The Walt Disney Company is a premier American diversified transnational amusement and mass media pudding stone headquartered in Burbank, California. Founded on October 16, 1923, by Walt Disney and his brother Roy as a small sketch life studio, the company struggled through years of unsuccessful creative activities but turned around after the introduction of Mickey Mouse, the official mascot of the company.
Now headed by CEO Robert Iger, Disney is one of the largest amusement corporations in the universe with about 166,000 employees and one-year grosses nearing the $45 billion mark (Walt Disney). For eight decades, Walt Disney has entertained people around the universe with its theme parks, resorts, sails, movies, television shows, wireless programming, and memorabilia.
Before diversifying into live-action movie production, television, and travel, the company established itself as a leader in the American life industry. The company went public in 1940 and was reincorporated under its current name in 1986 and expanded operations and also started divisions focused on theater, radio, music, publication, and online media (Cohesion Case).
Mission Statement
The mission of The Walt Disney Company is to be one of the world’s leading manufacturers and suppliers of amusement and information. Using our portfolio of trade names to distinguish our content, services, and consumer products, we seek to develop the most creative, innovative, and profitable amusement experiences and related products in the world (Walt Disney).
Organizational Structure
Walt Disney operates using a strategic business unit (SBU) organizational structure that consists of five diverse family-entertainment sections: Media Networks, Parks and Resorts, The Walt Disney Studios, Disney Consumer Products, and Disney Interactive (Cohesion Case).
The Walt Disney Company’s globally known consumer trade names include Disney, ABC, ESPN, Pixar, Marvel, and Lucas Films (Walt Disney). Media Networks, Disney’s Media Networks section includes domestic broadcast television, television production and distribution operations, domestic television stations, international and domestic cable networks, domestic broadcast radio networks and stations, and publication and digital operations.
The Disney/ABC Television Group comprises Disney’s global entertainment and news television properties, owned television stations group, and radio and publication concerns. Disney/ABC Channels creates programming and franchise benefits for all of Disney’s concerns.
The group’s portfolio includes ABC Television Network, ABC Owned Television Stations Group, ABC Studios, Disney Channels Worldwide, ABC Family, SOAPnet, Disney ABC Domestic Television, Disney Media Distribution, Hyperion, and Radio Disney Network.
The ABC television Station Group operates more than 220 attached stations, and the ABC Owned Television Stations Group owns ten television stations, six of which are in the top 10 rated markets, across the US (Cohesion Case).
Disney also produces and distributes live-action and animated television programming under the ABC Production Studios label. ABC Studios develops, produces, and distributes entertainment content across broadcast and cable television and digital platforms (Cohesion Case).
This includes many prime-time programs and drama, such as Castle, Criminal Minds, Desperate Housewives, Grey’s Anatomy, Private Practice, and a variety of syndicated programming. Two of Disney’s major television networks (ABC and ESPN) have an agreement with Cox Communication where the companies now offer hit shows and football games on demand. In this deal, Cox, the country’s third-largest cable operator, agreed to stop the fast-forwarding of commercials to gain access to the content (Marketwatch).
Studio Entertainment:
This is regarded as the most visible concern within the Disney Company (Battikh). It is also the most extensive with the integration of 10 production subdivisions: Walt Disney Pictures and Television, Miramax Films, Buena Vista Home Entertainment, Buena Vista Theatrical Productions, Walt Disney Records, Buena Vista Records, Touchstone Pictures, Hollywood Records, Lyric Street Studios, and Pixar Studios (Strategic Management).
Disney produces live-action and animated feature films, direct-to-video programming, musical programming, and live stage plays (Cohesion Case). Disney licenses the rights to produce and distribute feature films to third-party studios.
Disney earns a licensing fee on these movies, while the third-party studio incurs the cost to produce and distribute the movie. The company distributes feature films produced by DreamWorks under the Touchstone Pictures name (Cohesion Case).
Disney’s cable network group provides national programming networks and licenses television programming both domestically and internationally. The majority of the revenue comes from fees charged to cable, satellite, and telecommunications service providers who operate under multi-year agreements. This helps Disney sell time for commercial announcements (Marketwatch).
Certain programming developed by cable networks is also distributed in DVD format by the home entertainment division in the Studio Entertainment section, online via Disney’s Internet sites such as ESPN.com, and on third-party services such as iTunes. Radio Disney, a 24/7 web for kids, teens, and families, also operates under this licensing model (Walt Disney).
It is available on 37 radio stations, 31 of which the company owns. It is also available on radiodisney.com, SiriusXM satellite radio, iTunes Radio Tuner, XM/DIRECTV, and mobile phones (Cohesion Case).
