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The Walt Disney Company

The Walt Disney Company

500 South Buena Vista Street
Burbank, California 91521
U.S.A.
Telephone: (818) 560-1000
Fax: (818) 840-1930
Web site: http://www.disney.com

Public Company
Incorporated: 1938 as Walt Disney Productions
Employees: 117,000
Sales: $27.06 billion (2003)
Stock Exchanges: New York Pacific Midwest Tokyo
Ticker Symbol: DIS
NAIC: 515120 Television Broadcasting; 515112 Radio Stations; 713110 Amusement and Theme Parks; 512110 Motion Picture and Video Production; 511120 Periodical Publishers; 423990 All Other Durable Good Merchant Wholesalers; 511210 Software Publishers; 512110 Motion Picture and Video Production; 711510 Independent Artists, Writers, and Performers

A colossal force in the entertainment industry, The Walt Disney Company (Disney) is best known for bringing decades of fantasy and fun to families through its amusement parks, television series, and many classic live-action and animated motion pictures. Beginning in 1984, Disney enjoyed an enormous creative and financial renaissance, due to the leadership of CEO Michael Eisner; the success of such subsidiaries as Touchstone Films, Hollywood Pictures, The Disney Studios, Buena Vista Distribution, The Disney Channel, and Buena Vista Home Video; the sales of Disney consumer products through The Disney Stores and a multitude of licensing arrangements; and a recommitment to excellence in the making of original feature-length animated films. Under Eisner's reign, Disney acquired Capital Cities/ABC in 1996, a $19 billion deal that increased the company's stature enormously. Adding to the theme parks, cruise ships, professional sports teams, and dozens of other businesses owned by the company, the acquisition of Capital Cities/ABC gave Disney the power of broadcasting and the ability to meld entertainment content with programming. During the late 1990s, the company was aggressively building a presence on the Internet and adopting a concerted approach to international expansion.

The Birth of a U.S. Icon

Walt Disney, the company's founder, was born in Chicago in 1901. His appeal to the greater United States is said to have had roots in his humble, middle-class upbringing. Disney's father, Elias, moved the family throughout the Midwest seeking employment. Young Disney grew up in a household where hard work was prized: feeding the family's five children left little pocket change for amusement. Walt Disney began working at the age of nine as a newspaper delivery boy. His father instructed him and his siblings in the teachings of the Congregational Church and socialism.

Drawing provided an escape for Disney, and at the age of 14 he took his work on the road and enrolled at the Kansas City Art Institute. His art was temporarily put on hold when he joined the Red Cross at age 16 to serve as an ambulance driver at the end of World War I. In 1919 he returned to the United States and found work as a commercial artist. Together with Ub Iwerks, another artist at the studio, Disney soon formed an animated cartoon company in Kansas City.

In 1923, following the bankruptcy of this company, Disney joined his brother Roy O. Disney in Hollywood. By the time he arrived on the West Coast, word came from New York that a company wanted to purchase the rights to a series of Disney's live-action cartoon reels, ultimately titled Alice Comedies. A distributor named M.J. Winkler offered $1,500 per reel, and Disney joined her as a production partner.

A series of animated films followed on Alice 's heels. In 1927 Disney started a series called Oswald the Lucky Rabbit, which met with public acclaim. The distributor, however, had the character copyrighted in its own name, so Disney earned only a few hundred dollars. It was while pondering the unfairness of this situation on a California-bound train that Disney first thought of creating a mouse character named Mortimer. He changed the name to Mickey Mouse, drew up some simple sketches, and went on to make several Mickey Mouse films with his brother Roy, using their own money.

On the third Mickey Mouse film, Disney decided to take a bold step and add sound to Steamboat Willie. The cartoon was synchronized with a simple musical background. The process provided some of the first technical steps in film continuity: music was played at two beats a second and the film was marked every 12 frames as a guide to the animator, and later an orchestra.

Film distributors laughed at Disney's idea. Finally one, Pat Powers, released Steamboat Willie in theaters. Audiences loved what they saw and heard, and suddenly Disney was a hit in the animation business. In 1935 the New York Times called Mickey Mouse "the best-known and most popular international figure of his day." Meanwhile, Disney suffered criticism from observers who judged him to be a cartoonist of only mediocre ability. (Iwerks was responsible for the actual design of Mickey Mouse and the other characters.) Disney was, however, given credit for his ability to conceptualize characters and stories.

The Mickey Mouse projects brought in enough cash to allow Walt Disney to develop other projects, including several full-length motion pictures and advances in Technicolor film. Disney's first full-length film, Snow White and the Seven Dwarfs, opened in 1937 to impressive crowds and led to a string of Disney hits, including Pinocchio and Fantasia in 1940, Dumbo in 1941, Bambi in 1942, and Saludos Amigos in 1943.

Around 1940 Disney decided to tackle live-action films, first with The Reluctant Dragon and to a greater extent with 1946's Song of the South. Meanwhile, during World War II, Disney lent his characters to the war effort, making shorts, including one in which Minnie Mouse showed U.S. homemakers the importance of saving fats. After the war, Walt Disney Productions was back in business with live-action features including 20,000 Leagues Under the Sea. The Living Desert was released in the early 1950s by Disney's new distribution company, Buena Vista, to tremendous box office success.

Taking on Television: 1950s

During the 1950s, as Americans began to spend more time at home watching television for entertainment, Disney's studio took full advantage of the small screen revolution. In 1954, the "Disneyland" television series premiered. The show included an introduction by Walt Disney and incorporated film clips from Disney productions with live action and coverage of Disneyland. Some four million people tuned in each week. Disney also made a national folk hero out of Davy Crockett when he devoted a three-part program to coverage of his life. Within a matter of weeks, U.S. boys could not live without coonskin caps and other Crockett merchandise, all of which earned Disney a fortune. Crockett's popularity led to the era of the Disney live-action adventures that included the 1950s hits The Great Locomotive Chase, Westward Ho, Old Yeller, and The Light in the Forest.

In October 1955 The Mickey Mouse Club debuted on the ABC television network. The hour-long show aired at 5 p.m. weekdays and made television history. Six years later, his groundbreaking Sunday night color TV show Walt Disney's Wonderful World of Color (later changed to The Wonderful World of Disney ), began its 20-year run on NBC. At the same time, Disney was making stars out of Fred MacMurray, Hayley Mills, and Dean Jones in such movies as The Shaggy Dog, The Absent-Minded Professor, Pollyanna, and The Parent Trap. In 1964 Disney's Mary Poppins became one of the top-grossing films of all time.

Disney required professionalism of his staff and demanded the highest-quality Technicolor available, and as a result his live-action films topped competitors in both creativity and technical standards. He also had his hand in several other projects, including Audio-Animatronics (automatically controlled robots) and a Florida amusement complex that eventually became Walt Disney World, complementing California's vacation hot spot, Disneyland.

