THE WALT DISNEY COMPANY

 February 25, 2020, 4:15 am. Bob Chapek - being named Disney’s new CEO
 The Walt Disney Company is one of the world’s largest media companies.
 a lot of questions about his future vision for Disney
 $60 billion in annual revenues in 2019
 Disney is active in a wide array of business activities –
1. Movies
2. amusement parks
3. cable and broadcast television networks (ABC, ESPN, and others)
4. cruises
5. retailing
6. streaming
 The New CEO will need to implement multiple strategic initiatives that were put in place by
Bob Iger –
 Disney closed its $71.3 billion acquisition of 21st Century Fox’s entertainment assets,
or its largest acquisition ever, in March 2019
 As part of the Fox and other deals, Disney gained controlling ownership of Hulu, a
streaming service
 also rolling out its own new streaming service called Disney+ in November 2019,
thus moving into the direct-to-consumer space
 Iger also announced that Disney will pull most of its movies from Netflix by 2020
 managing the growing portfolio in Disney’s Studio Entertainment division, as it
operates more than seven movie studios, including Walt Disney Pictures, Walt
Disney Animation, Pixar, Marvel, Lucasfilm, 21st Century Fox, Fox, and Blue Sky.
 Disney has outlined plans for roughly a dozen movies each year through 2022.

Iger’s Tenure

 Disney has performed well in terms of stock price appreciation and financials

Strategic Leadership

 The phenomenal success of Disney is partly attributed to the leadership of three

distinguished individuals:
 Walt Disney
 Michael Eisner
 Robert Iger
 Each leader is recognized for providing a strong vision and strategic direction that enabled
the company to adapt to unprecedented changes in the media and entertainment industry

WALT DISNEY
 the entrepreneur, animator, and film producer
 had the corporate vision, values, and perseverance
  In 1923, Walt moved to Los Angeles joined forces with his brother Roy, and they founded
Disney Brothers Cartoon Studios.
 Walt was an influential leader with a strong work ethic and lofty values.
 He ran the company as a flat, nonhierarchical meritocracy.
 He held employees to high professional standards emphasizing creativity, quality, teamwork,
communication, and cooperation.
 Even when facing financial pressure, Walt refused to compromise on quality and worked to
constantly reinvent his company.
 One such reinvention was his idea of building an entertainment theme park, a testament to
his commitment to having fun
 Disneyland’s success resulted in financial stability for the company
 Disney’s different business lines, TV, music, studio, merchandise licensing, publications,
comic strips, magazines, art corner shops, and Disneyland create synergies by leveraging
intellectual property (IP) across complementary business segments.

MICHAEL EISNER
 In 1984, Michael Eisner was appointed CEO of Disney
 He continued Walt Disney’s emphasis on creativity, branding, and synergies
 The media conglomerate’s revenues increased from less than $2 billion to more than $25
billion,16 and its market value from $1.8 billion to a high of $80 billion
 Eisner believed creativity was the result of creative conflict out of which the best ideas
would emerge.
 focused on strengthening the Disney brand through synergies across business units.
 he established a centralized corporate marketing function to oversee corporate-wide mar-
keting and branding activities.
 Eisner started by revitalizing Disney’s television programming and animated films
 In parks and resorts, Eisner expanded and improved Disney theme parks to increase
profitability, growth, and synergies with other business lines
 In consumer products, Eisner’s strategy of “retail as entertainment” doubled the average
rate of retail sales per square foot in 1992.
 by the late 1990s, Disney financials deteriorated, and this was partly attributed to Eisner’s
heavy-handed management style, and strategic imperatives of creativity, branding, and syn-
ergy
 The intense focus on branding also caused displeasure among Disney fans who felt that
branding is what you do when you lack original, high-quality content.

ROBERT IGER
 appointed The Walt Disney Company’s CEO in 2005
 established a new vision and strategic direction for Disney
 he articulated three pillars of strategy that he felt were aligned with Walt Disney’s original
intent, that is invest in:
1) creative content,
2) technology innovation
3) international expansion
 Iger envisioned a Disney that uses advanced technology to produce creative content with
global reach
 Iger proceeded to make some major changes in the company-
 beginning with reconciliation with board members to end conflicts.
  Iger worked to change the perception within Disney of technology as a threat, to
viewing it as an opportunity
 decentralized decision making by empowering individual business, while
reducing the role of Disney’s central strategic planning
 articulated a corporate strategy to pursue billion-dollar franchises, which generally
begin with a big movie hit and are followed up with derivative TV shows, theme park
rides, video games, toys, clothing such as T- shirts and PJs, among many other spin-
offs
 Disney now produces about 10 movies per year, focusing on box office hits.
 implemented his strategic vision to build billion-dollar franchises by making a number of
high- profile acquisitions
 led a group of about 20 executives whose sole responsibility is to hunt for the next billion-
dollar franchise. This group of senior leaders decides top-down which projects are a go and
which are not.
 Coming out in November, Frozen II may help to take the top-line revenue figure above $10
billion—which is staggering sum for big screen movies alone.
 Disney has performed well in terms of stock price appreciation and financials