Interactive Media:
Disney’s Interactive Media section creates and delivers Disney-branded entertainment across interactive media platforms, particularly through gaming and online platforms (Cohesion Case). This subdivision serves as the online, mobile, and social media gateway (Walt Disney).
Disney Interactive Games creates and distributes console, handheld, online, and mobile games worldwide based on Disney-created characters. They also produce online and interactive games for social networking websites and smartphone platforms (Cohesion Case).
Children are making the switch to gaming earlier and earlier, so the market for video games is growing. Disney does not, however, have a large presence in the rapidly growing video game market, though the company is making large investments in this area, such as a $350 million investment to develop its own in-house video game capabilities (Forecasts).
In 2010, the company acquired Playdom, Inc., one of the largest developers and publishers of online social games (Chmielewski). This move was made to enhance the brand’s previously undistinguished presence across social media platforms, as they became a more integral component of interactive entertainment.
Playdom broadens Disney’s portfolio of games with new and diverse titles such as Market Street, Sorority Life, and Bola, which the company estimates attract around 42 million participants a month (Chmielewski). Disney’s Online business develops, publishes, and distributes content for Disney-branded online services primarily intended for family entertainment. This includes Disney.com and Disney Family Network.
Disney Online creates lifestyle and parenting websites, online virtual worlds for global audiences, and entertainment content for the Web (Walt Disney). A new division of the online sector was created in 2006 when Disney bought Kaboose.com, Babyzone.com, and six other parent-oriented sites. Disney recently launched Disney Xtreme Digital, a networking site aimed at kids under 14. This platform competes against websites like MySpace (owned by News Corp.) (Strategic Management).
As people increasingly consume their media through online platforms, Disney changed its model to adapt to demand. Consumer spending on DVDs and home videos dropped 2% in the past year. Disney recently began distributing its content in new ways, such as video-on-demand and online and television shows formatted for iPod users (Forecasts).
In 2012, it sold exclusive streaming rights to Netflix to show Disney programming. However, Disney’s CEO says they are willing to work with other Internet TV providers (Spangler). Although distribution through these new channels comes with a higher risk of piracy, the migration of Disney’s core younger audiences to the Internet makes finding new ways to reach this demographic critical (Forecasts).
Competition: Disney’s competitors differ in each business segment. Walt Disney is classified as “Entertainment-Diversified” and over the years has created a unique portfolio and niche position that is not matched by a single company in all its areas (Battikh). However, in the Media Network section, Disney competes directly with Time Warner, Inc. and News Corporation.
Time Warner is a major competitor to Disney and is composed of three divisions: Cable, Filmed Entertainment Networks, and Publishing. It owns Time Inc., Warner Bros., and TBS Networks (Strategic Management). Like Time and Disney, News Corp is a diversified international media and entertainment company that operates in several segments:
- Filmed Entertainment,
- Television,
- Cable Network Programming,
- Direct Broadcast Satellite Television,
- Magazines and Inserts,
- Newspapers,
- Book Publishing, and others (Strategic Management).
The company also faces competition from NBC Universal (owned by Comcast) in television and with their Universal Studio amusement, theme parks and resorts sector, and Paramount Pictures.
Though The Walt Disney Company is an amusement leader, these other rivals pose unequivocal challenges because they are all diversified conglomerates with a solid presence in the global market.
In many instances, Disney has dealt with new competition by purchasing and integrating emerging rivals. Disney bought Pixar in 2006 as it emerged as a highly profitable animation giant. In July 2011, Disney’s ESPN acquired television rights to broadcast the Wimbledon tennis tournament for 12 years, replacing NBC, which previously showed the annual event.
In 2011, for the first time ever, ESPN offered the NBA finals in 3-D (Cohesion Case). However, with the increasing success of ESPN, more stations are coming into the sports mix as rivals. ESPN now competes with NBC Sports and 21st Century Fox’s Fox Sports West cable channels. If this trend persists in the future, as expected, it may drive up programming costs (Hellman).
Products & Target Audience
It may seem that Disney’s target audience is mainly kids, but with its vast assets, Disney’s products reach the full spectrum of audiences from kindergarteners to adults. Disney products include television programs, books, magazines, musical recordings, and films (Walt Disney).
Disney Channels Worldwide is comprised of 94 children’s and family entertainment channels available in 169 countries (Walt Disney). ABC Family is a mixture of TV series and films targeted towards young adults and families. SOAPnet owns character-driven “soapy drama” from daytime and primetime soaps to reality shows and films, targeted at women and adults.
Hyperion publishes fiction and non-fiction titles for adults (Cohesion Case). Radio Disney is available in more than 40 U.S. markets and on satellite radio, mobile apps, and the web. Disney’s Consumer Products section includes worldwide licenses, manufacturers, and retailers who design and sell a variety of products based on Disney characters. These products include character merchandise and publishing licensing, books, magazines, and the Disney Store (Strategic Management).
