The Walt Disney Company

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The Walt Disney Company

founded: 1923

Contact Information:

headquarters: 500 s. buena vista st.
burbank, ca 91521 phone: (818)560-1000 fax: (818)560-1930 url: http://www.disney.com

OVERVIEW

The Walt Disney Co. is the second-largest entertainment and media company in the world; only Time Warner is larger. The company divides its operations into three main segments: Creative Content, Broadcasting, and Theme Parks and Resorts. Its Creative Content operation includes films, animated motion picture production, and television programming, which are distributed to theaters, home video, and television markets around the world. This segment also licenses the famous Walt Disney name, arguably the world's best known brand, along with its famous cartoon characters, songs, and music. Creative Content also engages in retail distribution, mainly through the Disney Stores, and produces books and magazines, audio products, and film, video, and computer software for the educational market. The company's Broadcasting segment operates ABC Television Network and owns television and radio networks, most of which are owned by ABC. The Broadcasting segment is also involved in cable television programming through the Disney Channel and its joint ventures ESPN, A&E Television Network, and Lifetime Television. Its Theme Parks and Resorts segment is involved in the operation of the company's famous theme parks and resorts: Disneyland, Magic Kingdom, Epcot, and the newest addition, Animal Kingdom. This section also handles the company-owned professional hockey team, the Mighty Ducks, and its part-ownership of the Anaheim Angels baseball team.

COMPANY FINANCES

The Walt Disney Co. had 1997 revenues (sales) of $22.47 billion in 1997 and profits (net income) of $1.97 billion in 1997, reflecting growth in all its business segments, according to the company's 1997 annual report. Its 1997 revenues were a 6-percent increase over its 1996 revenues of $18.74 billion, and its net income that year grew 25 percent over its 1996 net income of $1.21 billion. Its 1995 revenues were $12.15 billion and its net income was $1.38 billion.

ANALYSTS' OPINIONS

While Disney's overall business continued to grow, financial analysts saw some challenges on the horizon for the company; challenges that Disney did not have in the mid-1990s, and that if not met, may cut into Disney's sales and profits. Chief among these is the trend among some of the company's biggest rivals, Fox, Dreamworks, and Time Warner, to come out with their own animated feature films that have been threatening the company's near monopoly on animated feature film production. Analysts also point to other Disney rivals that have established a cable sports television network, as well as a family entertainment channel, which are competing for Disney's audiences. Disney is even being challenged in the theme park and resort arena. Alan Kassan, an entertainment analyst with Deutsche Morgan Grenfell was quoted in an August 1997 issue of Forbes as saying that Disney's competitors have built theme parks which will draw customers away from Disney's parks and resorts; and even worse, the competition's parks charge customers less for admission passes and rides.

HISTORY

The Walt Disney story began in 1923, when Walt and Roy Disney started a Hollywood film studio after their first animated film business failed. They achieved a breakthrough with their new venture in 1928, when Walt directed the first Mickey Mouse animated film, titled "Plane Crazy," a silent film. Sound was introduced in the studio's third animated film, which also starred the soon-to-be-famous Mickey Mouse. This film was an enormous achievement at the time and set the stage for the studio's later successes. The studio went on to produce its first animated feature film, Snow White and the Seven Dwarfs, in 1937. Other films such as Fantasia and Pinocchio were introduced in the 1940s. With the success of Disney's feature films, Disney embarked on what was then a unique marketing concept: he developed merchandise to be marketed, such as toys, clothing, and other products, which were tied to the studio's film characters. Disney continued to produce films throughout the 1950s and 1960s and also produced the famous The Mickey Mouse Club television series, which ran from 1955 to 1959, along with its own Disneyland television series.

In 1966, Walt Disney died of lung cancer, and his brother Roy was named chairman. Before his death, Walt was witness to the 1955 opening of Disneyland in Anaheim, California. Within a short time, Disneyland became famous the world over. With the success of Disneyland, the company opened its second theme park, Walt Disney World, in Florida in 1971. Roy Disney passed away that same year, and his son Roy, who was then the acting vice president of animation, became the company's principal individual shareholder. For a period, the deaths of the Disney brothers proved to be devastating to the company's profits and sales. In 1984, an alliance with Roy E. Disney and the Bass family was formed, when the latter purchased a controlling share in the company. Also that year a new CEO, Michael Eisner, took over as the company's head, along with a new president, Frank Wells. The Walt Disney Company expanded into numerous areas of entertainment that have corresponded with the changes in technology and the desires of their customers. These new techniques, along with the global interests that Disney had acquired, brought the company incredible successes.

