netrashetty
Netra Shetty
The Walt Disney Company (NYSE: DIS) (commonly referred to as Disney) is the largest media and entertainment conglomerate in the world in terms of revenue.[5] Founded on October 16, 1923, by brothers Walt Disney and Roy Disney as the Disney Brothers Cartoon Studio, the company was reincorporated as Walt Disney Productions, Ltd. in 1929, and became publicity-traded as Walt Disney Productions in 1938. Walt Disney Productions established itself as a leader in the American animation industry before diversifying into live-action film production, television, and travel. Taking on its current name in 1986, The Walt Disney Company expanded its existing operations and also started divisions focused upon theatre, radio, publishing, and online media. In addition, it has created new divisions of the company in order to market more mature content than it typically associates with its flagship family-oriented brands.
The company is best known for the products of its film studio, the Walt Disney Motion Pictures Group, today one of the largest and best-known studios in Hollywood. Disney also owns and operates the ABC broadcast television network; cable television networks such as Disney Channel, ESPN, and ABC Family; publishing, merchandising, and theatre divisions; and owns and licenses 11 theme parks around the world. The company has been a component of the Dow Jones Industrial Average since May 6, 1991. An early and well-known cartoon creation of the company, Mickey Mouse, is the official mascot of The Walt Disney Company.
The Walt Disney Company (NYSE: DIS) is a leading media and entertainment conglomerate. The company is divided into five major business segments: Media Networks (including the ABC network), Parks and Resorts, Studio Entertainment (including Pixar), Consumer Products and Interactive Media. Under the leadership of its new CEO, Bob Iger, Disney has renewed its emphasis on its core strategy of creating and distributing attractive content for children and syndicating this content through its various entertainment channels. For example, when Disney produces a new movie, it continues to capitalize on the characters in the movie long after it has left the box office. Before the movie leaves theaters, the company will have already released a line of complementary toys and action figures. This is followed by the release of the movie on DVD and - depending on its popularity - a presence in Disney's theme parks or its own television show.
In line with this strategy of maximizing the value of its content, Disney recently began distributing its content in new ways, such as video-on-demand online and television shows formatted for video iPod users. Although distribution through these new mediums comes with significant risks of piracy, the migration of younger audiences (Disney's core customer base) away from traditional television to new media makes finding new ways to reach out to this demographic critically important. Disney has also invested $350 million to develop its own in-house video game development capabilities.
Contents
1 Company Overview
1.1 Major Sources of Revenue
1.2 Business Segments
2 Trends and Forces
2.1 Volatility of advertising revenues
2.2 Consistency in affiliate fees
2.3 Growing technology investments
2.4 Digital Delivery of Content
2.5 Exposure to movie attendance
2.6 Slowing DVD business
2.7 Video games investment
3 Competitors
4 References
In another major acquisition, Disney purchased comic book company Marvel for $4 billion in cash and stock on August 31, 2009. The purchase gives Disney the rights to 5000 Marvel characters, including Spider Man, X-Men, and Iron Man, and their associated royalty and licensing revenues from games, movies, clothing, toys, and theme park rides. [1]
Disney reported $38 billion of revenue in fiscal 2010, up 5.3% from a year prior. Net income rose 19.8% to $3.96 billion.[2]
For the first quarter of fiscal 2011, Disney reported a 40% increase in profits to $2.2 billion from $1.57 billion a year earlier. Revenue rose 10% to $10.7 billion, up from $9.7 billion in the previous year. Cable and broadcast networks, which by far account for the largest slice of revenue, reported an 11% gain in revenue to $1.65 billion.[3] Operating income surpassed analyst estimates in all segments. On a per share basis, net income was 68 cents per share, easily beating the 56-cent average analyst estimate.[4]
Company Overview
The Walt Disney Company was founded in 1923 as a movie studio, and its iconic Mickey Mouse character appeared for the first time five years later. In 1955, Disneyland Resort opened in Anaheim, California, and the company went public two years later. Over the following decades, Disney continued to expand, acquiring film distributors and perfecting its model for consumer product merchandising. In 1996, Disney acquired ABC, and in 2006, Disney finally purchased its long-time partner Pixar, though the two had a previous distribution agreement prior to the acquisition.