On December 15, 1966, Walt Disney died of lung cancer. Shortly after Disney's death, his brother Roy issued an optimistic statement pledging that Walt Disney's philosophy and genius would be carried on by his employees.

But no one could match Walt Disney's keen story sense or enthusiasm, and the studio floundered through most of the 1970s despite several strong CEOs, including E. Cardon "Card" Walker, who had joined the company as a traffic boy in 1938. The studio did manage a few successes during this period, including Blackbeard's Ghost, with Dean Jones and Suzanne Pleshette, and the 1969 release The Love Bug, which became the year's biggest box office hit. Other popular releases of the late 1960s and early 1970s included The Jungle Book, The Aristocats, Bedknobs and Broomsticks, and several live-action features.

But a run of box office disappointments followed in the mid-1970s before The Rescuers proved successful. Pete's Dragon, an experimental film combining human and animated characters, followed. Progress was slow but steady for the Disney studio in the late 1970s and early 1980s as well. The studio released three new live-action movies: The World's Greatest Athlete, Gus, and The Shaggy D.A. Return from Witch Mountain, a sequel to the popular mystery-fantasy Escape to Witch Mountain, premiered in 1978. A risky science fiction venture titled The Black Hole cost $20 million to produce but was lost in the amazing success of Star Wars, an all-time box office recordbreaker. CEO Ron Miller brought in new directors and younger writers who produced such films as Watcher in the Woods and the computer-generated Tron, but achieved only mild success in the face of competition from other movie studios.

Company Perspectives:

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.

In 1983, beginning with the release of Mickey's Christmas Carol, Disney's fortunes finally began to look up. A string of successful movies followed, including the Arctic adventure Never Cry Wolf and a production of Ray Bradbury's Something Wicked This Way Comes. That same year the company also began marketing a family-oriented pay-TV channel called the Disney Channel, which quickly became the fastest-growing channel on cable television.

Corporate raider Saul Steinberg attempted a hostile takeover of the company in 1984. Disney ultimately bought Steinberg's 11.1 percent holding in the company for $325.4 million. A number of lawsuits were filed by shareholders against both Disney and Steinberg's Reliance Group Holdings, charging that Disney's managers had attempted to secure their positions and had lowered the value of the stock. The suits were settled in 1989 when the two companies jointly agreed to pay shareholders $45 million.

The Eisner Era Begins: 1984

Shortly after its purchase of 18.7 percent of Disney's stock, the Bass family of Texas supported the Disney board's hiring of Michael Eisner from Paramount Pictures to be Disney's new CEO and Frank Wells to be president.

Eisner, responsible for such Paramount blockbusters as Raiders of the Lost Ark and Beverly Hills Cop, immediately began to emphasize Touchstone Films, a subsidiary devoted to attracting adult movie audiences. Commentators began to note that Eisner, like Walt Disney, had the ability to predict and deliver movies people wanted to see. The 1985 release of Down and Out in Beverly Hills helped Touchstone build momentum, which it increased with Outrageous Fortune, Tin Men, Ruthless People, and other hits. In Eisner's first four years as CEO, Disney surged from last place to first in box office receipts among the eight major studios.

Eisner also set out to take full advantage of expanding markets such as cable television and home video. Disney signed a long-term deal with Showtime Networks, Inc., giving the cable service exclusive rights to Touchstone and other Disney releases through 1996. In addition, Eisner bought KHJ, an independent Los Angeles TV station; sought new markets for old Disney productions through television syndication; and began to distribute such TV shows as The Golden Girls.

Certain Disney classics, including Lady and the Tramp and Cinderella, were released on videocassette during the late 1980s. Eisner protected the value of the films by limiting the availability of the tapes. He also scheduled the re-release of many other films for the late 1980s and early 1990s, by which time a new generation of children would be ready to see the films in the theater once again. Disney's revenues soon began to increase, averaging an improvement of approximately 20 percent annually during the second half of the 1980s.

In 1989 Disney-MGM Studios Theme Park opened near Orlando, Florida, on the grounds of Walt Disney World. Despite its name, the park was not a collaboration between the two studios; Disney purchased the rights to include attractions based on MGM films. Euro Disney, of which Disney owned 49 percent, opened outside of Paris, in Marne-la-Vallée, on April 12, 1992; and Tokyo Disneyland, licensed though not owned by Disney, regularly drew phenomenal crowds in a powerful consumer market. Plans were made to open a second Disney-MGM Studios park, on a site adjacent to Euro Disney, in the mid-1990s.

In the early 1980s the parks were responsible for about 70 percent of the company's revenue. Although they continued to be a crucial part of the company, the theme parks found competition with Disney's newer projects, including hotel expansions, home video distribution, and Disney merchandising, which together in 1991 garnered an impressive 28 percent of fiscal revenues. Virtually as important, perhaps more so given their unrealized potential, were Disney's international operationsevident not only in Japan and France, but throughout much of Europe, the former Soviet Union, South America, and Chinawhich contributed 22 percent of total revenues in 1991.

Key Dates:

1901:
Walt Disney, the company's founder, is born.
1919:
With Ub Iwerks, Disney forms Iwerks-Disney Commercial Artists.
1923:
The distributor M.J. Winkler purchases Disney's Alice Comedies for $1,500 per reel; Disney creates Disney Bros. Studios with his brother Roy.
1924:
M.J. Winkler Productions debuts the Alice Comedy Series, with the film Alice's Day at Sea, in theaters.
1928:
Mickey Mouse is "born"; Disney releases Steamboat Willie, its first film with sound.
1937:
Snow White and the Seven Dwarfs, Disney's first full-length animated film, debuts.
1940:
Pinocchio and Fantasia are released.
1955:
The Mickey Mouse Club debuts; Disneyland opens in Anaheim, California.
1966:
Walt Disney dies of lung cancer.
1971:
Walt Disney World opens near Orlando, Florida; Roy O. Disney dies.
1982:
EPCOT Center opens on the grounds of Walt Disney World.
1983:
The first foreign Disneyland, Tokyo Disneyland, opens.
1984:
Michael Eisner is named Disney's new CEO; Disney releases Splash under its new label, Touchstone Pictures.
1989:
Disney-MGM Studios Theme Park opens near Orlando, Florida.
1992:
Euro Disney (later named Disneyland Paris) opens.
1996:
Disney acquires television station Capital Cities/ABC for $19 billion; Radio Disney debuts.
1998:
Animal Kingdom opens in Walt Disney World, Florida.
1999:
Disney Cruise Line begins operations with the Disney Magic.
2001:
Disney's California Adventure opens next to Disneyland; Disney acquires Fox Family Worldwide for $5.3 billion.
2003:
Roy E. Disneyson of Roy O. Disney, last of the founding family associated with the companyand Stanley Gold quit the Disney board and start Save Disney.com in an attempt to oust CEO Michael Eisner.

