2. Corporate Strategy
Centered on:
– Creating a high-quality family content
– Exploiting technological innovation to
make entertainment experiences more
memorable
– International expansion
* Disney is employing both a growth and
differentiation strategy
2
3. Walt Disney Company’s Portfolio
• Media
• Parks and Resorts
• Studio
• Consumer Products
• Interactive Media
3
4. Media Industry
Threats:
• Social Media and video on mobile devices
• User Generated Content
• Fragmentation
• Shift from traditional media outlets
Opportunities:
• Social Media
• Combining social media with traditional media for
expanded footprint
4
5. Parks and Resorts
Threats:
• High competition in U.S. Markets (Busch
Entertainment)
• Weak economy
• High unemployment
Opportunities:
• High barriers to entry
• Technology advancement
• Threat of substitutes are minimal
• Niche market for theme parks and resorts
5
6. Studio Entertainment
Threats:
• High competition
• Weak economy
• High unemployment
• Social Media
• Increasing box office prices
• Shorter time in box office
Opportunities:
• High barriers to entry
• Technology advancement
• Low consumer bargaining power
• Improved CGI and 3D capabilities
• Social Media
6
7. Studio Entertainment
(cont’d)
Global Box Office - All Films (US$ Billions)
US/Canada
International
$40
$32.6
$35
$34.7
$31.6
$27.7
$29.4
$30
$25
23.9
$20
18.8
21.0
22.4
(69%)
18.1
(66%)
$15
(65%)
(69%)
(64%)
$10
$5
9.6
10.6
10.6
10.2
10.8
2008
2009
2010
2011
2012
$0
7
8. Consumer Products
Threats:
• Consumer products industry is highly competitive
• Weakened global economy has significantly impacted bottom
lines
• Technological impacts
• Many available substitutes
Opportunities:
• High supplier power
8
9. Interactive Media
Threats:
• Low barriers to entry
Opportunities:
• Technology
• Inexpensive for consumers in a weakened economy
• Social Media
• Growing market
9
10. Long-Term Attractiveness of
Portfolio
Media - Attractive
Parks and Resorts – Attractive
Studio/Motion Picture – Neither Attractive nor Unattractive
Consumer Products – Unattractive
Interactive Media – Attractive
Overall the industries represented in
Disney’s portfolio are attractive.
10
11. Competitive Strength
Media Networks
• Business unit operates domestic and international
cable networks, ABC Television network, television
production, U.S. domestic TV stations
• Advancing in the global market with filmed
entertainment
• Most TV stations are number one in their market
• Very strong news brands with 238 affiliates that reach
99% of U.S. households
• Radio Disney is offered through multiple platforms
including SiriusXM, iTunes, and mobile phones
• Utilizing technology to reach viewers via apps for
mobile devices and online viewing
• Operating income increased 29% from 2009 to 2011
11
12. Competitive Strength
Parks and Resorts
• Disney has parks on both the west coast and east coast of the
U.S., as well as a cruise line with ports on both U.S. coasts
• Disney has ownership in other parks and resorts in the global
market
• Inclusive facilities so visitors never need to leave the area
which results in high revenues due to hotel lodging and food
sales
• All parks and resorts tie back to the themes of popular movies
produced by Disney
• Disney has the capital resources to expand attractions when
necessary
•
Two new cruise ships were deployed due to the existing fleet
operating at full capacity
12
13. Competitive Strength
Studio Entertainment
• Business unit produces live-action and animated
movies, pay-per-view and DVD home
entertainment, and Disney on Ice performances
• Pixar and Marvel were purchased by Disney for use
of technology as well as character use
• Disney knows exactly how many of each branded
movies will be produced each year: one animated
Pixar and Disney film, two Marvel films and six to
eight live-action Disney films
• Operating profits grew about 250% after
acquisition of Marvel
13
14. Competitive Strength
Consumer Products
• Business unit includes Disney Stores and
businesses focusing on merchandise
licensing and children’s books and
magazine publishing
• Global with 208 Disney Stores in North
America, 103 in Europe, and 46 in Japan
• Publishing includes print format as well as
electronic format that is viewed on mobile
or tablet devices
14
15. Competitive Strength
Interactive Media
• Business unit produces video games for
multiple devices as well as Disney’s
websites
• Acquired Playdom, Inc. which creates
online games for social networking
15
17. Strategic Fit: How do Disney’s
businesses build off each other’s
successes?
• Branding is king – leveraging to the max
• Costs incurred long ago by the Studios to develop
characters like Mickey Mouse and Cinderella now
continue to generate returns in hotels/cruise
ships, gaming/video production, theme parks
• Gaining Expertise in technology – also to be
shared, no borders, to catch up and potentially
overtake competitors
• Assets are deployed across all business lines to
drive shareholder value. Let’s look at three
examples.