STRATEGY

Disney's success has been attributed to two main strategies: its expansion into multiple areas of entertainment and media, and the concept of "synergy." For example, during the period of Michael Eisner's tenure as CEO, Disney's theme park-resort business expansion has been phenomenal. It built a theme park near Paris, and a cruise ship line started operating in the summer of 1998. In the Florida area, it expanded its Walt Disney World with Disney-MGM Studios, two water parks, six golf courses, 14 hotels, villas, a Wide World of Sports complex, and Animal Kingdom, turning the area between Cape Canaveral and Tampa into "the world's top resort destination," according to an April 1998 issue of Time magazine. Referring to Disney's Animal Kingdom, PaineWebber analyst Christopher Dixon was quoted as saying: "Think of all the animal-related programming, from Bambi to Simba, Disney can now use Animal Kingdom as a way to promote and revitalize many of its animal brands." And herein lies the second aspect of Disney's success: "synergy" or product "cross-pollinating" that started with Walt Disney and was refined to a high art during Michael Eisner's time as CEO. Walt Disney began offering consumers tie-in products with his early films and cartoon characters. Snow White and the Seven Dwarfs had a complete line of merchandise ready to be marketed when it was released in 1938. With the opening of Disneyland, this trend became even more pronounced; visitors to Disneyland were greeted by Mickey Mouse or Goofy, and most of the park's attractions were based on famous Disney live-action and animated films, such as Davy Crockett, Alice in Wonderland, or Cinderella. Soon the Disney name became one of the world's best known brands. The company's expansion of its theme parks has carried this strategy to new heights. Referring to Animal Kingdom, Judson Green, president of Walt Disney Attractions, quoted in an April 1998 issue of Fortune, told the magazine that the theme park will host live shows spun off from The Lion King, one of Disney's most popular films, and The Jungle Book. Green said that, "In a way, we're an ancillary [secondary] market, because we take our animated films and infuse them into our parks."

FAST FACTS: About The Walt Disney Company

Ownership: The Walt Disney Company is a publicly owned company traded on the New York and Pacific Stock Exchanges.

Ticker symbol: DIS

Officers: Michael D. Eisner, Chmn. & CEO, 55, 1997 base salary $10,650,000; Roy E. Disney, VChmn., 67, 1997 base salary $1,200,000; Sanford M. Litvack, Sr. Exec. Vice-Pres. & CCO, 61, 1997 base salary $2,224,616; Thomas O. Staggs, Exec. VP & CFO, 37

Employees: 108,000

Principal Subsidiary Companies: Disney's principal subsidiaries include: Buena Vista Entertainment; Caravan Pictures; The Disney Channel; Hollywood Pictures; Hollywood Records; Miramax Film Corp.; Touchstone Pictures; Touchstone Television; Walt Disney Pictures; Walt Disney Television; Walt Disney Theatrical Productions; Disney Development Company; Disney Interactive; ABC Inc.; ABC Cable; ABC Radio Networks; ABC Television Network Group; ABC Publishing; Walt Disney Imagineering; The Mighty Ducks of Anaheim; and The Anaheim Angels.

Chief Competitors: The company's primary competitors include: Time Warner; Universal; and Viacom. Disney competes with other companies involved in film and television production, and television broadcasting, including cable channels, home video production, music production, compact disk and cassette production, book publishing, and theme parks and resorts. Some of these companies include: DreamWorks SKG; Fox; Sony; Rubert Murdoch's News Corp.; Liberty Media and Cablevision; General Electric; Anheuser-Busch; Lucas Film, Ltd.; TCI; ThornEMI; PolyGram; NBC; and EMI.