Meanwhile, Touchstone remained healthy. Hollywood Pictures, Disney's newest film-producing arm, also began making more films in the late 1980s. Disney continued to score hits with Three Men and a Baby, Good Morning Vietnam, Who Framed Roger Rabbit, and others. Most importantly, production costs, though constantly rising, were held by Disney in 1989 to an average of $15 million per movie, compared to an industry average of more than $23 million.

Taking a Roller-Coaster Ride: 1990s

The 1990s, termed the "Disney Decade" by the company, promised to witness perhaps the most dramatic changes and accomplishments of Disney's more than half-century history. The combined talents of Eisner, President Frank Wells, and studio Chairman Jeffrey Katzenberg caused a rush of excitement as the decade began. By the second quarter of 1991, the studio, under Katzenberg's strong leadership, had surpassed the theme parks in profitability, leading the company to commit to a record-high 25 new films in 1992. By far the greatest highlight of 1991 was Disney's 30th feature-length animated film, Beauty and the Beast. Amid a troubled year and a depressed economy, during which corporate net income plummeted by 23 percent and Disney, despite the success of its studio, experienced its first year with no growth since 1984, this filmnominated for best picture and winner of Academy Awards for best original score and best original songprovided much welcomed relief. Beauty, like its 1989 Oscar-winning predecessor The Little Mermaid, shattered previous records for the most successful opening of an animated film. It quickly became the highest-grossing picture of its genre.

Although Disney was notorious for undercutting its Hollywood competitors, it, too, was forced to pay exorbitant amounts for top creative talent. Both Bernard Weinraub, in a New York Times article, and Eisner, in the company's 1991 annual report, reported that Disney was going to try to stem the flow of high production costs for big-budget films and instead offer films with appealing storylines and engaging characters. According to Ron Grover, Katzenberg himself began pushing for such a redirection in early 1991. Presumably, films like the modestly budgeted 1990 sleeper Pretty Woman were expected in the future.

Disney's next foraysits creation, for example, of Hyperion Press and Hollywood Records for stakes in the publishing and adult music industrieswere expected to further strengthen its reputation as an entertainment giant. Yet, here too, it became increasingly cautious. In August, the company revealed that its Imagineering division, responsible for theme park design, was laying off up to 400 of its employees. Further news that Euro Disney's profitability for its first year was in serious doubt indicated to some that Disney might be struggling. However, Disney's overseas investment was less than $200 million, "a fraction of the total," according to Stewart Toy. "And whether or not there's a profit, Walt Disney gets 10 percent of ticket sales and 5 percent of merchandise sales."

During the latter half of the 1990s, Disney grew at a prolific rate, but by the decade's end there was little cause to celebrate. The remainder of the Disney Decade was pocked with troubling developments that shook the foundation of the Disney empire, prompting some experts to suggest the previously unimaginable: that the omnipotent Disney name was losing its market appeal. The tumultuous period began with tragedy, when Frank Wells died in a helicopter crash in 1994. The fatal accident left Eisner without his most trusted aide and left Disney without a president, a title Katzenberg reportedly coveted. Two days after the helicopter crash, Katzenberg approached Eisner about the job, but his bid to become president was rebuffed. Katzenberg responded by leaving Disney, departing on decidedly unfriendly terms. An acrimonious feud between Eisner and Katzenberg erupted that became litigious. Upon his departure, Katzenberg was given the equivalent of ten year's pay, but the former studio head wanted considerably more cash. He filed a lawsuit against Disney, demanding $580 million in compensation.

Against the backdrop of a sordid legal battle, whose ugly details became the stuff of headlines, Eisner prepared to add a new dimension to Disney's operations. In 1994, Eisner attempted to buy the NBC television network from General Electric Company, but the deal fell through because General Electric reportedly wanted to retain ownership of 51 percent of the network. Eisner pressed ahead, determined to buy a television network. His search ended in 1995 when Disney announced its head-turning merger with Capital Cities/ABC, a $19 billion deal that gave Disney control over television stations, radio stations, cable networks, and legions of other properties. Applauded by industry pundits as a strategically sound move, the acquisition of Capital Cities/ABC married the vast content collection controlled by Disney to the expansive broadcasting capabilities of the ABC network, exponentially increasing the might of what, after the transaction was completed in 1996, stood as a more than $20 billion entertainment conglomerate.

The late 1990s saw Eisner steer Disney in several other strategically important directions. The growth of the Internet presented the company's chairman and CEO with another opportunity to disseminate Disney's entertainment content to the public. In 1998, Disney acquired Starwave, which maintained ESPN.com and Mr. Showbiz, as well as other web sites, and purchased 43 percent of Infoseek, acquiring the rest of the Internet search engine company in 1999. In January of that year, the company launched the GO Network Web portal. Other additions to the company's operations included the opening of the 540-acre Animal Kingdom park in Florida, the Disney version of a zoo, and the launching of an 875-stateroom cruise ship christened the Disney Magic, to be followed by the debut of a sister ship, the Disney Wonder. Eisner also acquired two professional sports clubs, the Mighty Ducks of Anaheim, a professional hockey team, and Major League Baseball's Anaheim Angels. Concurrent with the numerous acquisitions he presided over, Eisner endeavored to expand Disney's geographic reach. During the late 1990s, the company collected roughly 20 percent of its revenue from overseas businesstoo low of a percentage from Eisner's viewpoint. China and India were considered to be high-growth markets.

The scope and scale of Disney's properties by the late 1990s represented an impressive list of businesses that few companies in the world could equal. The additions to the Disney portfolio during the latter half of the decade turned an already sprawling empire into a multifaceted entertainment conglomerate of mind-boggling proportions, but no matter the size of a company, success depended on execution. As it became evident during the court proceedings to resolve Katzenberg's lawsuit, Disney's massive revenue-generating, profit-making engine was sputtering inefficiently. The details delineating the company's problems were divulged because of the nature of the Katzenberg case. Eisner, who had the opportunity to settle his former studio chief's compensation claim for $100 million, decided not to give in without a fight, believing the demand for as much as $580 million was preposterously high. It was a decision he later regretted. In court, Eisner learned that Katzenberg had negotiated a contract with Wells during the 1980s. A passage in the contract, as published by the Financial Times on June 4, 1999, read: "It is, of course, obvious but nonetheless worth pointing out that many of these pictures still have substantial revenues forthcoming from ancillary markets which continue to accrue to Jeffrey's benefit. . . . Of course, some of these will continue 'forever' in the sense that even if he should leave one day, there would be an arbitrated amount as to future income from the pictures." The inclusion of the word "forever" in the contract struck a crippling blow to Eisner's hope of leaving the courtroom victorious.

