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Walt Disney Case

Walt Disney case for Capstone Final. Enjoy!~ good luck !

Mary Wang

on 11 April 2014

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Transcript of Walt Disney Case

International and domestic
Disney Channel Worldwide
ABC Family
Media Networks
Evaluate Disney’s corporate
strategy during the Walt Disney Era.
What role did Disney’s businesses play in its success?
Have A Magical Day
The Entertainment King
Anthony Jackson Amaid Rifai Arlanna Stowes Dustin Samko Mary Wang & Ryan Schoch
Walt Disney –
New distribution channels:
direct-mail & catalogs
Disney's Theme Park Division:
EURO DISNEY (Disneyland Paris)
Euro Disney, opened in 1992. 4,800 Acres outside Paris
49% owner ship = Disney. Rest Euro Disney S.N.A. Shares
Disney takes: 10% Ticket sales. 5% Merchandise sales.

French warns of "Cultural Chernobyl"
Solutions: President = Former French Lit professor
Required compromise b/t by staff (shave) & guests (wine)

Project fine tuning:
Admission prices sashed, workers laid-off, no management fees for 2 years
Adamant about maintaining the Disney formula for family recreation

Tokyo Disneyland = Evidence of Disney universal appeal
Defied Critics & Performed well
100 millionth customer: 1992

Disney adds attractions & expand hotels

DISNEY RESORT EXPANSIONS: Anaheim. Orlando, Tokyo & Paris

Disney World adds:
Pleasure Island, Typhoon Lagoon, Spalsh Mountain

1988-1994= cost > $1 billion

Pretty Woman through Touchstone Studio

Hollywood Pictures: 1990, 3rd Disney studio

Acquired Miramax: 1993

Film volume: 18 films (1988) to 64 films (1994)
1992: $50 million to aquaire a NHL expansion team


Major cross-market opportunity

80% money spend on NHL
merchandise = "DUCKWEAR"
1995: Disney buys ABC for $19 BILLION
largest entertainment company in US

-ABC television network
-ABC radio network -ESPN, ESPN2
-newspapers & > 100 periodicals

20% debt ratio to 34% debt ratio
Merger= King Kong & Godzilla

1 year after... culture clash = high culture of Disney

ABC executives uncomfortable with cross-promoting brands

Which divisions provided greater synergy than others? Why and how?
How did Michael Eisner and top management from the 1980s onward create value for Disney shareholders?

In what areas have they failed to create value?

As of the end of the case, should Disney divest any of its divisions? If so,which one?

What should be the criteria for deciding whether or not a division should be divested?
“I only hope that we never loose sight of one thing—that it was all started by a mouse”
At... 16 he lied about his age during WWI so that he could serve with the Red Cross.

At... 17 he created a cartoon business in
Kansas City that failed.

In 1923... he moved to Hollywood with his brother and created Disney Brothers Studios
His first cartoon was Oswald, The Lucky Rabbit 1927.
His distributor tried to shut him down buy stealing his animators.

He was going to hire animators, but realized in the small print that his distributor owned the rights to Oswald
In trying to create a new character he modified Oswald ears and other Minor changes and created a Mickey Mouse.

To create interest in Mickey Mouse he
synchronized sound with the cartoon.
“Steamboat Willie 1928”

Mickey Mouse became an international sensation.

They were still strapped for cash so they began to license Mickey Mouse for the cover of a pencil tablet.
The Disney brothers ran their company as a flat non hierarchical organization.
He emphasized teamwork, communication, and cooperation.
Everyone used their first names and had no titles.
After winning six academy awards and successfully introducing new characters, Goofy and Donald Duck .

He realized that cartoon shorts could not sustain the studio indefinitely.

He felt as the money lays influent in feature films.
In 1937 he released Snow White and the Seven Dwarves.

With the success, his goal was to release two films per year,plus a large number of shorts.

With the goals the company scaled up with hiring new employees

New studio in Burbank

Company went public in 1940
To create quick income, they made the movie Song of the South mixed live action and cartoon
After WWII still in financial trouble, his
next movie Cinderella took a long time
to create 1950
Also created Disney Music Company to control copyrights and sign new talent.
Plus in 1950 created first TV special. 20 million
viewers on only 10.5 sets in America.
With Treasure Island in 1950
entered the live action movies.

Started to average 3 movies a year. Mary Poppins,
Old Yeller, and Swiss Family Robinson.