INFLUENCES

The influences that have shaped the Disney Co.'s strategy have been mostly internal and have revolved around two of its leaders: Walt Disney and Michael Eisner. According to a January 1998 issue of The Economist, Walt Disney left an indelible mark on the American consciousness, an influence that was far greater than any other of the Hollywood moguls. As mentioned above, Disney was a pioneer in "brand-stretching" and merchandising. Today this marketing practice is part of the way Hollywood conducts its business. Disney continued to follow this strategy when he diversified into theme parks, television, music, and comic strips. The magazine quoted the late Roy Disney, explaining this concept in 1958: "We don't do anything in one line without giving a thought to its likely profitability in our other lines." But Disney's influence went far beyond the bottom line. A product of small town Midwest at the turn of the century, Disney infused his films and other ventures with the values of that area and era: Disneyland was designed to be foremost a family entertainment park. But after the Disney brothers died, the company went into a marked decline. When Eisner joined the company, he took Disney's influence and strategy to new levels; now the company is the world's second largest entertainment and media giant. Still mostly known for producing "family entertainment," its films have become more diverse through the acquisition of movie production companies like Touchstone. The Disney brand name remains stronger than ever and is on hundreds of products and many different kinds of media.

CURRENT TRENDS

Like most large companies, Disney has established a strong presence on the Internet. In 1996, it launched "family.com." This family-oriented web site is especially geared toward children and includes resources to help students with their homework. Disney also is prominently featured on America Online, which has the most subscribers of any Internet service.

Disney followed the merger trend that swept across various industries when, in 1997, Disney and Comcast Cable made a joint agreement to purchase a majority of E! Entertainment Television.

Because of America's booming economy, more citizens had disposable income to spend on travel and leisure activities in the mid- to late 1990s. This was one reason behind Disney's decision to launch a cruise ship line. The company also planned to build a new theme park near Tokyo Disneyland, but Japan's economic problems may bring about a revision to this plan.

PRODUCTS

Besides its involvement in film, television, Internet, recreational ventures, home video, music publishing, and audio products, the company is also involved in other media and consumer products, including the magazines Discover, Disney Adventures, and FamilyFun; and book publishing, such as Hyperion Press and Disney Press. Disney's retail store chain, The Disney Store, sells clothing, dolls, and other assorted items that are associated with the many animated characters that the company has introduced throughout its history.

CHRONOLOGY: Key Dates for The Walt Disney Company

1923:: Walt and Roy Disney open a Hollywood film studio
1928:: Disney releases "Plane Crazy," Micky Mouse's debut
1932:: The company's first full-color cartoon is released and wins an academy award
1937:: Snow White and the Seven Dwarfs is released as the first full-length animated film
1948:: Disney releases its first live-action feature film
1950:: The first Disney television show, "One Hour in Wonderland," debuts
1955:: Disneyland opens in Anaheim, California; the "Micky Mouse Club" debuts
1966:: Walt Disney dies and Roy Disney takes over
1971:: Walt Disney World opens in Orlando, Florida
1982:: The EPCOT Center opens next to Walt Disney World
1983:: Launches Touchstone pictures
1984:: The Bass family purchases a controlling share of the company and appoints Michael Eisner CEO
1989:: Disney/MGM Studio Theme Park and Pleasure Island opens outside of Orlando
1992:: EuroDisney opens outside of Paris
1997:: Disney and Comcast Cable make a joint purchase of E! Entertainment Television
1998:: Operations of the Disney cruise line begin

CORPORATE CITIZENSHIP

The Disney Co. has large-scale environmental and recycling programs for its theme parks, its employees, and the park's surrounding communities. Its employee programs include rewards given to employees who practice environmentally friendly methods at home. A children's environmental awareness education program, Recycle Rex, encourages children to recycle. A seven-minute animated film of the Recycle Rex character has been given to every California school. At the theme parks, all trash is carefully sorted for recycling. Another employee program, "Frequent Freeway Flier Program," encourages its California employees to car pool or take public transit by paying employees 50 percent of public transit costs, 40 percent of vanpool costs, and matching their car pool costs. In Florida, the company has built research facilities for endangered species, waste water research, wetland creation research, and community waste management research.

GLOBAL PRESENCE

As a multimedia company, Disney's films, television programming, music, and videos are seen or heard in almost every foreign market. Disney began its global foray into the theme park business in 1984 when it built Tokyo Disneyland. In 1992, it opened Disneyland Paris, which was initially met with an outcry from some French citizens worried that the park would aid in the "Americanization" of French culture. By the mid-1990s, the theme park had become France's biggest tourist attraction.