Because the amount of Katzenberg's claim depended on the future profit potential of certain facets of the Disney enterprise, company lawyers were inclined to paint a bleak picture of the company's financial health at the end of the 1990s and its prospects for the years ahead. Despite the incentive to underestimate the company's financial might, it became obvious to onlookers that all was not right in the Magic Kingdom. The theme parks were performing well, but nearly every other aspect of the company's business suffered from disappointing results. ABC was at the top of the list, hobbled by low ratings and rising costs, including the $9.2 billion spent for ABC and ESPN to acquire the rights for the NFL through 2008. Internationally, the company was not making headway, notoriously evident in two cinematic failures. Mulan, the Chinese-themed animation film, generated a paltry $1.3 million during its run in China. The release of Hercules in India fell decidedly flat and actually led to a loss of $14,000. On the whole, the last year of the decade signaled a depressing end to the 20th century for Disney. For the first nine months of 1999, excluding the income gained from an asset sale, operating income was down 17 percent, net income dropped 26 percent, and earnings per share fell 27 percent.

The Katzenberg compensation claim was settled for a reported $200 million, although both parties refused to divulge the amount. More significant to industry observers than the exact dollar amount of the settlement was the information revealed during the proceedings, prompting some analysts to cast a wary eye toward the entertainment behemoth. Some critics charged that Eisner's autocratic leadership inhibited efficiency and progress, but the most threatening diagnosis struck at the company's fundamental strength. Some industry experts contended that "age compression," the theory that youths of the late 1990s emulated teenage behavior at an earlier age than in decades past, was draining the strength of the Disney name. Rebellion against the wholesome Disney image was the result, reducing the size of Disney's target audience. "They've never gotten past the problem that their core audience is girls 2 to 8 and their moms," a former, unnamed, Disney executive explained in the September 6, 1999 issue of Fortune magazine. Sociological intricacies aside, the future financial health of Disney depended on the ability of the company to reap the rewards inherent in its operations, on its effectiveness in churning out profits from a powerful entertainment machine that looked good on the outside but internally was suffering. The continued attraction of the Disney name in the 21st century represented the foundation upon which the company's return to soaring profits would be built.

Disney's finances improved in 2000, with a 9 percent increase in total revenues and an impressive 39 percent jump in net income. The boost in growth was due particularly to the success of the ABC Network and ESPN. Parks and Resorts also had an impact on growth, achieving record results for the sixth consecutive year. Creatively, Disney had a positive year, with the premier of The Emperor's New Groove, as well as the Broadway premier of its musical Aida. But the success of 2000 would be short-lived.

The September 11, 2001 terrorist attacks in the U.S. immediately impacted Disney's financial situation. The hardest hit were Disney's Parks and Resorts, as vacation travel came to a halt. The recession that followed the attacks did not help matters. The suffering economy, coupled with a drop in ratings, led to a dramatic decrease in advertising rates for Disney's Media Networks, and in particular, the ABC Network. By 2001's end, Disney suffered a staggering $158 million loss in net income. Also contributing to a loss of income was a costly acquisition of Fox Family Worldwide, Inc. (FFW), for $5.3 billion.

In reaction to troubled times, Disney implemented a number of cost-cutting measures. Such measures included decreasing operations at Disney parks; cutting its annual investment in live-action films; and minimizing Internet operations. Additionally, Disney cut approximately 4,000 employees from its payroll. On a more positive note, Disney's Monsters, Inc. premiered at this time, quickly becoming a top 20 film for the studio.

Revenues for 2002 dropped slightly below those for 2001; yet, largely because of Disney's cost-cutting measures, the company's net income jumped to $1.2 billion. The year 2002 also witnessed creative successes for Disney, with the releases of Peter Pan: Return to Neverland and Lilo & Stitch. The latter, in particular, was hugely successful. The Walt Disney Studios reaped large rewards in 2003, becoming the first in history to exceed over $3 billion in worldwide box office sales. Contributing to this success were the premieres of Pirates of the Caribbean: The Curse of the Black Pearl, Bringing Down the House,; Finding Nemo, and Brother Bear.

But the mood was partly spoiled by turmoil within the company, between CEO Eisner and board members Roy E. Disney (son of Roy O. Disney) and Stanley Gold. Conflict came to the fore when Eisner pushed the board to deny the reelection of Disney to the board, claiming the latter, at age 72, was required to retire. In response, Gold resigned from the board, urging other board members to oust Eisner.

Eisner's difficulties did not lessen in 2004. For one, Pixar Animation Studios, creator of such hits as Toy Story and Finding Nemo, chose to look for another distributor. The end of the 12-year relationship between the twospawned by Pixar's longstanding battles with Eisner over issues of control and moneywas anticipated to further damage Disney's financial situation. Also in 2004, cable giant Comcast Corporation placed an unsolicited $54 billion bid to acquire the Walt Disney Company, which the latter refused, but which spread doubt concerning the company's future. Uncertainty seemed to surround Disney, even within its movie division. The 2004 movies The Alamo and Home on the Range yielded poor box office earnings, especially considering their high price tags (The Alamo alone cost $100 million). In the face of such difficulties and general dissatisfaction among certain board members, Eisner was forced to cede chairmanship, with some members desiring to see his resignation as CEO.

Principal Subsidiaries

ABC, Inc.; A&E Network (37.5%); Anaheim Sports; Buena Vista Home Video; Buena Vista International; Buena Vista Internet Group; Buena Vista Pictures Distribution, Inc.; Buena Vista Television; Childcraft Educational Corp.; The Disney Channel; The History Channel; Disney Consumer Products International, Inc.; Disney Development Co.; The Disney Store, Inc.; EDL Holding Co.; Euro Disney S.C.A. (49%); E! Entertainment Television (39.5%); ESPN (80%); Fairchild Publications; Hyperion; Infoseek Corporation; KHJ-TV, Inc.; Lake Buena Vista Communities; Lifetime Entertainment Services (50%); Miramax Films; Reedy Creek Energy Services, Inc.; Touchstone Films; Touchstone Television; Walt Disney Attractions; Walt Disney Imagineering; Walt Disney Pictures and Television; WCO Parent Corp.; WED Transportation Systems, Inc.

Principal Divisions

Broadcasting; Creative Content; Theme Parks; Resorts; Sports.

Principal Competitors

DreamWorks SKG; Fox Entertainment Group, Inc.; Liberty Media Corporation; Lucasfilm Ltd.; MGM; Microsoft Corporation; NBC Universal; Six Flags, Inc.; Sony Corporation; AOL Time Warner Inc.

Further Reading

Beard, Richard R., Walt Disney's Epcot, New York: Abrams, 1982.

Birnbaum, Steve, The Best of Disneyland, Boston: Houghton Mifflin, 1987.