18. Disney Growth by Strategic
Business Unit
FYE 9-28-2013
Revenue %
45%
Growth %
31%
26%
13%
8% 9%
9%
5%
3%
2%
Media Networks and Resorts
Parks
Studio Entert'mnt
Consumer ProductsInteractive
18
19. Parks & Resorts: An example of
Strategic Fit at Work in China…
19
22. How Strategic Fit Informs
Disney’s Shanghai Plan
(http://skift.com/2013/11/08/how-disney-plans-to-build-a-brand-in-china-before-shanghai-park-opening)
There are risks: “Disney still has a far way before Mickey’s
famous ears are recognizable by every child and parent in China”.
Disney CEO Robert Iger addressed the issue during the
company’s 4th quarter call on Nov 7, 2013. He cited the
synergies of the Disney empire in addressing these risks:
LEVERAGING MEDIA In CHINA:
• Relying more on its mobile and online platforms than TV due
to national restrictions.
• The company is planning to increase marketing once park
attractions based on cultural or media interests are
announced. Chinese culture will be wedded to Mickey.
22
23. Disney’s Shanghai Plan, cont’d
(http://skift.com/2013/11/08/how-disney-plans-to-build-a-brand-in-china-before-shanghai-park-opening)
RETAIL: will also help Disney build a buzz before the 2015 opening .
“We’re also opening or developing our first big store in China and
that is actually in Shanghai, which will be used before it opens sort
of a quasi visitor center to let people know more about the park
itself,” said Iger. “Once the park opens we actually believe that we’ll
have a significant halo effect on the brand. There will be a lot more
interest in and appreciation of Disney stories and characters.”
DISNEY’S CRUISE LINE:
represents another opportunity for tapping into the Chinese
market. Iger says the company currently has no plans of adding to
its fleet or expanding itineraries; however, it could become an
option when Asia opens up to the family cruise business.
23
24. Another example of
Strategic Fit: Consumer
Products (9% growth) In
August 2013, Disney
Introduced its latest
“COLLECTION” – Disney
Fairytales Designer
Collection.
“Limited to an edition of 6,000
of each of the five couples
globally, each Doll Set retails
for $129.95”.
And what else? Apparel and
home décor, of course….
24
26. Delivering on Strategy: Financial Performance
• Disney’s mission focuses heavily on financial performance:
“The Walt Disney Company's objective is to be one of the world's leading producers and
providers of entertainment and information, using its portfolio of brands to
differentiate its content, services and consumer products. The company's primary
financial goals are to maximize earnings and cash flow, and to allocate capital toward
growth initiatives that will drive long-term shareholder value.”
-thewaltdisneycompany.com/investors
43,000
EPS Trend 2010-2012
Net Income Trend 2010 - 2012
Revenue Trend 2010 - 2012
7,000
$3.50
6,000
$3.00
5,000
$2.50
4,000
$2.00
3,000
$1.50
2,000
$1.00
36,000
1,000
$0.50
35,000
0
$0.00
42,278
42,000
40,893
41,000
$MM
40,000
39,000
38,063
38,000
37,000
2010
2011
2012
2010
2011
2012
2010
2011
2012
26
27. Strategic Business Unit Contribution
2011
Amounts in $MM USD
MEDIA
Operating Expense
Selling & General Expense
Depreciation & Amortization
Other
OPERATING INCOME
STUDIO
18,714
Revenue
PARKS &
RESORTS
11,797
10,376
2010
CONSUMER
INTERACTIVE
MEDIA
MEDIA
PARKS &
RESORTS
STUDIO
CONSUMER
INTERACTIVE
MEDIA
6,351
3,049
982
17,162
10,761
6,701
2,678
761
7,383
3,136
1,334
732
9,888
6,787
3,469
1,236
581
2,539
1,696
2,465
794
504
2,358
1,517
2,450
687
371
237
1,165
132
105
54
222
1,139
89
78
43
1,318
693
677
(234)
(584)
6,146
(438)
1,553
618
816
(308)
Total Operating Income from SBUs
8,825
7586
CONTRIBUTION
2011
2010
70%
68%
18%
17%
7%
9%
9%
9%
-3%
-3%
MEDIA
PARKS & RESORTS
STUDIO
CONSUMER
INTERACTIVE MEDIA
5,132
• Media by far the strongest strategic unit
• Parks & Resorts, Studio and Consumer are all
effectively leveraging the Media / Broadcast unit
• Disney has not effectively capitalized on Interactive
Media. Why?