Created Buena Vista Distribution. Saved 1/3 of gross

Avoided high salaries by developing studio’s
with own pool of talent.
1955 Disneyland
Biggest risk took out millions in loans
Build park for the whole family
Parks “neither amusing nor clean, and offered nothing for Daddy”
Financial performance deteriorated incurred heavy cost to finish EPCOT
Walt Disney World
Opened in house travel company
Live shows Disney on parade, Disney on Ice.
In 1984, Eisner was named Disney’s chairman and CEO.

He committed himself to maximizing shareholder wealth.

He believed in managing creativity.

Thus he created tension between the creative and financial forces of the company.
Revitalizing TV and movies
Launched the Disney channel.

In 1986 he created the Disney Sunday movie on ABC.

They produced the Golden Girls, Siskel and Ebert at the movies,
and live with Regis and Kathy Lee.

They created touchtone's first rated R movies, “Down and out in Beverly hills”
Twenty-seven of Disney’s next 33 movies were profitable and six
of them earn 50 million each, including “Three Men and a Baby”
and “good morning Vietnam”

In order to expand, they wanted to create an animated feature and invested 30 million in computer animation
production system (CAPS)

In 1988, they spent 45 million on
“Who framed Roger Rabbit” and it grossed
220 million and other licensing agreements.
Maximizing theme park profitability
They updated and expanded attractions at the theme park, including captain EO starring Michael Jackson in 1986

Attendance building strategies designed to generate rapid revenue and profit growth, including national TV ads, lifted restrictions on number of visitors permitted to the park, open Disneyland on Mondays, and raised ticket prices.
Coordination Among Businesses
As business units expanded after 1984, overlaps among them began to emerge thus creating synergy.

Promotional campaign with corporate sponsors needed to be coordinated with similar initiatives by other Disney businesses.
For example, allocation of minutes of free advertising granted to Disney during the Disney Sunday movie.

In 1987, a corporate marketing function was installed to stimulate and coordinate company wide marketing activities.

A marketing calendar was introduced, listing the next six months of planned promotional activities by every U.S. division.

There were monthly meetings of the twenty divisional executives to coordinate important events, such as snow white’s 50th birthday anniversary and mickey’s 60th birthday
Disney's business played a direct and strategic role in its success as a business.

• Disney's first success was “Oswald the Lucky Rabbit.”
• Distributor owned the copyrights to Disney Brothers work
• Attempted to shut Disney out of the Oswald franchise
• Modified Oswald's appearance and creates “Mickey Mouse”

In the Beginning...

• To create universal timeless family entertainment
• Strong belief in the importance of family life
• Created an experience that families could enjoy together
• “You're dead if you aim only for kids. Adults are only kids grown up anyway.”

Early Philosophy

• Initial failure, attracted little interest
• First ever use of synchronized sound in “Steamboat Willie” 1928
• Overnight sensation internationally
• Still strapped for cash and worried about brand equity
• Licensed only to the “best” companies to generate cash
• 6 Academy Awards
• Introduction of new characters, “Goofy” and “Donald Duck”

The Rise of Disney
• After success of “Snow White” goal of 2 feature films per yr
• Company size scaled upward
• One Hour in Wonderland 1950 had 20 million
viewers, only 10.5 million TV sets in the U.S.
• Spans outward into live-action movie
• 1954 – Mickey Mouse Club
• 1955 – Disneyland amusement park major

Reaching New Heights
• Corporate sponsorship was exploited to minimize the
cost of upgrading attractions and adding exhibits.
• Conservation of capital by licensing food and concessions
• Entering different entertainment markets (music, live action, theme park, etc)
• Live Action film industry
• Buena Vista Distribution
• Walt Disney Music Company
• Expanse of television broadcasting through ABC
Corporate Strategies
After reviewing the content in this case, it appears that the pattern shows that Disney Theme Parks provide the highest level of popularity while the movie industry provided the greatest level of Synergy...
• The 1980s were a time of financial decline for Disney as a whole
• 1980 – 1983 Disney went through a huge financial decline to finish EPCOT and a cable channel called, The Disney Channel

Declining Financial Performance

• Touchstone was established to target the teen/adult audiences and was a success
• Decline in creativity in film
• The Film division itself was failing fast and managers were continually asking themselves, “What would Walt have done?”
• Recovery under Eisner

Film Division
• Eisner assists a turnaround for the movie division in 1984 and Disney regain success
• Grow Disney brand and preserve values of quality, creativity, entrepreneurship, and teamwork.
• Eisner viewed “managing creativity” as Disney's most distinct corporate skill
• Rebuild Disney TV and movie industry
• Following Down and Out in Beverly Hills 27/33 movies were profitable, and six of them earned over $50M each.