Strategic Business Units

 diversified worldwide entertainment company with operations in four strategic business
units (SBUs):
1. Media Networks
2. Parks and Resorts
3. Studio Entertainment
4. Consumer Products & Interactive
 Recently, the company combined former Consumer Products and Interactive into a single
segment
MEDIA NETWORKS
 largest segment by revenues earned $24.5 billion in 2018 from cable networks, broad-
casting, radio businesses, original programming, and equity investments
 The cable network includes ESPN, the Disney Channels and Freeform,
 Disney has equity investments in external media businesses including A&E Television
Network LLC, BAMTech LLC, and CTV Specialty Television Inc.
 In 2019, Disney’s acquisition of 21st Century Fox also included several television networks,
including mega movie hits (Titanic, Avatar) and TV series (The Simpsons), plus some of its
key net- works (FX, Hulu, National Geographic Channel).

PARKS AND RESORTS

 $20.3 billion in revenue with 10 percent of growth from 2017
 The company owns and operates Disneyland in California, Disney World in Florida, Aulani
Disney Resort & Spa in Hawaii, Disney Cruise Line, Adventures by Disney, and the Disney
Vacation Club.
 In 2018, Disney introduced variable ticket prices that increased for higher demand time
periods (“dynamic pricing”).

STUDIOS ENTERTAINMENT
 This segment generated $10 billion and 19 percent growth over the prior year in 2018,
which, in part, reflects contributions from acquisitions.
 this segment produces and acquires live-action and animated movies, in addition to musical
recordings, and live stage plays
 The company distributes films under the Walt Disney Pictures, Pixar, Marvel, Lucasfilm, and
Touchstone banners.

DISNEY CONSUMER PRODUCTS & INTERACTIVE MEDIA

 This business segment had $4.65 billion in revenue in 2018—a 4 percent decline from 2017
 This segment generates revenues through licensing Disney’s characters to third parties for
use in consumer merchandises, published materials, and in multi-platform games.
 This division is also home to one of Disney’s new strategic initiatives into consumer
streaming with Disney+, ESPN+, and Hulu.
 Disney+ a direct-to-consumer streaming service is built around some of its most popular
franchises from Star Wars to High School Musical.
 In November 2019, Disney will launch Disney+ at half the price of Netflix’s monthly
subscription fee, and Apple+ streaming is launching at the same time with an even lower
price
 Disney continues to lose money on its streaming services as it attempts to grow its
subscriber base.

Consumers are switching from watching cable TV to viewing content online via streaming services
such as Netflix, and other inter- active media.

Competition

 Comcast, AT&T (Time Warner and HBO+), National Amusements (CBS and Viacom) and Sony,
Amazon, Apple, and Netflix
 Disney has a large market capitalization (over 230 billion).
  new competitors are larger in terms of market capitalization (Amazon $850 bil- lion and
Apple $1 trillion), and Apple has over $210 billion in cash on hand
 Disney+, relies on Amazon Web Services for cloud services
 Disney’s Media Network segment competes for viewers, sale of advertising time, and
acquisitions of sports and other programming

Disney’s Media Network segment competes

1. for viewers, sale of advertising time, and acquisitions of sports and other programming.
2. Its primary competitors for an audience are other television and cable networks, TV stations,
DVD and Blu-ray formats, and the Internet.
3. For advertisers, competition is from TV networks, radio and TV stations, MVPDs, advertising
media such as newspapers, magazines, billboards, and the Internet.
4. Competition for acquisition of sports and other programming is intense, especially for
Disney’s ESPN which faces increasing competition from the sports channels of 21st Century
Fox, CBS, and Comcast’s NBC Universal segment

The Parks and Resorts segment competes for consumers’ leisure time

Primary competitors include other forms of entertainment, lodging, tourism, and recreational
activities.

Specific competitors for theme parks and resorts include Six Flags Entertainment, Comcast, Cedar
Fair, SeaWorld Entertainment, and Universal Studios

The Studios Entertainment segment competes with all forms of entertainment including companies
that provide films, home entertainment products, pay TV, music, and live theatre.

There is also competition for performing talent, advertisers, and broadcast rights. Primary
competitors in this area include AT&T (Time Warner), Sony, and Viacom.