27
28. Strategic Business Unit Contribution
The roll out of the “Disney Infinity” game has had a massive impact
http://thewaltdisneycompany.com/sites/default/files/reports/q4-fy13-earnings.pdf
28
29. Interactive Media Sales
• Disney’s fiscal year runs October – September
• Anticipated holiday sales of “Infinity” may take unit to profitability
Interactive Media Revenue Trend $MM
2010
2011
2012
2013
761
982
845
1,064
Interactive Media Revenue Trend
1200
1000
800
600
400
200
0
2010
2011
2012
2013
29
30. Interactive Media Operating Income
• Disney is erasing the huge operating losses in the division slowly
• Infinity’s Q4 release led to the first profitable quarter in years for the division
2010
-234
Operating Losses
2011
2012
-308
-216
2013
-87
Operating Losses Last 4 Years $MM
0
-100
2010
2011
2012
2013
-200
-300
-400
30
31. Interactive Media Sales Forecasts
• Currently not providing guidance
• Key Factors for Sales:
• Holiday Season for “Infinity”
• Leveraging the Lucas Arts and Marvel intellectual properties
• New Platforms: Playstation 4 and Xbox One
31
According to a 2011 IAAPA U.S. survey of adults: 25 percent of Americans surveyed visited an amusement park within the last 12 months, with 43 percent of Americans indicating they plan to visit an amusement park within the next 12 months.64 percent of Americans reported that their last trip to an amusement park was a day trip and 27 percent say it was an overnight trip.28 percent of Americans said they would be interested in working for an amusement company.- See more at: http://www.iaapa.org/resources/by-park-type/amusement-parks-and-attractions/industry-statistics#sthash.115QNkuq.dpuf
-Media - Projected to grow 18.7% -Parks and Resorts –-Studio and Motion Picture Industry is expected to remain relatively stagnant over the next 5 years. -Consumer Products is a highly competitive industry. One reason for a significant weakness is due to a reduction in household residual income. Technology and the growth of non-traditional channels (warehouse clubs) are also a major challenge to the consumer products industry. -Interactive Media Projected to grow 105% between 2013 and 2017. Interactive Media has a large number of opportunities for growth due to improved and ever changing technology.
The studio entertainment business unit produces live-action and animated movies, as well as pay-per-view and DVD home entertainment in which,Over the last several years, disney acquired Pixar and marvel for use of their technology as well as charactersThis alone is s a huge advantage over competiors since, considering that just last week, the Marvel Movie Thor: The Dark Age, set a marvel record of $86 million on its opening weekend
The 9-cell industry atrractiveness, business strength matrix shows at a glance which of disney’s business units should have priority. The size of the circle shows the current financial value of each business unit and the blue shaded portion shows disney’s current market shareAs you can see in general, the more market share the larger the circle and parks and resorts is disney’s leading business unit.But The interactive media business unit seems promising. Disney currently has strong competitive position in the area that is getting more attractive as technology advances with a great amount of room for growth. Who knows, maybe in the future, visits to the parks will just be through interactive media.
In the slides that follow, how Disney leverages its corporate assets to build shareholder success is highlighted in each of its 5 major business lines. You will see that while Disney’s historical strengths continue to thrive, Disney is about to break out into the digital environment, with its assets fully engaged in converting customers to Disney interactive games, and a future building on “personalized, on-demand” entertainment.
We’ll discuss the relative strengths of these strategic business units – history and future at Disney. The tremendous growth (from a very small base – 2%) in Interactive Revenues is a key strategy for Disney. The company has spent dollars in acquisitions in the arena to establish itself, and not get left behind. Those acquisitions appear to be paying off.
Disney will be opening this new resort, with China as a partner, in 2015. Millions of people will be within a 3 hour drive of this park, but Mickey Mouse and Donald Duck are not part of the culture in China, and this presents a problem for Disney – how to get people to come? Tokyo Disneyland and Hong Kong Disneyland has given the company experience in the far east – so they will use these lessons to make a big splash in China.
The size of the Shanghai resort will be more like DisneyLand in California; not the size of Orlando’s Disney World. Disney will own 44% and the Chinese Government will own the rest.
China’s deserted, fake Disneyland was begun in the late 1990’s and never got off the ground. This was located on about 100 acres, and was never completed. Fields are going back to the farmers. Disputes with property owners doomed the developers to failure. Disney has much more experience than that – and knows how to roll this out – in a whole different technological era.
Classis Disney – they exploit every opportunity to cross-sell.
A final example of Strategic Fit of Disney products – Interactive Media – 26% growth in FY 13. This review sums it all up… brand marketing…. Family friendly….. Using technology developed by another company…
The Media Networks group drives the majority of the business and supports the marketing efforts of all the other SBUs. Media is by far the most important strategic unit of DisneyParks and resorts are a solid contributor to overall income. Their contribution has remained essentially flatStudio productions is showing year over year decline in operating income. This is in spite of a reduction in expenses for the division. Consumer products contribution remained flat year over yearInteractive Media is the problem child of the SBUs. Operating losses in the unit have increased 74mm year over year
The Media Networks group drives the majority of the business and supports the marketing efforts of all the other SBUs. Media is by far the most important strategic unit of DisneyParks and resorts are a solid contributor to overall income. Their contribution has remained essentially flatStudio productions is showing year over year decline in operating income. This is in spite of a reduction in expenses for the division. Consumer products contribution remained flat year over yearInteractive Media is the problem child of the SBUs. Operating losses in the unit have increased 74mm year over year