Eisner Contributions
Theme Park Division
• Remained at a constant rate of popularity
• Updated and expanded attractions within the park
• Lifted restrictions to # of visitors in the park
• Increased ticket prices, customers felt as if they received value for their money


–Mickey does not use drugs, get old, or divorced. Disney controls the characters completely.


–all the profit Mickey Mouse makes is retained by Disney.


–the childhood experiences that these characters provide would be hard to replicate (brand strength).

Characteristics &
Values Portrayed
- Successfully created emotional attributes of the brand -- Christmas, holidays, unique events, special experiences.

- Created the real values of the Disney brands
ex. Mickey Mouse and other animated cartoons.

- Parents never had to worry about their children watching Disney movies

- Disney is loved by both parents and children

Tactics of Success
• Investor Sid bass purchases 18.7 percent of Walt Disney.

• Eisner Vision

• Building a Brand

• Revitalizing TV and movies
• Disney Animation
• Maximizing Profitability at The Theme Parks
• Expanding into new Businesses
• Consumer product division
As Disney entered new businesses, it increasingly faced the prospect of damaging its brand.
- Most publicized controversy ABC show

-1997 disclosure of title character being a lesbian

-Southern Baptists organized a boycott of all Disney products : Disney had departed from “traditional family values.”
-Arab-Americans decried what they felt were stereotypical portrayals in the movie Aladdin.
- Catholic groups objected to the Miramax movie Priest (1994), which featured a gay cleric
-Animal rights activists protested Disney’s treatment of animals at the Animal Kingdom theme park
-Disney’s Hong Kong theme park had been delayed for two years because of movie Kundun (1997)

-About the Dalai Lama that the Chinese government found objectionable.
- Disney was hamstrung by its wholesome image.

-Disney Channel ranked a distant third in ratings for kids aged 2 to 11, behind Nickelodeon
and Cartoon Network.

-Exploited Disney’s emphasis on wholesome programming based on myths, history, and fairy tales by putting on more
contemporary shows.
Disney sought to generate greater international sales, especially

in Europe and Japan.
“If we can drive per capita spending levels on Disney merchandise in Britain, France, Germany, Italy and Japan to 80% of the U.S. level, it would generate $2 billion a year in incremental annual revenue.”
“If there’s one single realm that can put our company back on the growth track, it is the overseas market,”
-1999, Disney generated about 21% of its revenue from abroad

-1999, consumers in Europe spent 40% as much per capita on Disney products as
those in the United States.

-In Japan, the figure was 80%.
-Disney planned to better integrate its overseas operations.
-Disney's major initiatives involved the Internet and TV.

-Saw the Internet as a possible distribution channel for its film library and its sports and news programming, among other content.
“Our goal is to lead in this space because we know that soon it will be where entertainment in the home consolidates,”
- Eisner.
Disney made a major push onto the Internet, with uneven results...
-1996, Disney began selling its products online
-1997, failed in its launch of a subscription service: the Daily Blast
-1999, Disney merged its Internet assets with the search engine Infoseek.
-This entity operated Disney’s Web sites (Disney.com, ESPN.com, and ABCNews.com)
-Set up a portal : the GO Network (wwww.go.com)
-Traffic at Go.com lagged behind that of its rivals.
-2001, Disney shut down the Go.com, lays off 20% of its 2,000 Internet employees
-Disney would focus on e-commerce and on providing news and entertainment content through its individual Web sites.
-Between 1994 and January 2000, approximately 75 high-level executives left the company.

-Some observers wondered whether Disney was putting too much emphasis on controlling costs and thus driving away its creative talent.
“It’s not as fun a place as it used to be, It’s just money, money, money. The creative side doesn’t rule anymore.”
-Ryan Harmon, former Imagineer
-Other Disney executives cited Disney’s combative culture and Eisner’s increasingly autocratic management style as reasons for leaving.

-Eisner countered that Disney’s turnover was not unusual given the company’s size and success.
“Every headhunter head hunts Disney, Where would you go? You go to the companies that do very well. It may not be convenient, but it’s a compliment.”
A divestment strategy is the idea that a company can recover most of its investment in an underperforming business by selling it early before the industry has entered a steep decline.
Five major divisions of Disney

Theme parks & Resorts
Studio entertainment (film)
Consumer Products
Media Networks
Internet & Direct Marketing
- 1996 Disney took a step into the Internet.

- 1997 Disney failed at launching its internet subscription service called the Daily Blast.

- 1999 Disney merged with Infoseek and lanched a web gateway called Go Network.

