Walt Disney Company

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Walt Disney Company

EARLY HISTORY
AFTER WALT: THE SIXTIES THROUGH
THE DISNEY DECADE
DISNEY IN THE TWENTY-FIRST CENTURY
FURTHER READING

Though the Walt Disney Company began as an independent production company producing cartoons distributed by other companies, in 2005 the company was one of the Hollywood majors and the second largest entertainment conglomerate in the world.

EARLY HISTORY

The history of the Walt Disney Company is bound up with the history of Walt Disney himself. Disney began cartooning in Kansas City with a series called Alice's Wonderland (1923), which included live action and animation. When he moved to California in 1923, he made arrangements with a New York company to distribute the Alice films. (The company considers this as its starting date.) Since Walt Disney (1901–1966) was a partner with his brother Roy (b. 1930), the company was originally called the Disney Brothers Cartoon Studio. However, the name was shortly changed to the Walt Disney Studio, which had moved to a location on Hyperion Avenue in Hollywood.

Beginning in 1927, the company developed an all-animated series called Oswald the Lucky Rabbit. After losing the rights to the character, Walt and his chief animator, Ub Iwerks (1901–1971), developed Mickey Mouse, the character that has come to symbolize the company itself. Mickey was featured in cartoons that utilized synchronized sound, the first of which was Steamboat Willie, which opened in New York on 18 November 1928. A long series of cartoons based on the popular character became the staple product of the company.

The company also began producing another series to feature sound and animation innovations. The Silly Symphonies series included "Flowers and Trees" (1932), the first full-color cartoon, which won the first Academy Award^® for Best Cartoon that same year. The Disney studio continued to win the award during the entire 1930s and most years thereafter. Disney also developed merchandising connected to its cartoon characters, beginning with a $300 license to put Mickey Mouse on writing tablets in 1929. Other products quickly followed, including dolls, toys, dishes, and so on, attracting funds that the company used to produce its innovative and popular cartoons.

The company expanded into feature-length animation with Snow White and the Seven Dwarfs (1937). Although there were doubts about the viability of feature length animated films, the project was an enormous success, becoming the highest grossing film of all time, until it was surpassed by Gone With the Wind (1939). The company continued to produce animated cartoons and features, including Pinocchio and Fantasia, both released in 1940. Many technical achievements were developed by the studio in the process, but the cost of the films strained the small company's resources, especially during World War II, when foreign markets were closed.

During World War II, Disney produced two films in South America for the US Department of State (Saludos Amigos [1942] and The Three Caballeros [1944]), as well as propaganda and training films for the military. After the war, the company repackaged some of its cartoons into features (Make Mine Music [1946] and Melody Time [1948]), as well as developing such live-action films as Song of the South (1946) and So Dear to My Heart (1949), both of which included animated segments. Disney'sTrue-Life Adventure series introduced a new style of nature film, which attracted numerous awards and accolades.

Disney's first completely live-action film, Treasure Island, was released in 1950, as was the classic animated feature Cinderella and the first Disney television show at Christmas time. After two Christmas specials, Disney moved further into television with the beginning of the Disneyland anthology series in 1954. Over the years this series eventually appeared on all three networks under six different titles. When The Mickey Mouse Club, one of the most popular children's series on television, debuted in 1955, it introduced a group of young performers called Mouseketeers. These television shows promoted Disney products and developed an outlet for new products.

Another opportunity to promote Disney products was provided by the creation of Disneyland, a theme park that opened on 17 July 1955, in Anaheim, California. Featuring characters and stories from Disney films, the park was immediately successful and has continuously added new attractions based on new Disney films.

The Disney Company also finally started its own distribution company (Buena Vista Distribution) during the 1950s, having depended until then on other distribution firms to deliver its cartoons and features to theaters. Also during the 1950s, the company released 20,000 Leagues Under the Sea; the first in a series of wacky comedies, The Shaggy Dog (1954); and a TV series about the legendary fictional hero, Zorro. The company also developed Audio-Animatronics, which were introduced at Disneyland beginning with the Enchanted Tiki Room. Walt Disney died on 15 December 1966, shortly after the release of Mary Poppins (1964).

