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Walt Disney Report
Walt Disney Report
February 25, 2020, 4:15 am. Bob Chapek - being named Disney’s new CEO
The Walt Disney Company is one of the world’s largest media companies.
a lot of questions about his future vision for Disney
$60 billion in annual revenues in 2019
Disney is active in a wide array of business activities –
1. Movies
2. amusement parks
3. cable and broadcast television networks (ABC, ESPN, and others)
4. cruises
5. retailing
6. streaming
The New CEO will need to implement multiple strategic initiatives that were put in place by
Bob Iger –
Disney closed its $71.3 billion acquisition of 21st Century Fox’s entertainment assets,
or its largest acquisition ever, in March 2019
As part of the Fox and other deals, Disney gained controlling ownership of Hulu, a
streaming service
also rolling out its own new streaming service called Disney+ in November 2019,
thus moving into the direct-to-consumer space
Iger also announced that Disney will pull most of its movies from Netflix by 2020
managing the growing portfolio in Disney’s Studio Entertainment division, as it
operates more than seven movie studios, including Walt Disney Pictures, Walt
Disney Animation, Pixar, Marvel, Lucasfilm, 21st Century Fox, Fox, and Blue Sky.
Disney has outlined plans for roughly a dozen movies each year through 2022.
Iger’s Tenure
Disney has performed well in terms of stock price appreciation and financials
Strategic Leadership
WALT DISNEY
the entrepreneur, animator, and film producer
had the corporate vision, values, and perseverance
In 1923, Walt moved to Los Angeles joined forces with his brother Roy, and they founded
Disney Brothers Cartoon Studios.
Walt was an influential leader with a strong work ethic and lofty values.
He ran the company as a flat, nonhierarchical meritocracy.
He held employees to high professional standards emphasizing creativity, quality, teamwork,
communication, and cooperation.
Even when facing financial pressure, Walt refused to compromise on quality and worked to
constantly reinvent his company.
One such reinvention was his idea of building an entertainment theme park, a testament to
his commitment to having fun
Disneyland’s success resulted in financial stability for the company
Disney’s different business lines, TV, music, studio, merchandise licensing, publications,
comic strips, magazines, art corner shops, and Disneyland create synergies by leveraging
intellectual property (IP) across complementary business segments.
MICHAEL EISNER
In 1984, Michael Eisner was appointed CEO of Disney
He continued Walt Disney’s emphasis on creativity, branding, and synergies
The media conglomerate’s revenues increased from less than $2 billion to more than $25
billion,16 and its market value from $1.8 billion to a high of $80 billion
Eisner believed creativity was the result of creative conflict out of which the best ideas
would emerge.
focused on strengthening the Disney brand through synergies across business units.
he established a centralized corporate marketing function to oversee corporate-wide mar-
keting and branding activities.
Eisner started by revitalizing Disney’s television programming and animated films
In parks and resorts, Eisner expanded and improved Disney theme parks to increase
profitability, growth, and synergies with other business lines
In consumer products, Eisner’s strategy of “retail as entertainment” doubled the average
rate of retail sales per square foot in 1992.
by the late 1990s, Disney financials deteriorated, and this was partly attributed to Eisner’s
heavy-handed management style, and strategic imperatives of creativity, branding, and syn-
ergy
The intense focus on branding also caused displeasure among Disney fans who felt that
branding is what you do when you lack original, high-quality content.
ROBERT IGER
appointed The Walt Disney Company’s CEO in 2005
established a new vision and strategic direction for Disney
he articulated three pillars of strategy that he felt were aligned with Walt Disney’s original
intent, that is invest in:
1) creative content,
2) technology innovation
3) international expansion
Iger envisioned a Disney that uses advanced technology to produce creative content with
global reach
Iger proceeded to make some major changes in the company-
beginning with reconciliation with board members to end conflicts.
Iger worked to change the perception within Disney of technology as a threat, to
viewing it as an opportunity
decentralized decision making by empowering individual business, while
reducing the role of Disney’s central strategic planning
articulated a corporate strategy to pursue billion-dollar franchises, which generally
begin with a big movie hit and are followed up with derivative TV shows, theme park
rides, video games, toys, clothing such as T- shirts and PJs, among many other spin-
offs
Disney now produces about 10 movies per year, focusing on box office hits.
implemented his strategic vision to build billion-dollar franchises by making a number of
high- profile acquisitions
led a group of about 20 executives whose sole responsibility is to hunt for the next billion-
dollar franchise. This group of senior leaders decides top-down which projects are a go and
which are not.
Coming out in November, Frozen II may help to take the top-line revenue figure above $10
billion—which is staggering sum for big screen movies alone.
Disney has performed well in terms of stock price appreciation and financials
STUDIOS ENTERTAINMENT
This segment generated $10 billion and 19 percent growth over the prior year in 2018,
which, in part, reflects contributions from acquisitions.
this segment produces and acquires live-action and animated movies, in addition to musical
recordings, and live stage plays
The company distributes films under the Walt Disney Pictures, Pixar, Marvel, Lucasfilm, and
Touchstone banners.