"Disney Merges Television Production Arms," MEDIAWEEK, July 12, 1999, p. 3.

"Disney Profit Jumps 30%," New York Times, April 28, 1992.

"Disney Trimming Theme Park Staff As Par Gears Up," Variety, August 3, 1992.

"Eisner's Mousetrap," Fortune, September 6, 1999, p. 106.

Flower, Joe, Prince of the Magic Kingdom: Michael Eisner and the Re-Making of Disney, New York: John Wiley & Sons, 1991.

Gilpen, Kenneth N., "Comcast Withdraws Its Bid for The Walt Disney Company," New York Times, April 28, 2004.

Grover, Ron, The Disney Touch: How a Daring Management Team Revived an Entertainment Empire, Homewood, Ill.: Business One Irwin, 1991.

Holliss, Richard, The Disney Studio Story, New York: Crown, 1988.

Holstein, William J., "Mickey's Net Loss," U.S. News & World Report, June 21, 1999, p. 48.

La Franco, Robert, "Disney's Problems Go Well Beyond One Big Lawsuit," Forbes, July 5, 1999, p. 50.

Leebron, Elizabeth, Walt Disney: A Guide to References and Resources, Boston: G.K. Hall, 1979.

Maltin, Leonard, The Disney Films, New York: Crown, 1984.

Masters, Kim, Keys to the Kingdom: The Rise of Michael Eisner and the Fall of Everybody Else, HarperInformation, 2001.

Parkes, Christopher, "Inside the Magic Kingdom," Financial Times, June 4, 1999, p. 6.

Taylor, John, Storming the Magic Kingdom: Wall Street, the Raiders, and the Battle for Disney, New York: Knopf, 1987.

Thomas, Bob, Walt Disney, an American Original, New York: Simon & Schuster, 1976.

Toy, Stewart, Patrick Oster, and Ronald Grover, "The Mouse Isn't Roaring," Business Week, August 24, 1992.

"Walt Disney Co.," Discount Store News, June 21, 1999, p. 26.

Weinraub, Bernard, "2 Titans Clash and All of Filmdom Feels Shock Waves," New York Times, April 13, 1992.

Cindy Pearlman

updates: Jay P. Pederson, Jeffrey L. Covell, Candice Mancini

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The Walt Disney Company

The Walt Disney Company

500 South Buena Vista Street
Burbank, California 91521
U.S.A.
(818) 560-1000
Fax: (818) 840-1930
Web site: http://www.disney.com

Public Company
Incorporated: 1938 as Walt Disney Productions
Employees: 117,000
Sales: $22.97 billion (1998)
Stock Exchanges: New York Pacific Midwest Tokyo
Ticker Symbol: DIS
NAIC: 51312 Television Broadcasting; 513112 Radio Stations; 51321 Cable Networks; 711211 Sports Teams & Clubs; 71311 Amusement & Theme Parks; 51211 Motion Picture & Video Production

A colossal force in the entertainment industry, The Walt Disney Company is best known for bringing decades of fantasy and fun to families through its amusement parks, television series, and many classic live-action and animated motion pictures. Beginning in 1984, a pivotal juncture in the companys history, Disney enjoyed an enormous creative and financial renaissance, due to the leadership of CEO Michael Eisner; the success of such subsidiaries as Touchstone Films, Hollywood Pictures, The Disney Studios, Buena Vista Distribution, The Disney Channel, and Buena Vista Home Video; the sales of Disney consumer products through The Disney Stores and a multitude of licensing arrangements; and a recommitment to excellence in the making of original feature-length animated films. Under Eisners reign, Disney acquired Capital Cities/ABC in 1996, a $19 billion deal that increased the companys stature enormously. Adding to the theme parks, cruise ships, professional sports teams, and dozens of other businesses owned by the company, the acquisition of Capital Cities/ABC gave Disney the power of broadcasting and the ability to meld entertainment content with programming. During the late 1990s, the company was aggressively building a presence on the Internet and adopting a concerted approach to international expansion.

The Birth of a U.S. Icon

Walt Disney, the companys founder, was born in Chicago in 1901. His appeal to the greater United States is said to have had roots in his humble, middle-class upbringing. Disneys father, Elias, moved the family throughout the Midwest seeking employment. Young Disney grew up in a household where hard work was prized: feeding the familys five children left little pocket change for amusement. Walt Disney began working at the age of nine as a newspaper delivery boy. His father instructed him and his siblings in the teachings of the Congregational Church and socialism.

Drawing provided an escape for Disney, and at the age of 14 he took his work on the road and enrolled at the Kansas City Art Institute. His art was temporarily put on hold when he joined the Red Cross at age 16 to serve as an ambulance driver at the end of World War I. In 1919 he returned to the United States and found work as a commercial artist. Together with Ub Iwerks, another artist at the studio, Disney soon formed an animated cartoon company in Kansas City.

In 1923, following the bankruptcy of this company, Disney joined his brother Roy in Hollywood. By the time he arrived on the West Coast, word came from New York that a company wanted to purchase the rights to a series of Disneys live-action cartoon reels, ultimately titled Alice Comedies. A distributor named MJ. Winkler offered $1,500 per reel, and Disney joined her as a production partner.

A series of animated films followed on Alices heels. In 1927 Disney started a series called Oswald the Lucky Rabbit, which met with public acclaim. The distributor, however, had the character copyrighted in its own name, so Disney earned only a few hundred dollars. It was while pondering the unfairness of this situation on a California-bound train that Disney first thought of creating a mouse character named Mortimer. He changed the name to Mickey Mouse, drew up some simple sketches, and went on to make several Mickey Mouse films with his brother Roy, using their own money.

On the third Mickey Mouse film, Disney decided to take a bold step and add sound to Steamboat Willie. The cartoon was synchronized with a simple musical background. The process provided some of the first technical steps in film continuity: music was played at two beats a second and the film was marked every 12 frames as a guide to the animator, and later an orchestra.

Film distributors laughed at Disneys idea. Finally one, Pat Powers, released Steamboat Willie in theaters. Audiences loved what they saw and heard, and suddenly Disney was a hit in the animation business. In 1935 the New York Times called Mickey Mouse the best-known and most popular international figure of his day. Meanwhile, Disney suffered criticism from observers who judged him to be a cartoonist of only mediocre ability. (Iwerks was responsible for the actual design of Mickey Mouse and the other characters.) Disney was, however, given credit for his ability to conceptualize characters and stories.

The Mickey Mouse projects brought in enough cash to allow Walt Disney to develop other projects, including several full-length motion pictures and advances in Technicolor film. Disneys first full-length film, Snow White and the Seven Dwarfs, opened in 1937 to impressive crowds and led to a string of Disney hits, including Pinocchio and Fantasia in 1940, Dumbo in 1941, Bambi in 1942, and Saludos Amigos in 1943.