Merchandise Licensing
Disney Consumer Products is the business licensing section of Walt Disney and its affiliates (Walt Disney). Disney offers licenses for retail sellers of toys, clothing, home decor and accessories, stationery, accoutrements, health and beauty products, food, footwear, and consumer electronics.
This includes many major brand names for which royalties are earned, including Marvel properties Spider-Man and Iron Man. The licensing business is aligned around five brand priorities: Disney Media, Classics & Entertainment, Disney & Pixar Animation Studios, Disney Princess & Disney Fairies, Lucasfilm, and Marvel (Walt Disney).
Printing
Disney Publishing Worldwide (DPW) publishes books, magazines, and digital products in 85 countries and in 75 languages (Walt Disney). The company publishes a range of children’s magazines and books globally, mostly related to Disney’s characters. DPW also distributes digital products like eBook titles and original apps.
This subdivision includes Disney Book Group in the US and Disney Libri in Italy. Disney English is DPW’s English language learning business, which includes Disney English learning centers in China and a worldwide retail-licensing program (Walt Disney).
Retail
The Disney Store retail chain debuted in 1987 (Walt Disney). Disney owns and operates numerous shops throughout North America, Europe, and Japan, as well as online. It is the retail marketing subdivision of Disney Consumer Products, the business section of Disney and its affiliates, extending the brand to merchandise tie-in ware.
Management Strategies
Media integration is one of the most typical features of the movie industry over the past several years. Disney has expanded its investment both domestically and globally through corporate integration. Like their rivals, Disney has aggressively acquired other movie corporations using their huge capital resources (Jin).
To replace lost revenues and respond to industry changes, film studios have shifted their primary focus from show quality and content to distribution, licensing, marketing, and trading agreements. Seeking alternate sources of revenue and taking advantage of emerging technological opportunities, traditional studios have extended their reach more broadly into other forms of entertainment.
It is difficult to categorize the company into a single industry because it is a conglomerate with diversified business interests (Battikh). The company’s main competitive theory statement is constructed of six parts:
Globalization
Walt Disney’s products and services are found all over the world in different forms and locations. Disney has focused on international growth in the last few years. As a global brand, Walt Disney International provides oversight of the company’s activities outside the United States and aims to increase the company’s globalization to ensure it is locally relevant to consumers worldwide.
The company’s recent focus has been on establishing the foundations for long-term growth in the emerging markets of Latin America, Russia, India, and China. Recently more focus has been placed on Japan, Europe, the Middle East, and Africa, where the company is well-established, yet there is significant room for growth (Walt Disney).
Horizontal Integration
Walt Disney owns many studio entertainment companies, consumer product companies, and media networks. Disney uses horizontal integration to promote products, gain more interest and differentiate itself from competitors. Disney also applies this strategy to increase its presence and market awareness through cross-promotions. In addition, Disney continually expands beyond the “family entertainment” base, to many more mainstream establishments (Jin).
Vertical Integration
Walt Disney’s many sub-companies allow it to plan, produce, advertise, and distribute all of its products on its own, without relying on other companies’ services, thereby better controlling quality, content, and costs. Collaboration among business sectors with the same corporate culture and values makes communication and production more efficient and effective (Strategic Management).
Media Synergy
Through the companies owned by Disney, it can both produce and distribute its products. Besides, Disney creates media that extends beyond one product into multiple other links, such as online games that play off their feature movies (Battikh). An important factor of its success is the integrated nature of its products with synergies between film, television, media, theme parks, and resort operations (Laws).
Diversification
Walt Disney has focused on market diversification for years. The company covers a wide variety of products and services; its films, shows, theme parks, music, television, radio, and merchandise offer a range for all tastes, cultures, and ages.
Distribution
Through its licensing and marketing and diverse business establishments, when Disney produces a new image or brand, such as a movie character, it continues to capitalize on the character long after it has left the box office. Before the movie leaves theaters, Disney already releases a line of toys and merchandise through its shops and other establishments. This is followed by the DVD release and often the character’s presence in theme parks (Forecasts).
Financial Situation
Disney holds $80.5 billion in assets (E*Trade). The company’s overall revenue has continued to increase annually from 2008 to 2013. Media Networks make up the largest part of the company financially.
The major sources of revenue for the company come from advertising spending, mostly driven by the economy, and the presence of large-scale TV events. Disney’s success here is driven by the quality of programming on its various channels and the audience size.