Consumers are switching from watching cable TV to viewing content online via streaming services
such as Netflix, and other inter- active media.
Competition
Comcast, AT&T (Time Warner and HBO+), National Amusements (CBS and Viacom) and Sony,
Amazon, Apple, and Netflix
Disney has a large market capitalization (over 230 billion).
new competitors are larger in terms of market capitalization (Amazon $850 bil- lion and
Apple $1 trillion), and Apple has over $210 billion in cash on hand
Disney+, relies on Amazon Web Services for cloud services
Disney’s Media Network segment competes for viewers, sale of advertising time, and
acquisitions of sports and other programming
1. for viewers, sale of advertising time, and acquisitions of sports and other programming.
2. Its primary competitors for an audience are other television and cable networks, TV stations,
DVD and Blu-ray formats, and the Internet.
3. For advertisers, competition is from TV networks, radio and TV stations, MVPDs, advertising
media such as newspapers, magazines, billboards, and the Internet.
4. Competition for acquisition of sports and other programming is intense, especially for
Disney’s ESPN which faces increasing competition from the sports channels of 21st Century
Fox, CBS, and Comcast’s NBC Universal segment
The Parks and Resorts segment competes for consumers’ leisure time
Primary competitors include other forms of entertainment, lodging, tourism, and recreational
activities.
Specific competitors for theme parks and resorts include Six Flags Entertainment, Comcast, Cedar
Fair, SeaWorld Entertainment, and Universal Studios
The Studios Entertainment segment competes with all forms of entertainment including companies
that provide films, home entertainment products, pay TV, music, and live theatre.
There is also competition for performing talent, advertisers, and broadcast rights. Primary
competitors in this area include AT&T (Time Warner), Sony, and Viacom.
The Consumer Products & Interactive Media businesses compete with other licensors, retailers and
publishers of character, brand, and celebrity names
Competition also arises from licensors, publishers and developers of game software, online video
content, and websites
STREAMING WARS
Entry into streaming service is generating cutthroat competition with established players
such as Netflix and Hulu (now fully controlled by Disney), but also new entrants such as
Apple TV+, AT&T’s HBO MAX, NBC Universal’s Peacock (owned by Comcast), YouTube
Premium, as well as Disney’s new streaming services Disney+ and ESPN+.
In 2019, the clear market leader in streaming services is Netflix with over 150 million
subscribers worldwide, thereof, 61 million in the United States. The revenues for the media
services provider in 2019 were $16 billion, and its market cap stood at $150 billion
new entrants such as Apple TV+ are pricing their services aggressively ($4.99 a month vs.
$12.99 a month for basic Netflix subscription)
Amazon offers its Instant Video service to its estimated 100 million Prime subscribers ($119
a year or roughly $10 a month), with selected titles free. In addition, Prime members receive
free two- day shipping on Amazon purchases (with one-day shipping announced in 2019)
Hulu Plus ($7.99 a month), a video-on-demand service, has some 25 million subscribers. One
advantage Hulu Plus has over Netflix and Amazon is that it typically makes the latest
episodes of popular TV shows available the day following the broadcast; the shows are often
delayed by several months before being offered by Netflix or Amazon
A joint venture of Disney (67 percent ownership, but 100 percent voting rights) and
NBCUniversal (33 percent), Hulu Plus uses advertisements along with its subscription fees as
revenue sources
Google’s YouTube with its more than 1 billion users is evolving into a TV ecosystem,
benefiting not only from free content uploaded by its users but also creating original
programming. Google offers its ad-free service YouTube Premium for $12 per month, which
allows users to download content such as videos and music for later, off-line use
Apple has over 1 billion devices worldwide such as iPhones and iPads as an installed base
where users can enjoy its services such as Apple TV+ and Apple Music
Challenges
an acquisition-led growth strategy may not be sustainable
An increased reliance on billion-dollar franchises also reduces originality
Disney relies on a formulaic recipe of success: a blockbuster hit followed by derivative
shows, merchandise, and other spin-offs
While nearly half of Disney profits come from its TV networks ESPN, ABC, and others,63 the
media industry is being disrupted, as consumer preferences to streaming content via over-
the- top services such YouTube, Netflix, Apple TV+, Sling TV, and other services
While ESPN continues to do well, the cost of rights to show the big sporting events live has
escalated dramatically in recent years. ESPS is losing subscribers as many consumers “cut the
cord” (that is cancel their cable subscription), or never subscribe to cable in the first place.
This trend also affects Disney’s other TV properties, including ABC
Disney is in the process of launching its own streaming services, Disney+ and ESPN+, there
appears to be room for only a few, if not just one or two winners in a competitive landscape
where Apple, Netflix, Comcast, AT&T, and Amazon are all chasing after the same costumer.
The question is for how many different services will the average consumer in the United
States and else- where pay for?
“I sure hope that the force is with me, and I can create some more magic for Disney going
forward
Recommendations
Focus on success in international markets
focus and resolve the issues in organisation
continue innovations
needs to convert Tv into internet services
adopting new technologies competitors used
issue – decreasing no. of subscribers
needs to maintain quality along with affordable price