Around 1940 Disney decided to tackle live-action films, first with The Reluctant Dragon and to a greater extent with 1946s Song of the South. Meanwhile, during World War II, Disney lent his characters to the war effort, making shorts, including one in which Minnie Mouse showed U.S. homemakers the importance of saving fats. After the war, Walt Disney Productions was back in business with live-action features including 20,000 Leagues Under the Sea. The Living Desert was released in the early 1950s by Disneys new distribution company, Buena Vista, to tremendous box office success.

Taking on Television: 1950s

During the 1950s, as Americans began to spend more time at home watching television for entertainment, Disneys studio took full advantage of the small screen revolution. In 1954, the Disneyland television series premiered. The show included an introduction by Walt Disney and incorporated film clips from Disney productions with live action and coverage of Disneyland. Some four million people tuned in each week. Disney also made a national folk hero out of Davy Crockett when he devoted a three-part program to coverage of his life. Within a matter of weeks, U.S. boys could not live without coonskin caps and other Crockett merchandise, all of which earned Disney a fortune. Crocketts popularity led to the era of the Disney live-action adventures that included the 1950s hits The Great Locomotive Chase, Westward Ho, Old Yeller, and The Light in the Forest.

In October 1955 The Mickey Mouse Club debuted on the ABC television network. The hour-long show aired at 5 p.m. weekdays and made television history. Six years later, his groundbreaking Sunday night color TV show Walt Disneys Wonderful World of Color (later changed to The Wonderful World of Disney), began its 20-year run on NBC. At the same time, Disney was making stars out of Fred MacMurray, Hayley Mills, and Dean Jones in such movies as The Shaggy Dog, The Absent-Minded Professor, Pollyanna, and The Parent Trap. In 1964 Disneys Mary Poppins became one of the top-grossing films of all time.

Disney required professionalism of his staff and demanded the highest-quality Technicolor available, and as a result his live-action films topped competitors in both creativity and technical standards. He also had his hand in several other projects, including Audio-Animatronics (automatically controlled robots) and a Florida amusement complex that eventually became Walt Disney World, complementing Californias vacation hot spot, Disneyland.

On December 15, 1966, Walt Disney died of lung cancer. Shortly after Disneys death, his brother Roy issued an optimistic statement pledging that Walt Disneys philosophy and genius would be carried on by his employees.

But no one could match Walt Disneys keen story sense or enthusiasm, and the studio foundered through most of the 1970s despite several strong CEOs, including E. Cardon Card Walker, who had joined the company as a traffic boy in 1938. The studio did manage a few successes during this period, including Blackbeards Ghost, with Dean Jones and Suzanne Pleshette, and the 1969 release The Love Bug, which became the years biggest box office hit and the second highest grossing film in Disney history after Mary Poppins. Other popular releases of the late 1960s and early 1970s included The Jungle Book, The Aristocats, Bedknobs and Broomsticks, and several live-action features.

But a run of box office disappointments followed in the mid-1970s before The Rescuers proved successful. Petes Dragon, an experimental film combining human and animated characters, followed. Progress was slow but steady for the Disney studio in the late 1970s and early 1980s as well. The studio released three new live-action movies: The Worlds Greatest Athlete, Gus, and The Shaggy D.A. Return from Witch Mountain, a sequel to the popular mystery-fantasy Escape to Witch Mountain, premiered in 1978. A risky science fiction venture titled The Black Hole cost $20 million to produce but was lost in the amazing success of Star Wars, an all-time science fiction box office recordbreaker that became one of the most popular films ever released in the United States. CEO Ron Miller brought in new directors and younger writers who produced such films as Watcher in the Woods and the computer-generated Tron, but achieved only mild success in the face of competition from other movie studios.

Company Perspectives:

Disneys overriding objective is to create shareholder value by continuing to be the worlds premier entertainment company from a creative, strategic, and financial standpoint.

In 1983, beginning with the release of Mickeys Christmas Carol, Disneys fortunes finally began to look up. A string of successful movies followed, including the Arctic adventure Never Cry Wolf and a production of Ray Bradburys Something Wicked This Way Comes. That same year the company also began marketing a family-oriented pay-TV channel called the Disney Channel, which quickly became the fastest-growing channel on cable television.

Corporate raider Saul Steinberg attempted a hostile takeover of the company in 1984. Disney ultimately bought Steinbergs 11.1 percent holding in the company for $325.4 million. A number of lawsuits were filed by shareholders against both Disney and Steinbergs Reliance Group Holdings, charging that Disneys managers had attempted to secure their positions and had lowered the value of the stock. The suits were settled in 1989 when the two companies jointly agreed to pay shareholders $45 million.

The Eisner Era Begins: 1984

Shortly after their purchase of 18.7 percent of Disneys stock, the Bass family of Texas supported the Disney boards hiring of Michael Eisner from Paramount Pictures to be Disneys new CEO and Frank Wells to be president.

Eisner, responsible for such Paramount blockbusters as Raiders of the Lost Ark and Beverly Hills Cop, immediately began to emphasize Touchstone Films, a subsidiary devoted to attracting adult movie audiences. Commentators began to note that Eisner, like Walt Disney, had the ability to predict and deliver movies people wanted to see. The 1985 release of Down and Out in Beverly Hills helped Touchstone build momentum, which it increased with Outrageous Fortune, Tin Men, Ruthless People, and other hits. In Eisners first four years as CEO, Disney surged from last place to first in box office receipts among the eight major studios.

Eisner also set out to take full advantage of expanding markets such as cable television and home video. Disney signed a long-term deal with Showtime Networks, Inc., giving the cable service exclusive rights to Touchstone and other Disney releases through 1996. In addition, Eisner bought KHJ, an independent Los Angeles TV station; sought new markets for old Disney productions through television syndication; and began to distribute such TV shows as The Golden Girls.

Certain Disney classics, including Lady and the Tramp and Cinderella, were released on videocassette during the late 1980s. Eisner protected the value of the films by limiting the availability of the tapes. He also scheduled the re-release of many other films for the late 1980s and early 1990s, by which time a new generation of children would be ready to see the films in the theater once again. Disneys revenues soon began to increase, averaging an improvement of approximately 20 percent annually during the second half of the 1980s.

In 1989 Disney-MGM Studios Theme Park opened near Orlando, Florida, on the grounds of Walt Disney World. Despite its name, the park was not a collaboration between the two studios; Disney purchased the rights to include attractions based on MGM films. Euro Disney, of which Disney owned 49 percent, opened outside of Paris, in Marne-la-Vallee, on April 12, 1992; and Tokyo Disneyland, licensed though not owned by Disney, regularly drew phenomenal crowds in a powerful consumer market. Plans were made to open a second Disney-MGM Studios park, on a site adjacent to Euro Disney, in the mid-1990s.