-The portal was eventually shut down and Disney had to lay off 20% of its internet employees.

-Disney’s internet and direct marketing division has been costing the company money since it was launched in 1996.

-Disney’s push into the internet has been plagued with many failed attempts and should be divested.
"RETAIL-AS-ENTERTAINMENT" Disney stores (1987).
-evoked sense of "DISNEY SOUNDSTAGE"
-Targets Children, mix high-up collector items
Consumer products division: Books, Magazines
& Hollywood Records (1989)
Disney Press (1990)
-published children's books
Hyperion Books (1991)
-adult publishing label

Releases series of successful films:
- The Little Mermaid (1989)
-Beauty and the Beast (1991)
-Aladdin (1992)

Animated features
President Wells dies April 4, 1994

Eisner= chairman & now president.
quadruple bypass heart surgery

Katzenberg once Film Division Head now President

Katzenberg Leaves Disney
joins forces w/ Steven Spielberg & David Geffen = DREAMWORKS

Disney falls from 1st to third in TV network
ABC returns to #1 network with "WHO WANTS TO BE A MILLIONAIRE"

Disney financial performance deteriorates

Eisner's bonus cuts: $9.9 mil (1997) to $5 mil (1998) to $0 (1999)

New Approach to Film Making...
1994: Joe Roth replaces Katzenberg as head of Disney live-action movies

puts out big budget Star-driven "event" movies

1999: several bombs so scale back was needed
New Theme Park Strategies
Through 2000s, Disney = leader in theme parks
Strategy= tourists destination.
-more than 1 day stays
-more than 1 park per site

1996-begin selling products online
1997-Daily Blast subscription launch fails
1999-Disney merges with Infoseek
-operates all Disney websites
-set up Go Network portal
2001-Go Network shuts down
Major push into internet,
with uneven results
Disney dimensions program
-held every few months for 25 senior execs from every business
-"synergy bootcamp"
-cleaned bathrooms, cut hedges & played characters in park

Synergy group reports directly to Eisner

Synergy boosted revenue through cross-promotion

Disney scope
(greater international sales)
(Enter in new types of entertainment)

(Internet & TV)

Saved cost of Disney in ABC division & theme parks

LIMITS = effectiveness of movie tie-ins, little for toy sales

Affects of Synergy
Brand damaging:
-Movie Priest
-Poor treatment of Disney Animal Kingdom animals

Disney TV too traditional.
Rated Third for kids age 2 to 11
Eisner: important to find president with
-strong background in finance
-dispute mediation
-& labor relations

"gong show"
-weekly meeting of each division employees
-brainstorm new ideas

75 top executives left company
pressured for control cost and no creativity!

During WWII Disney stayed afloat by creating Fantasia

Training and educational cartoons for the government.

Re-released Snow White 1944
Did it make sense to expand into touchstone’s grown up (R-rated) movies?
Advantages & Disadvantages for moving into grown up movies:

• Turned around slumping movie sales, box office take only 4% in 1984

• 27 of the next 33 movies profitable, six earning more than 50 million each

• 1988, held 19% of the total U.S. box office share, leader in the market

• Risked alienating its core audience

• Risked damaging the brand
Whatever the arguments are, Walt Disney was moving further away from its traditional core of timeless family entertainment and the animated cartoons.
Did it make sense to acquire ABC?

- ABC undervalued.

- Severe competition from cable channels. e.g., Fox, Warner, Universal

- CapCities sports assets were undervalued.

- Disney overpaid at 22 times earnings and took on too much debt

- ABC network is a depreciating asset due to increasing competition

- Is purchasing distribution channel necessary? Great contents will always find a market

• Entering into live action
film industry represent
“related diversification.”

• Creating Buena Vista Distribution represent “forward vertical integration.”

• Creating Walt Disney Music Company represent “unrelated diversification.”
Why has Walt Disney so successful historically?

What made the company so successful?
Which corporate strategies
mentioned belong to which
corporate strategy category
(diversification, integration,
• The animation division had a much slower turnaround
• Animated films take much longer to produce
• Expanse of animation staff to speed up production process

Animation Division
Disney Embedded Values & Creative Ideas
• Walt Disney Core Business is centered upon family-orientated basic values

• Animated cartoons (film division) embedded Disney's family-orientated values

• Cartoon characters, unlike actors, could be perfectly controlled to avoid any negative


• Success stemmed from creating controllable brands with family-orientated values

• Successful brands expanded into hotel businesses, retail stores, and theme parks
Internet and direct marketing
Full transcript