AFTER WALT: THE SIXTIES THROUGH
THE DISNEY DECADE

By the 1960s, the company had developed a diversified foundation, with the Disney brand firmly established in a wide range of film products (live action and animation), as well as television, theme parks, and merchandise. The Disney firm also benefited from a policy of re-releasing its popular (already amortized) feature films every few years, reaping additional profits with minimal additional expenditures. For instance, Snow White and the Seven Dwarfs was re-released in 1952, 1958, and 1967, amassing an additional $50 million.

With some success, Roy Disney, Donn Tatum (previously, vice president of administration), and Cardon E. Walker (formerly in marketing) served as the management team until 1971. Film releases included The Jungle Book (1967), Winnie the Pooh and the Blustery Day (1968)—the beginnings of a franchise that would become especially lucrative during the 1990s—and The Love Bug (1968). Roy Disney saw Walt Disney World in Orlando, Florida, open in October 1971, but he died a few months later.

After Roy's death, Tatum moved into the chairman position and Walker became president. By this time, however, the company had become even more oriented to recreation and real estate than entertainment, exemplified by the theme park expansion (Tokyo Disneyland opened on 15 April 1983) and an ambitious plan to develop a mountain resort in Mineral King, California (which eventually failed).

Meanwhile, the film division was turning out mainly box-office duds, which fell far short of previous Disney successes. Part of the reason may have been the attempt to cling to the past, attempting to reproduce the classic Disney films and avoiding the changes that were being adopted by the rest of the industry. For instance, the management turned down proposals for Raiders of the Lost Ark and ET, The Extra-Terrestrial—both films that became huge box office hits. By the early 1980s, Disney's share of the box office was less than 4 percent.

Moreover, the company seemed to be moving into new media outlets at a leisurely pace. By the early 1980s, much of the film industry had started to adjust to the introduction of cable and home video as new opportunities for distribution of theatrical motion pictures, plus opportunities for new investments. The Disney company made a few moves in this direction, with the launching of the Disney Channel in April 1983, and an adult-oriented film label, Touchstone, inaugurated in 1984 with the release of Splash. However, by the mid-1980s, most analysts agreed that the company's management was basically "sitting on its assets," trying to "do what Walt would have done" and not doing a very good job of it.

Finally in 1984, Disney's uninspired management was challenged by a group of outside high-profile investors and eventually lost control of the company. A group of corporate raiders who recognized the value of the enterprise started accumulating huge blocks of Disney stock and jockeying for position to take over the company. In the end, the billionaire Bass brothers of Ft. Worth, Texas, invested nearly $500 million in Disney, preventing a hostile takeover and the possible dismantling of the company. Bass Brothers Enterprises ended up with nearly 25 percent of the Disney stock, enough to control the company and to appoint their own managers.

The new management team (which dubbed itself "Team Disney") was led by Michael Eisner (b. 1942), former head of Paramount, as chief executive officer. Team Disney also included former Warner Brothers's vice chairman, Frank Wells, who served as Disney's president and chief operating officer until his death in 1994. Jeffrey Katzenberg (b. 1950) (also from Paramount) became head of the Film Division.

Immediately after the team was put into place, it proceeded to break a strike at Disneyland and fire 400 Disney employees. Other cost-cutting measures and strategies were introduced, as discussed below. But the real evidence of Team Disney's achievements for Disney's owners is in the value of the company's stock and its balance sheets. From 1983 to 1987, annual revenues more than doubled, profits nearly quintupled, and the value of Disney stock increased from $2 billion to $10 billion; by 1994, it was worth $28 billion. By 1999, company revenues totaled nearly $23 billion, assets were over $41 billion, and net income was $1.85 billion.

When the new ownership and management team took over in 1984, the Disney empire extended its reach more widely than ever. While drawing on valuable assets and previous policies, Team Disney also introduced new strategies that must be understood in the context of the entertainment business of the 1990s. As with the other major Hollywood companies, Disney's expansion did not depend solely on motion pictures, but on a wide array of business activities in which the new management team aggressively exploited the Disney brand name, as well as diversifying outside of the traditional Disney label. Team Disney rejuvenated the sagging corporation through a variety of new policies, including reviving the classic Disney (by repackaging existing products and creating new animated features), modernizing some Disney characters, implementing rabid cost cutting (especially on feature films), introducing dramatic price increases at the theme parks, and employing new technological developments (such as computer animation).