Major Sources of Revenue
Overall advertising spending is largely driven by the economy, as well as by the presence of large-scale TV events like the Olympics. Disney's success in attracting advertising money and affiliate fees is driven by the quality of programming and the size of the audience it attracts.
Affiliate fees are payments from cable and satellite companies for programming. These fees provide a stable source of revenue and are expected to grow in virtually any economic environment. Disney generates the highest affiliate fees in the industry, largely due to the popularity of its ESPN programming.
Film and DVD syndication and merchandising are both more volatile than Disney's other sources of revenue. Success in this segment is determined by Disney's ability to produce hit movies--a difficult task with unpredictable results. A blockbuster movie can significantly boost revenues for years to come, but a pricey flop can also lead to extended lower sales.
Domestic theme parks' revenues depend on the number of visitors, which is related to the strength of the dollar. A weaker dollar encourages more foreign travelers to visit the U.S. and more domestic travelers to stay within the country, but a stronger dollar makes products and services (including admissions to Disney's theme parks) relatively more expensive.
Business Segments
The Walt Disney Company divides its operations into four business segments: Media Networks, Parks and Resorts, Studio Entertainment, and Consumer Products.
Media Networks: Media Networks manages Disney's operations in the television, Internet, and radio media industries. The division is centered around its American Broadcasting Company (ABC) television network, though Disney also a number of other successful networks, including ESPN, Walt Disney Television, and SOAPnet. Additionally, Disney holds substantial ownership interests in Lifetime and A&E. The Walt Disney Internet Group runs websites for many of the company's media networks. Only Disney's radio presence has been decreasing, with the recent sale of its ABC Radio Network to Citadel Broadcasting (CDL). However, Disney does still own a number of radio stations across the country and world.
Parks and Resorts: This segment deals with the operation of Disney's theme parks and resorts, both in the U.S. and abroad. Also included in this segment is the Disney Cruise Line, which offers cruises from Florida to Disney's private island, Castaway Cay, in the Bahamas. Disney has been working to expand this segment in recent years. Efforts to this end include the completion of the Hong Kong Disneyland and the announcement of the construction of two new cruise ships 50% larger than previous ones. Parks and Resorts was a significant driver of growth prior to the 2008 Financial Crisis. However, as disposable income decreased as a result of the economic downturn, consumers have been less inclined to visit Disney theme parks. The company attempted to increase publicity and drive attendance through its "free birthday ticket" promotion in 2009, in which it gave away about 1.2 million free theme park tickets.[5] Attendance at Disney's US resorts was up 2% in the fiscal year ending Oct 31, 2009. [6]
Studio Entertainment: Often regarded as Disney's most visible business, Studio Entertainment is actually subject to a great deal of variability in terms of both revenue and profit generation, as its performance is driven largely by Disney's ability to produce hit movies to be released in theaters, on television, and on home video. A flop, like the 2002 movie Treasure Planet, can be quite detrimental to the company's profits. On the other hand, a blockbuster hit, like the Pirates of the Caribbean series, can boost sales and profits substantially. In September 2009, Disney Studios Chairman Dick Cook was forced to resign at the request of CEO Robert Iger, who had been unhappy with the studio's direction and performance. In July 2010, the company announced it would be selling its independent film Miramax unit for $650 million to a group of investors including Ron Tutor, Colony Capital, James Robinson, and an unidentified Middle Eastern investor group.[7]
Consumer Products: The Consumer Products segment licenses the Disney brand for a variety of merchandise. Products bearing the Disney brand range from toys and apparel to home décor and electronics. The Disney Store chain of retailers also falls under this segment's umbrella. Though revenues for the Consumer Products division have traditionally come from licensing the Disney brand to other manufacturers, current chairman Andy Mooney has been expanding the segment's reach from licensing to manufacturing its own products. Current initiatives in this division include the recent $350 million investment in developing Disney's video game business, aimed at increasing the company's presence in this rapidly growing market. In July 2009, Disney announced plans to launch eight mobile games for the iPhone, Android, Blackberry, and Java/Brew, aiming to compete in the mobile gaming market. [8]