A stable source of revenue also stems from affiliate fees for cable and satellite programming, and they are expected to grow in virtually any economic environment (Forecasts). Disney generates the highest affiliate fees in the industry, mostly due to the popularity of ESPN. Film and DVD syndication and marketing are both more unpredictable forms of revenue, and success in this area is determined by Disney’s ability to produce hit films.
Market Performance
Walt Disney is a publicly held company listed on the New York Stock Exchange (NYSE) under the symbol DIS. Over the last five years, from late 2008 until October 27, 2013, the stock of the Walt Disney Company (DIS) has appreciated from a price of $25.91 to its current price of $69.26, an increase of 167%.
During those five years from 2008 to the present, the company’s gross revenues have risen from $37.8 billion to an estimated $45.05 billion, an increase of 19%. Their earnings per share of stock outstanding have risen from $2.28 a share to $3.34 (estimated) for all of 2013, an increase of 46%. Since 2008, DIS has raised the dividend that it pays annually to stockholders from 35 cents a share to 75 cents, a 114% increase (E*Trade).
The company has a strong balance sheet (the accounting of its assets and liabilities) with over $6.5 billion in cash, $80.5 billion in total assets versus only $37 billion in total liabilities, leaving it with a net worth of $43.5 billion (E*Trade).
In addition to raising its dividend every year for the last five, Disney has executed a share redemption plan to buy back 400 million shares that has allowed it to keep its number of shares outstanding (1.8 billion) fairly stable while acquiring, for stock, Marvel Entertainment as well as 40 million shares in the acquisition of Lucas Films.
Using corporate cash to buy company stock is considered good for current stockholders as it helps to decrease the supply of shares via increasing the demand (Walt Disney).
Growth Potential
Disney continues to spread out to new markets and develop internationally. In 2011, the company launched a free-to-air Disney Channel in Russia, reaching over 40 million homes, around 75% of the Russian viewing audience (Walt Disney). This was followed by a free-to-air Disney Channel in Turkey, expanding the market from 1.5 million homes in the country to 11 million.
Disney also continues to take advantage of new potential markets in India, where it acquired UTV to become India’s leading movie studio and television manufacturer, making it one of India’s premier broadcasters and reaching 100 million viewers per week.
This deal also increased Disney’s advantage in the digital media space, which had previously been a lagging sector, with the inclusion of Indiagames, a top mobile gaming company in the market. There are now 108 Disney Channels in 34 languages, reaching more than 426 million homes in 166 different markets around the world.
With the extended reach of the conglomerate’s partners around the world, Disney and Marvel-branded children’s television content is now available in about one billion homes (Forecasts).
At the end of the last financial year (2012), Disney achieved record profit, revenue, and earnings per share. Overall, Walt Disney is poised to do very well in the future (Russell). With strong film franchises (Disney, Lucas, Pixar, and Marvel), television properties (ABC and ESPN), theme parks, and Broadway plays, Disney is a major player in the entertainment business and is expected to continue to grow internationally and continue its financial success.
Works Cited
- Battikh, Sara O. “Walt Disney Company Report.” Sarabattikh.com, 13 May 2013, Web.
- Chmielewski, Dawn C. “Disney to Buy Playdom Inc. for $563.2 Million.” Los Angeles Times, Los Angeles Times, 28 July 2010, Web.
- David, Fred R. “The Cohesion Case: Walt Disney Company.” Strategic Management Concepts: A Competitive Advantage Approach. Boston: Pearson, 2013, Print.
- David, Fred R. “Strategic Management Cases: Walt Disney.” Strategic Management Concepts and Cases, 13th ed., Prentice Hall, n.d. N. pag. Francis Marion University, Web.
- E*TRADE Financial, n.p., Web.
- “Forecasts: Walt Disney.” TradeForecast, n.p., Web.
- Hellman, Justin. “Research Hub.” The Walt Disney Company: A Short SWOT Analysis., 01 Oct. 2013, Web.
- Jin, Dal Y. “Transforming the Global Film Industries: Horizontal Integration and Vertical Concentration amid Neoliberal Globalization.” The International Communication Gazette (2012), Web.
- Laws, Eric, H. W. Faulkner, and Gianna Moscardo. Embracing and Managing Change in Tourism: International Case Studies. London: Routledge, 1998, Print.
- Marketwatch. “Video on Demand Deal Bars Ad Skipping: WSJ.” Marketwatch, Wall Street Journal, n.d., Web.
- Russell, Christina L. “Walt Disney Finance.” Strategic Financial Management, n.d., Web.
- Spangler, Todd. “Disney CEO Iger: Netflix Will Not Be Able to Corner Internet Video Market.” Variety, 24 Sept. 2013, Web.
- Walt Disney. “Investor Relations.” The Walt Disney Company, Walt Disney, Web, 25 Oct. 2013.
