, created a new character. The character was a black inkspot rabbit, a happy go lucky rabbit by the name of Oswald.
The first Oswald cartoon, Poor Papa, was completed in 1927, Walt hoped for Oswald to be a success. Instead, Universal outright refused to distribute the short as Oswald was too old and the cartoon itself was deemed low quality. The next short "Trolley Troubles" ended up being the one Universal accepted, being the first Oswald short to be distributed and released.
It looked goof for Walt and Iwerks, but it wasn't enough for Walt. Walt's economic situation was looking dire, the depression had costed him half of his earnings, and Walt needed a solution. In February 1928, Walt went to Mintz with hopes on negotiating a higher salary. To Walt's surprise, not only did Mintz reject Walt's request, but also threatened to start his own studo and bring Walt's crew with him if he didn't accept a reduced salary. Walt was reluctant, but not wanting to risk his job, Walt accepted.
Things didn't look too good for Walt, and it certainly wouldn't improve...