Disney Online: On June 1, 2009, Disney acquired Kaboose.com, BabyZone.com, and another 6 parent-oriented sites for $18 million.[9] The company announced it would create a new division called Disney Online Mom and Family portfolio to oversee these new assets as well as the company's existing assets. The company said that mothers are an attractive segment because they make most household buying decisions. [9]
Trends and Forces
Volatility of advertising revenues
Overall advertising spending is largely driven by the economy, as well as by the presence of large-scale TV events like the Olympics. Disney's ABC has recently achieved success with shows like Lost, Grey's Anatomy, and Desperate Housewives. Advertisers are willing to pay more for airtime during shows like these because they attract large numbers of viewers. Similarly, ad prices spike during playoff sports coverage and Superbowl coverage. A very disappointing sports season or flagging TV show ratings can significantly hurt advertising revenues, as does a general economic downturn
Consistency in affiliate fees
Sensitivity to short-term fluctuations in advertising spending are somewhat offset by steady revenues from cable networks' affiliate fees, which tends to provide a more stable revenue stream.
However, a large portion of affiliate fees come from sports coverage channels in the ESPN network, where the cost of sports coverage is rising. Extended increases in sports coverage cost may materially affect operating income after 2013, when Disney's current contracts with broadcasters will expire.
Growing technology investments
With the decline of traditional media to favor of influential technologies like Youtube and Apple's iTunes/iPod, it becomes necessary for media conglomerates to learn how to tap into these channels to access the audience and the advertising revenue. Disney recently began to post both full videos and clips of its programming online at ABC.com, ESPN.com, and Disney.com. In addition, Disney has begun to sell ABC content for use on iTunes and video iPods. These are new initiatives, but they have been very popular and could be a considerable source of future growth.
Average movie attendance per capita
Digital Delivery of Content
With increasing access to high speed internet and higher network bandwidth around the world, media delivery has increasingly become digital. In April 2009, Disney's ABC became one of the last of the major networks to sign on as a joint partner in the Hulu venture, bringing full-length episodes of programs such as "Lost" and "Grey's Anatomy" to Hulu for free public viewing. Disney's stake in the venture is estimated at 27%.[10] In April 2010, Disney signed a deal with MTS, the leading telecommunications provider in Russia, to deliver its content via the Internet in Russia through MTS's proprietary content portal Omlet.ru. Around 100 of Disney's movies will be available beginning in April.[11]
Exposure to movie attendance
The Studio Entertainment division's revenues are subject to conditions in the larger movie industry, including the rate of movie attendance. In recent years, the advent of online video and a rising amount of piracy has led to slow or flat growth in movie attendance, causing studios such as Disney to reevaluate their film distribution methods. One way the company has addressed declining cimema viewership is through enhancing the consumer movie experience, such as filming shows in I-MAX and 3-D. In 2009, Disney Pixar's 3-D "Up" grossed $68.1 million, coming only second to News Corp's "Avatar." In the future, film studios are expected to focus more on the higher-margin DVD and television broadcast segments as a result of this decline in cinema viewership.
Slowing DVD business
The DVD market has begun to mature over the last 2 years. Consumer spending on home videos dropped by about 2% in the past year. Fortunately, For Disney which derives a large portion of its revenues from syndication of its content the impact, however, as DVD sales growth has not slowed as much for Disney's target audience.
Video games investment
As children grow up, they tend to trade their toys for more sophisticated forms of entertainment such as video games. However, children are making switch earlier and earlier, a phenomenon termed as "age compression", so the market for video games is growing larger. Disney, however, does not currently have a large presence in this rapidly growing video game market, spurring its recent $350 million investment in developing its video game business over the next few years. In July 2009, the company announced it was launching eight games for the mobile phone market. [8] The vast majority of games released by Disney are geared to lower grade level children, whereas the vast majority of children would rather play games and not bother with educational games, no matter how cute the character is.