In the early 1980s the parks were responsible for about 70 percent of the companys revenue. Although they continued to be a crucial part of the company, the theme parks found competition with Disneys newer projects, including hotel expansions, home video distribution, and Disney merchandising, which together in 1991 garnered an impressive 28 percent of fiscal revenues. Virtually as important, perhaps more so given their unrealized potential, were Disneys international operationsevident not only in Japan and France, but throughout much of Europe, the former Soviet Union, South America, and Chinawhich contributed 22 percent of total revenues in 1991.

Meanwhile, Touchstone remained healthy. Hollywood Pictures, Disneys newest film-producing arm, also began making more films in the late 1980s. Disney continued to score hits with Three Men and a Baby, Good Morning Vietnam, Who Framed Roger Rabbit, and others. Most importantly, production costs, though constantly rising, were held by Disney in 1989 to an average of $15 million per movie, compared to an industry average of more than $23 million.

Taking a Roller-Coaster Ride: 1990s

The 1990s, termed the Disney Decade by the company, promised to witness perhaps the most dramatic changes and accomplishments of Disneys more than half-century history. The combined talents of Eisner, president Frank Wells, and studio chairman Jeffrey Katzenberg caused a rush of excitement as the decade began. By the second quarter of 1991, the studio, under Katzenbergs strong leadership, had surpassed the theme parks in profitability, leading the company to commit to a record-high 25 new films in 1992. By far the greatest highlight of 1991 was Disneys 30th feature-length animated film, Beauty and the Beast. Amid a troubled year and a depressed economy, during which corporate net income plummeted by 23 percent and Disney, despite the success of its studio, experienced its first year with no growth since 1984, this filmnominated for best picture and winner of Academy Awards for best original score and best original songprovided much welcomed relief. Beauty, like its 1989 Oscar-winning predecessor The Little Mermaid, shattered previous records for the most successful opening of an animated film. It quickly became the highest-grossing picture of its genre.

Although Disney was notorious for undercutting its Hollywood competitors, it, too, was forced to pay exorbitant amounts for top creative talent. Both Bernard Weinraub, in a New York Times article, and Eisner, in the companys 1991 annual report, reported that Disney was going to try to stem the flow of high production costs for big-budget films and instead offer films with appealing storylines and engaging characters. According to Ron Grover, Katzenberg himself began pushing for such a redirection in early 1991. Presumably, films like the modestly budgeted 1990 sleeper Pretty Woman were expected in the future.

Disneys next foraysits creation, for example, of Hyperion Press and Hollywood Records for stakes in the publishing and adult music industrieswere expected to further strengthen its reputation as an entertainment giant. Yet, here too, it became increasingly cautious. In August, the company revealed that its Imagineering division, responsible for theme park design, was laying off up to 400 of its employees. Further news that Euro Disneys profitability for its first year was in serious doubt indicated to some that Disney might be struggling. However, Disneys overseas investment was less than $200 million, a fraction of the total, according to Stewart Toy. And whether or not theres a profit, Walt Disney gets 10 percent of ticket sales and 5 percent of merchandise sales.

As the Disney Decade continued to unfold, and speculations of mergers and other high-level behind-the-scenes negotiations repeatedly surfaced, one fact remained clear. According to Joe Flower, author of Prince of the Magic Kingdom: Michael Eisner and the Re-Making of Disney, the Disney name remains the companys largest resource, an asset that would be difficult if not impossible for any other company to build or buy. While Disney may suffer setbacks in particular areas, and may even abandon some businesses, it was likely that, all things considered, the company would continue to grow faster and more safely through the next decade than the average American company.

During the latter half of the 1990s, Disney did indeed grow at a prolific rate, but by the decades end there was little cause to celebrate. The remainder of the Disney Decade was pocked with troubling developments that shook the foundation of the Disney empire, prompting some experts to suggest the previously unimaginable: that the omnipotent Disney name was losing its market appeal. The tumultuous period began with tragedy, when Frank Wells died in a helicopter crash in 1994. The fatal accident left Eisner without his most trusted aide and left Disney without a president, a title Katzenberg reportedly coveted. Two days after the helicopter crash, Katzenberg approached Eisner about the job, but his bid to become president was rebuffed. Katzenberg responded by leaving Disney, departing on decidedly unfriendly terms. An acrimonious feud between Eisner and Katzenberg erupted that became litigious. Upon his departure, Katzenberg was given the equivalent of ten years pay, but the former studio head wanted considerably more cash. He filed a lawsuit against Disney, demanding $580 million in compensation.

Against the backdrop of a sordid legal battle, whose ugly details became the stuff of headlines, Eisner prepared to add a new dimension to Disneys operations. In 1994, Eisner attempted to buy the NBC television network from General Electric Company, but the deal fell through because General Electric, reportedly, wanted to retain ownership of 51 percent of the network. Eisner pressed ahead, determined to buy a television network. His search ended in 1995 when Disney announced its head-turning merger with Capital Cities/ABC, a $19 billion deal that gave Disney control over television stations, radio stations, cable networks, and legions of other properties. Applauded by industry pundits as a strategically sound move, the acquisition of Capital Cities/ABC married the vast content collection controlled by Disney to the expansive broadcasting capabilities of the ABC network, exponentially increasing the might of what, after the transaction was completed in 1996, stood as a more than $20 billion entertainment conglomerate.

The late 1990s saw Eisner steer Disney in several other strategically important directions. The growth of the Internet presented the companys chairman and CEO with another opportunity to disseminate Disneys entertainment content to the public. In 1998, Disney acquired Starwave, which maintained ESPN.com and Mr. Showbiz, as well as other web sites, and purchased 43 percent of Infoseek, acquiring the rest of the Internet search engine company in 1999. In January 1999, the company launched the GO Network Web portal. Other additions to the companys operations in 1998 included the opening of the 540-acre Animal Kingdom park in Florida, the Disney version of a zoo, and the launching of an 875-stateroom cruise ship christened the Disney Magic, to be followed by the debut of a sister ship, the Disney Wonder, in 1999. Eisner also acquired two professional sports clubs, the Mighty Ducks of Anaheim, a professional hockey team, and Major League Baseballs Anaheim Angels. Concurrent with the numerous acquisitions he presided over, Eisner endeavored to expand Disneys geographic reach. During the late 1990s, the company collected roughly 20 percent of its revenue from overseas businesstoo low of a percentage from Eisners viewpoint. China and India were considered to be high-growth markets.