However, Team Disney also emphasized at least four other related strategies that the Disney Company had already developed: corporate partnerships, limited exposure in new investments, diversified expansion, and further development of its corporate synergy. Disney not only added a wide range of corporate activities, but the company linked these different business endeavors under the Disney brand (and, more recently, the ABC and ESPN brands). The management's stated goal was to identify the most profitable holdings and develop synergies across the corporation. So not only was Team Disney busy diversifying, it became masters at business cross-fertilization, perhaps the quintessential masters of synergy. During the early years of the Disney Decade, the company continued to expand and prosper utilizing these strategies. In 1991, the company ranked in the top 200 US corporations in terms of sales and assets and was 43rd in terms of profits. The company's stock was worth $16 billion.

Despite earning $1.1 billion in profits and more than $10 billion in revenues, as well as becoming the first film company to gross over $1 billion annually in domestic box office, a shadow fell over the Magic Kingdom in 1994. Wells died in a helicopter accident, Eisner had heart surgery, EuroDisney (which had opened in 1992) was suffering huge losses, and a proposal for a new historic theme park was getting hammered by nearly everyone. It looked like the company was running out of magic. Then in July 1995, the company stunned Wall Street and the media with the dramatic $19 billion take-over of Capital Cities/ABC. The move greatly enhanced the company's position in television, sports programming, and international marketing, in addition to adding publishing and multimedia components to its operations. Thus, Disney became—at least for a short while—the world's largest media company, with $16.5 billion in annual revenues.

DISNEY IN THE TWENTY-FIRST CENTURY

The Walt Disney Company today is made up of several divisions: Studio Entertainment, Parks and Resorts, Consumer Products, and Media Networks. As the company boasts on its website, "Each segment consists of integrated, well-connected businesses that operate in concert to maximize exposure and growth worldwide."

Studio Entertainment.

The Disney Company creates a wide range of entertainment products, including animated and live-action films under the Walt Disney label (such as The Lion King and The Pirates of the Caribbean), as well as using the Touchstone, Hollywood, Miramax, and Dimension labels, which have released a wide variety of films such as Splash, Pulp Fiction, and Cold Mountain. Thus, the company distributes adult and foreign films that are not associated with the family-oriented, PG-rated Disney brand. The Studio Entertainment division contributed over $8.7 billion of the company's revenues for 2004.

Buena Vista Home Entertainment manages Disney's home video business and interactive products around the world. As with its film products, Disney has diversified its television offerings, producing and distributing a variety of programming under the ABC, Buena Vista, Touchstone, and Walt Disney labels. Disney also produces theatrical versions of successful animated films through Buena Vista Theatrical Productions and has become an undeniable presence in Manhattan, not only by way of its stage productions and the Disney Store in Times Square, but through extensive real estate holdings, including the headquarters of ABC.

Audio and musical products offer further opportunities to feature Disney properties and are especially lucrative for animated features. Buena Vista Music Group coordinates Disney's various recorded music businesses, which include Walt Disney Records, Buena Vista Records, Hollywood Records, and Lyric Street Records, which make a wide range of audio and music products.

Consumer Products.

Not only are Disney's merchandising activities legendary in terms of their historical precedence, the more recent strategies are remarkable. The Walt Disney Company is certainly the foremost merchandising company in Hollywood and produces or licenses a seemingly endless array of products. The Consumer Products division contributed over $2.5 billion of the company's revenues in 2004.