Competitors
Disney's major competitors are the other large media conglomerates, such as News Corporation (NWS) and Time Warner (TWX), who directly compete with Disney in various business lines. Below is a chart of some of these competitors by line of business.
Below is a chart of box office shares of major media conglomerates. In the film business, Disney's Pixar also competes directly with smaller entertainment companies like Dreamworks Animation SKG (DWA).
The company is best known for the products of its film studio, the Walt Disney Motion Pictures Group, today one of the largest and best-known studios in Hollywood. Disney also owns and operates the ABC broadcast television network; cable television networks such as Disney Channel, ESPN, and ABC Family; publishing, merchandising, and theatre divisions; and owns and licenses 11 theme parks around the world. The company has been a component of the Dow Jones Industrial Average since May 6, 1991. An early and well-known cartoon creation of the company, Mickey Mouse, is the official mascot of The Walt Disney Company.
The Walt Disney Company (NYSE: DIS) is a leading media and entertainment conglomerate. The company is divided into five major business segments: Media Networks (including the ABC network), Parks and Resorts, Studio Entertainment (including Pixar), Consumer Products and Interactive Media. Under the leadership of its new CEO, Bob Iger, Disney has renewed its emphasis on its core strategy of creating and distributing attractive content for children and syndicating this content through its various entertainment channels. For example, when Disney produces a new movie, it continues to capitalize on the characters in the movie long after it has left the box office. Before the movie leaves theaters, the company will have already released a line of complementary toys and action figures. This is followed by the release of the movie on DVD and - depending on its popularity - a presence in Disney's theme parks or its own television show.
In line with this strategy of maximizing the value of its content, Disney recently began distributing its content in new ways, such as video-on-demand online and television shows formatted for video iPod users. Although distribution through these new mediums comes with significant risks of piracy, the migration of younger audiences (Disney's core customer base) away from traditional television to new media makes finding new ways to reach out to this demographic critically important. Disney has also invested $350 million to develop its own in-house video game development capabilities.
Contents
1 Company Overview
1.1 Major Sources of Revenue
1.2 Business Segments
2 Trends and Forces
2.1 Volatility of advertising revenues
2.2 Consistency in affiliate fees
2.3 Growing technology investments
2.4 Digital Delivery of Content
2.5 Exposure to movie attendance
2.6 Slowing DVD business
2.7 Video games investment
3 Competitors
4 References
In another major acquisition, Disney purchased comic book company Marvel for $4 billion in cash and stock on August 31, 2009. The purchase gives Disney the rights to 5000 Marvel characters, including Spider Man, X-Men, and Iron Man, and their associated royalty and licensing revenues from games, movies, clothing, toys, and theme park rides. [1]
Disney reported $38 billion of revenue in fiscal 2010, up 5.3% from a year prior. Net income rose 19.8% to $3.96 billion.[2]
For the first quarter of fiscal 2011, Disney reported a 40% increase in profits to $2.2 billion from $1.57 billion a year earlier. Revenue rose 10% to $10.7 billion, up from $9.7 billion in the previous year. Cable and broadcast networks, which by far account for the largest slice of revenue, reported an 11% gain in revenue to $1.65 billion.[3] Operating income surpassed analyst estimates in all segments. On a per share basis, net income was 68 cents per share, easily beating the 56-cent average analyst estimate.[4]
Company Overview
The Walt Disney Company was founded in 1923 as a movie studio, and its iconic Mickey Mouse character appeared for the first time five years later. In 1955, Disneyland Resort opened in Anaheim, California, and the company went public two years later. Over the following decades, Disney continued to expand, acquiring film distributors and perfecting its model for consumer product merchandising. In 1996, Disney acquired ABC, and in 2006, Disney finally purchased its long-time partner Pixar, though the two had a previous distribution agreement prior to the acquisition.
Major Sources of Revenue
Overall advertising spending is largely driven by the economy, as well as by the presence of large-scale TV events like the Olympics. Disney's success in attracting advertising money and affiliate fees is driven by the quality of programming and the size of the audience it attracts.