BIOGRAPHY OF A MOUSE

The year was 1928. Disney Studios was riding high with the success of the hit animated character Oswald the Rabbit. That year Walt Disney headed to New York to negotiate a better deal with Oswald's distributor, Snappy Comedies. But Walt was told that Snappy was taking over all production of the Oswald pictures. Worse yet, Walt found out that Snappy had raided the studio of several of its top animators. Things looked grim.

The story goes that on the train ride back to California, Walt came up with the first visions of a new character. He thought of his life back at his Kansas City office. "Mice gathered in my wastebasket when I worked late at night. One of them was my particular friend." Disney thought of Mortimer as a good name, but his wife, finding the name "too sissy," suggested Mickey.

When he got back to Los Angeles, Disney sat down with his lead animator Ub Iwerks in order to design the new character. Iwerks took Oswald, made his ears round and large, his tail thin and long, and Mickey was born!

Work immediately began on the first Mickey cartoon, the silent short, Plane Crazy. But the first talkies had just been released, and Disney had trouble finding a distributor for the film. He went back to the drawing board and started work on what was to be the first sound cartoon: Steamboat Willie. (Walt supplied the voice of Mickey, and continued to do so through World War II.) Willie was released on November 18, 1928. The short was an instant smash hit. Mickey Mania was born.

During the 1930s, Mickey appeared in 87 cartoon shorts. His popularity was enormous. People were more interested in the Mickey shorts than the features they accompanied. As early as 1929 the first Mickey Mouse Club was formed. In 1932, Walt Disney was awarded an Oscar for his creation.

Mickey's stardom peaked in 1940 when he appeared as the sorcerer's apprentice in Fantasia. Throughout the 1940s and 1950s, Mickey appeared in fewer films, but he still had some important roles to play. During World War II, he appeared on posters urging support of the war effort. And on D-Day, the Allied Forces' password was none other than "Mickey Mouse."

In 1955 Disney started television's first Mickey Mouse Club, the most successful children's show of all time. Also in 1955, Mickey became chief host at Disneyland. Since that time, Mickey has pretty much remained retired from pictures, instead focusing more on his role as corporate symbol and goodwill ambassador.

Today, Oswald is long forgotten, and Mickey lives on in the hearts and minds of Americans. Mickey's earnest, "go-get-um," nice guy demeanor endeared him to millions—they saw him as a projection of their best qualities. And so a mouse, originally conceived as a quick fix for a desperate company, ended up as an icon, encompassing the ideals and hopes of a nation that found his high-pitched laugh irresistible.

EMPLOYMENT

An indication of what it is like to work for one of Disney's many enterprises was given in an April 1998 Fortune article about Disney World. Discussing the corporate culture of Disney World, Judson Green, the president of Walt Disney Attractions, believes in giving his employees "some freedom to improvise." The company encourages them to "take chances, perform solo, express yourself, be open, listen, and cheer your partners, all within an agreed-upon framework."

SOURCES OF INFORMATION

Bibliography

"america's sorcerer." the economist, 10 january 1998.

corliss, richard, and tammerlin drummond. "beauty and the beasts." time, 20 april 1998.

furman, phyllis. "call him teflon mike: under eisner's leadership, disney enjoys banner year." new york daily news, 19 november 1997.

gunther, marc. "disney's call of the wild." fortune, 13 april 1998.

lewis, len. "keys to the kingdom: disney raises the corporate bar on creativity." progressive grocer, november 1997.

lubove, seth, and robert la franco. "why mickey isn't doing much talking these days." forbes, 25 august 1997.

schaffer, athena. "'recycle rex' latest addition to disney's environmental program." amusement business, 20 june 1994.

starr, mark, and jamie reno. "cartoons sure were easier." newsweek, 22 december 1997.

"walt disney co." hoover's online, 1998. available at http://www.hoovers.com.

For an annual report:

on the internet at: http://www.sec.gov/edaux/formlynx.htmor write: shareholder services, the walt disney co., 500 s. buena vista st., burbank, ca 91521-9722