Disney Consumer Products, one of the largest licensors in the world, is divided into Disney Hardlines, Disney Softlines, and Disney Toys. Disney merchandise is marketed at retail outlets around the world, its own outlets at the theme parks, through on-line sites, by way of the Disney Catalogue, and at Disney Stores worldwide. The Disney Company also produces a wide range of printed material, ranging from comic books and children's magazines to adult-oriented magazines and books. At the end of 1998, the company maintained that its print products, which are published in 37 languages and distributed in more than 100 countries, make it rank above all other publishers in the world in the area of children's books and magazines. In addition to publishing under the Hyperion banner (including, ESPN Books, Talk/Miramax Book, ABC Daytime Press, and Hyperion East), it publishes the number one children's magazine in the United States, Disney Adventures. The Consumer Products division also includes Buena Vista Games, which turns Disney content into interactive gaming products, and the Baby Einstein Company, which produces developmental media for infants.

Parks and Resorts.

Walt Disney Parks and Resorts operates or licenses 10 theme parks on three continents along with 35 resort hotels, two luxury cruise ships and a wide variety of other entertainment offerings. The division contributed over $7.7 billion of the company's revenues in 2004.

The Disney empire includes six major theme parks: Disneyland (including hotels, shopping, dining and entertainment venues and a new addition, California Adventure); Walt Disney World Destination Resort (including four different theme parks, numerous hotels, recreational activities and shopping outlets); Tokyo Disneyland (with Tokyo Disney Sea, since 2001); Disneyland Paris and Hong Kong Disneyland, which opened in September 2005.

Disney Regional Entertainment currently operates eight ESPN Zones, featuring sports-themed dining and entertainment. The Disney Cruise Line features voyages from the Florida complex to the Bahamas, with onboard activities for adults and for families. The company also was the mastermind of Celebration, the neotraditional planned community south of Disney World. A number of sports properties supplement the company's strong sports media holdings (see below), including the Mighty Ducks (hockey), as well as extensive sports facilities in Florida.

Media Networks.

Through the acquisition of Capital Cities/ABC in 1995, Disney firmly established its role as one of the dominant players in the US media industry. The ABC television network provides abundant opportunities to promote Disney-produced programming and other businesses, as well as exploiting the more popular ABC programs throughout the rest of the Disney empire. In 2004, the Media Networks division attracted over $11.7 billion, more than any of the other divisions.

The ABC Television Network includes ABC Entertainment, ABC Daytime, ABC News, ABC Sports, ABC Kids, and the Disney-owned production company, Touchstone Television. In addition, Disney owns 10 television stations (affiliated with ABC) that reach approximately 25 percent of the nation's households, as well as 72 radio stations, including Radio Disney, ESPN Radio, and ABC News Radio.

Disney's ownership of ESPN is through ABC, which owns 80 percent of ESPN Inc. in partnership with the Hearst Corporation. The franchise includes four domestic cable networks, regional syndication, 21 international networks, radio, Internet, retail, print and location-based dining, and entertainment. At the end of 1999, the flagship network reached over 77 million subscribers domestically, while ESPN International is said to reach more than 152 million households in 190 countries. The ESPN franchise diversified its activities even further, adding ESPN Magazine, ESPN Radio, ESPN Zones (restaurant entertainment centers), ESPN Skybox on Disney Cruise Line ships, and ESPN merchandise. Meanwhile, ESPN.com is maintained to be the most popular sports site on the Internet.

Disney's other cable holdings include the Disney Channel, ABC Family, 37.5 percent of the A&E Network, 37.5 percent of The History Channel, 50 percent of Lifetime Entertainment Services (including Lifetime and the Lifetime Movie Network), 39.6 percent of E! Entertainment Television, Toon Disney (with recycled Disney programming), and SoapNet (a 24-hour soap opera channel). The segment also operates Walt Disney Television Animation and Fox Kids International, as well as Buena Vista Television and Buena Vista Television International.

Meanwhile, The Walt Disney Internet Group manages the company's Internet business. The Company's Internet site, www.disney.com, is consistently rated as one of the Web's most popular sites, while The Daily Blast serves as a subscriber-based Website, which includes various features from Disney-owned enterprises. While the Walt Disney Company seems to have been plagued in the early years of the twenty-first century with a series of highly visible controversies pertaining to executive compensation, the composition of its Board of Directors, and Eisner's replacement, the conglomerate still holds valuable assets that continue to pay dividends. The company reported revenues of over $30 billion for 2004, with nearly $4.5 billion income and $1.12 earnings per share.