Affiliate fees are payments from cable and satellite companies for programming. These fees provide a stable source of revenue and are expected to grow in virtually any economic environment. Disney generates the highest affiliate fees in the industry, largely due to the popularity of its ESPN programming.
Film and DVD syndication and merchandising are both more volatile than Disney's other sources of revenue. Success in this segment is determined by Disney's ability to produce hit movies--a difficult task with unpredictable results. A blockbuster movie can significantly boost revenues for years to come, but a pricey flop can also lead to extended lower sales.
Domestic theme parks' revenues depend on the number of visitors, which is related to the strength of the dollar. A weaker dollar encourages more foreign travelers to visit the U.S. and more domestic travelers to stay within the country, but a stronger dollar makes products and services (including admissions to Disney's theme parks) relatively more expensive.
Business Segments
The Walt Disney Company divides its operations into four business segments: Media Networks, Parks and Resorts, Studio Entertainment, and Consumer Products.
Media Networks: Media Networks manages Disney's operations in the television, Internet, and radio media industries. The division is centered around its American Broadcasting Company (ABC) television network, though Disney also a number of other successful networks, including ESPN, Walt Disney Television, and SOAPnet. Additionally, Disney holds substantial ownership interests in Lifetime and A&E. The Walt Disney Internet Group runs websites for many of the company's media networks. Only Disney's radio presence has been decreasing, with the recent sale of its ABC Radio Network to Citadel Broadcasting (CDL). However, Disney does still own a number of radio stations across the country and world.
Parks and Resorts: This segment deals with the operation of Disney's theme parks and resorts, both in the U.S. and abroad. Also included in this segment is the Disney Cruise Line, which offers cruises from Florida to Disney's private island, Castaway Cay, in the Bahamas. Disney has been working to expand this segment in recent years. Efforts to this end include the completion of the Hong Kong Disneyland and the announcement of the construction of two new cruise ships 50% larger than previous ones. Parks and Resorts was a significant driver of growth prior to the 2008 Financial Crisis. However, as disposable income decreased as a result of the economic downturn, consumers have been less inclined to visit Disney theme parks. The company attempted to increase publicity and drive attendance through its "free birthday ticket" promotion in 2009, in which it gave away about 1.2 million free theme park tickets.[5] Attendance at Disney's US resorts was up 2% in the fiscal year ending Oct 31, 2009. [6]
Studio Entertainment: Often regarded as Disney's most visible business, Studio Entertainment is actually subject to a great deal of variability in terms of both revenue and profit generation, as its performance is driven largely by Disney's ability to produce hit movies to be released in theaters, on television, and on home video. A flop, like the 2002 movie Treasure Planet, can be quite detrimental to the company's profits. On the other hand, a blockbuster hit, like the Pirates of the Caribbean series, can boost sales and profits substantially. In September 2009, Disney Studios Chairman Dick Cook was forced to resign at the request of CEO Robert Iger, who had been unhappy with the studio's direction and performance. In July 2010, the company announced it would be selling its independent film Miramax unit for $650 million to a group of investors including Ron Tutor, Colony Capital, James Robinson, and an unidentified Middle Eastern investor group.[7]
Consumer Products: The Consumer Products segment licenses the Disney brand for a variety of merchandise. Products bearing the Disney brand range from toys and apparel to home décor and electronics. The Disney Store chain of retailers also falls under this segment's umbrella. Though revenues for the Consumer Products division have traditionally come from licensing the Disney brand to other manufacturers, current chairman Andy Mooney has been expanding the segment's reach from licensing to manufacturing its own products. Current initiatives in this division include the recent $350 million investment in developing Disney's video game business, aimed at increasing the company's presence in this rapidly growing market. In July 2009, Disney announced plans to launch eight mobile games for the iPhone, Android, Blackberry, and Java/Brew, aiming to compete in the mobile gaming market. [8]
Disney Online: On June 1, 2009, Disney acquired Kaboose.com, BabyZone.com, and another 6 parent-oriented sites for $18 million.[9] The company announced it would create a new division called Disney Online Mom and Family portfolio to oversee these new assets as well as the company's existing assets. The company said that mothers are an attractive segment because they make most household buying decisions. [9]
Trends and Forces
Volatility of advertising revenues
Overall advertising spending is largely driven by the economy, as well as by the presence of large-scale TV events like the Olympics. Disney's ABC has recently achieved success with shows like Lost, Grey's Anatomy, and Desperate Housewives. Advertisers are willing to pay more for airtime during shows like these because they attract large numbers of viewers. Similarly, ad prices spike during playoff sports coverage and Superbowl coverage. A very disappointing sports season or flagging TV show ratings can significantly hurt advertising revenues, as does a general economic downturn
Consistency in affiliate fees
Sensitivity to short-term fluctuations in advertising spending are somewhat offset by steady revenues from cable networks' affiliate fees, which tends to provide a more stable revenue stream.