The scope and scale of Disneys properties by the late 1990s represented an impressive list of businesses that few companies in the world could equal. The additions to the Disney portfolio during the latter half of the decade turned an already sprawling empire into a multifaceted entertainment conglomerate of mind-boggling proportions, but no matter the size of a company, success depended on execution. As it became evident during the court proceedings to resolve Katzenbergs lawsuit, Disneys massive revenue-generating, profit-making engine was sputtering inefficiently. The details delineating the companys problems were divulged because of the nature of the Katzenberg case. Eisner, who had the opportunity to settle his former studio chiefs compensation claim for $100 million, decided not to give in without a fight, believing the demand for as much as $580 million was preposterously high. It was a decision he later regretted. In court, Eisner learned that Katzenberg had negotiated a contract with Wells during the 1980s. A passage in the contract, as published by the Financial Times on June 4, 1999, read: It is, of course, obvious but nonetheless worth pointing out that many of these pictures still have substantial revenues forthcoming from ancillary markets which continue to accrue to Jeffreys benefit.... Of course, [these] will continue forever in the sense that even if he should leave one day, there would be an arbitrated amount as to future income from the pictures. The inclusion of the word forever in the contract struck a crippling blow to Eisners hope of leaving the courtroom victorious.

Because the amount of Katzenbergs claim depended on the future profit potential of certain facets of the Disney enterprise, company lawyers were inclined to paint a bleak picture of the companys financial health at the end of the 1990s and its prospects for the years ahead. Despite the incentive to underestimate the companys financial might, it became obvious to onlookers that all was not right in the Magic Kingdom. The theme parks were performing well, but nearly every other aspect of the companys business suffered from disappointing results. ABC was at the top of the list, hobbled by low ratings and rising costs, including the $9.2 billion spent for ABC and ESPN to acquire the rights for the NFL through 2008. Internationally, the company was not making headway, notoriously evident in two cinematic failures. Mulan, the Chinese-themed animation film, generated a paltry $1.3 million during its run in China. The release of Hercules in India fell decidedly flat and actually led to a loss of $14,000. On the whole, the last year of the decade signaled a depressing end to the 20th century for Disney. For the first nine months of 1999, excluding the income gained from an asset sale, operating income was down 17 percent, net income dropped 26 percent, and earnings per share fell 27 percent.

The Katzenberg compensation claim was settled for a reported $200 million, although both parties refused to divulge the amount. More significant to industry observers than the exact dollar amount of the settlement was the information revealed during the proceedings, prompting some analysts to cast a wary eye toward the entertainment behemoth. Some critics charged that Eisners autocratic leadership inhibited efficiency and progress, but the most threatening diagnosis struck at the companys fundamental strength. Some industry experts contended that age compression, the theory that youths of the late 1990s emulated teenage behavior at an earlier age than in decades past, was draining the strength of the Disney name. Rebellion against the wholesome Disney image was the result, reducing the size of Disneys target audience. Theyve never gotten past the problem that their core audience is girls 2 to 8 and their moms, a former, unnamed, Disney executive explained in the September 6, 1999 issue of Fortune magazine. Sociological intricacies aside, the future financial health of Disney depended on the ability of the company to reap the rewards inherent in its operations, on its effectiveness in churning out profits from a powerful entertainment machine that looked good on the outside but internally was suffering. The continued attraction of the Disney name in the 21 st century represented the foundation upon which the companys return to soaring profits would be built.

Principal Subsidiaries

ABC, Inc.; A&E Network (37.5%); Anaheim Sports; Buena Vista Home Video; Buena Vista International; Buena Vista Internet Group; Buena Vista Pictures Distribution, Inc.; Buena Vista Television; Childcraft Educational Corp.; The Disney Channel; The History Channel; Disney Consumer Products International, Inc.; Disney Development Co.; The Disney Store, Inc.; EDL Holding Co.; Euro Disney S.C.A. (49%); E! Entertainment Television (39.5%); ESPN (80%); Fairchild Publications; Hyperion; Infoseek Corporation; KHJ-TV, Inc.; Lake Buena Vista Communities; Lifetime Entertainment Services (50%); Miramax Films; Reedy Creek Energy Services, Inc.; Touchstone Films; Touchstone Television; Walt Disney Attractions; Walt Disney Imagineering; Walt Disney Pictures and Television; WCO Parent Corp.; WED Transportation Systems, Inc.

Principal Divisions

Broadcasting; Creative Content; Theme Parks; Resorts; Sports.

Further Reading

Beard, Richard R., Walt Disneys Epcot, New York: Abrams, 1982.

Birnbaum, Steve, The Best of Disneyland, Boston: Houghton Mifflin, 1987.

Disney Merges Television Production Arms, MEDIAWEEK, July 12, 1999, p. 3.

Disney Profit Jumps 30%, New York Times, April 28, 1992. Disney Trimming Theme Park Staff As Par Gears Up, Variety, August 3, 1992.

Eisners Mousetrap, Fortune, September 6, 1999, p. 106.

Flower, Joe, Prince of the Magic Kingdom: Michael Eisner and the Re-Making of Disney, New York: John Wiley & Sons, 1991.

Grover, Ron, The Disney Touch: How a Daring Management Team Revived an Entertainment Empire, Homewood, 111.: Business One Irwin, 1991.

Holliss, Richard, The Disney Studio Story, New York: Crown, 1988.

Holstein, William J., Mickeys Net Loss, U.S. News & World Report, June 21, 1999, p. 48.

La Franco, Robert, Disneys Problems Go Well Beyond One Big Lawsuit, Forbes, July 5, 1999, p. 50.

Leebron, Elizabeth, Walt Disney: A Guide to References and Resources, Boston: G.K. Hall, 1979.

Maltin, Leonard, The Disney Films, New York: Crown, 1984.

Parkes, Christopher, Inside the Magic Kingdom, Financial Times, June 4, 1999, p. 6.

Taylor, John, Storming the Magic Kingdom: Wall Street, the Raiders, and the Battle for Disney, New York: Knopf, 1987.

Thomas, Bob, Walt Disney, an American Original, New York: Simon & Schuster, 1976.

Toy, Stewart, Patrick Oster, and Ronald Grover, The Mouse Isnt Roaring, Business Week, August 24, 1992.

Walt Disney Co., Discount Store News, June 21, 1999, p. 26.

Weinraub, Bernard, 2 Titans Clash and All of Filmdom Feels Shock Waves, New York Times, April 13, 1992.

Cindy Pearlman and Jay P. Pederson

updated by Jeffrey L. Covell

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The Walt Disney Company

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


For additional industry research:

investigate companies by their standard industrial classification codes, also known as sics. the disney co.'s primary sics are:

2731 book publishing

4832 radio broadcasting stations

4833 television broadcasting stations

4841 cable & other pay tv services

5399 misc. general merchandise stores

5999 misc. retail stores, nec

7011 hotels & motels

7812 motion picture & video production

7822 motion picture & tape distribution

7996 amusement parks

7999 amusement & recreation, nec

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