However, a large portion of affiliate fees come from sports coverage channels in the ESPN network, where the cost of sports coverage is rising. Extended increases in sports coverage cost may materially affect operating income after 2013, when Disney's current contracts with broadcasters will expire.
Growing technology investments
With the decline of traditional media to favor of influential technologies like Youtube and Apple's iTunes/iPod, it becomes necessary for media conglomerates to learn how to tap into these channels to access the audience and the advertising revenue. Disney recently began to post both full videos and clips of its programming online at ABC.com, ESPN.com, and Disney.com. In addition, Disney has begun to sell ABC content for use on iTunes and video iPods. These are new initiatives, but they have been very popular and could be a considerable source of future growth.
Average movie attendance per capita
Digital Delivery of Content
With increasing access to high speed internet and higher network bandwidth around the world, media delivery has increasingly become digital. In April 2009, Disney's ABC became one of the last of the major networks to sign on as a joint partner in the Hulu venture, bringing full-length episodes of programs such as "Lost" and "Grey's Anatomy" to Hulu for free public viewing. Disney's stake in the venture is estimated at 27%.[10] In April 2010, Disney signed a deal with MTS, the leading telecommunications provider in Russia, to deliver its content via the Internet in Russia through MTS's proprietary content portal Omlet.ru. Around 100 of Disney's movies will be available beginning in April.[11]
Exposure to movie attendance
The Studio Entertainment division's revenues are subject to conditions in the larger movie industry, including the rate of movie attendance. In recent years, the advent of online video and a rising amount of piracy has led to slow or flat growth in movie attendance, causing studios such as Disney to reevaluate their film distribution methods. One way the company has addressed declining cimema viewership is through enhancing the consumer movie experience, such as filming shows in I-MAX and 3-D. In 2009, Disney Pixar's 3-D "Up" grossed $68.1 million, coming only second to News Corp's "Avatar." In the future, film studios are expected to focus more on the higher-margin DVD and television broadcast segments as a result of this decline in cinema viewership.
Slowing DVD business
The DVD market has begun to mature over the last 2 years. Consumer spending on home videos dropped by about 2% in the past year. Fortunately, For Disney which derives a large portion of its revenues from syndication of its content the impact, however, as DVD sales growth has not slowed as much for Disney's target audience.
Video games investment
As children grow up, they tend to trade their toys for more sophisticated forms of entertainment such as video games. However, children are making switch earlier and earlier, a phenomenon termed as "age compression", so the market for video games is growing larger. Disney, however, does not currently have a large presence in this rapidly growing video game market, spurring its recent $350 million investment in developing its video game business over the next few years. In July 2009, the company announced it was launching eight games for the mobile phone market. [8] The vast majority of games released by Disney are geared to lower grade level children, whereas the vast majority of children would rather play games and not bother with educational games, no matter how cute the character is.
Competitors
Disney's major competitors are the other large media conglomerates, such as News Corporation (NWS) and Time Warner (TWX), who directly compete with Disney in various business lines. Below is a chart of some of these competitors by line of business.
Below is a chart of box office shares of major media conglomerates. In the film business, Disney's Pixar also competes directly with smaller entertainment companies like Dreamworks Animation SKG (DWA).
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