The Consumer Products & Interactive Media businesses compete with other licensors, retailers and
publishers of character, brand, and celebrity names

Competition also arises from licensors, publishers and developers of game software, online video
content, and websites

STREAMING WARS

 Entry into streaming service is generating cutthroat competition with established players
such as Netflix and Hulu (now fully controlled by Disney), but also new entrants such as
Apple TV+, AT&T’s HBO MAX, NBC Universal’s Peacock (owned by Comcast), YouTube
Premium, as well as Disney’s new streaming services Disney+ and ESPN+.
 In 2019, the clear market leader in streaming services is Netflix with over 150 million
subscribers worldwide, thereof, 61 million in the United States. The revenues for the media
services provider in 2019 were $16 billion, and its market cap stood at $150 billion
 new entrants such as Apple TV+ are pricing their services aggressively ($4.99 a month vs.
$12.99 a month for basic Netflix subscription)
  Amazon offers its Instant Video service to its estimated 100 million Prime subscribers ($119
a year or roughly $10 a month), with selected titles free. In addition, Prime members receive
free two- day shipping on Amazon purchases (with one-day shipping announced in 2019)
 Hulu Plus ($7.99 a month), a video-on-demand service, has some 25 million subscribers. One
advantage Hulu Plus has over Netflix and Amazon is that it typically makes the latest
episodes of popular TV shows available the day following the broadcast; the shows are often
delayed by several months before being offered by Netflix or Amazon
 A joint venture of Disney (67 percent ownership, but 100 percent voting rights) and
NBCUniversal (33 percent), Hulu Plus uses advertisements along with its subscription fees as
revenue sources
 Google’s YouTube with its more than 1 billion users is evolving into a TV ecosystem,
benefiting not only from free content uploaded by its users but also creating original
programming. Google offers its ad-free service YouTube Premium for $12 per month, which
allows users to download content such as videos and music for later, off-line use
 Apple has over 1 billion devices worldwide such as iPhones and iPads as an installed base
where users can enjoy its services such as Apple TV+ and Apple Music

IGER’S STRATEGIC VISION

 based on billion-dollar franchises, which generally begin with a big movie hit followed by
derivative TV shows, theme park rides, video games, toys, clothing, among many other
possible spin-offs
 Iger focused Disney on his three pillars of strategy:
1) generate the best creative content possible
2) foster innovation and utilize the latest technologies
3) expand into new markets around the globe
 In 2006, Disney acquired Pixar
 In 2009, Disney acquired Marvel Entertainment
 In 2012, Disney acquired Lucasfilm.
 In 2014, Disney acquired Maker Studios, a YouTube-based multichannel network, for $675
million.
 In 2019, Disney made by far the largest acquisition in its history in its purchase of 21st
Century Fox for $71 billion, adding movies studios, characters, and network assets, as well as
control of Hulu
 he made a deliberate decision not to have a corporate-level CTO and assigned this position
to himself, and appointed a CTO for each of the four segments.
 also included more technology expertise on Disney’s board of directors
 In 2016, Iger made another bold technology move by acquiring 33 percent interest for $1.1
bil- lion in BamTech, a platform that allowed Major League Baseball to stream content to
consumers directly via the Internet
 The relatively small acquisition for Disney allowed Iger to build its in-house streaming
services, Disney+ and ESPN+, and thus to compete directly with other streaming content
distributors such as Netflix and Amazon Prime Video.
 With it, Disney is a fully vertically integrated media company that produces and distributes
its own content, in addition, to using content selective licensing deals
 Disney’s global presence in the form of products, services, and brand recognition was
another priority for Iger
 Walt Disney International is responsible for Disney’s businesses outside the United States.
  Disney International has over 13,500 employees with operations in 45 countries throughout
the world.
 The company has a substantial global footprint across six regions (Asia, Australia and New
Zealand, EMEA [Europe, Middle East, Africa], India, Latin America, and Russia). Yet, Disney
remains dependent on North America for most of its revenues
 Since its opening on April 1992, Disneyland Paris has struggled with socio-cultural
differences and barriers that limited profitability.
 Walt Disney International has implemented integrated structures in foreign markets that
have “greatly accelerated revenue in China, produced growth across Japan and Europe and
provided unparalleled access to emerging markets throughout Latin America and South East
Asia.
 Iger stressed how important it was to adjust to local culture tastes and preferences,

Challenges
 an acquisition-led growth strategy may not be sustainable
 An increased reliance on billion-dollar franchises also reduces originality
 Disney relies on a formulaic recipe of success: a blockbuster hit followed by derivative
shows, merchandise, and other spin-offs
 While nearly half of Disney profits come from its TV networks ESPN, ABC, and others,63 the
media industry is being disrupted, as consumer preferences to streaming content via over-
the- top services such YouTube, Netflix, Apple TV+, Sling TV, and other services
 While ESPN continues to do well, the cost of rights to show the big sporting events live has
escalated dramatically in recent years. ESPS is losing subscribers as many consumers “cut the
cord” (that is cancel their cable subscription), or never subscribe to cable in the first place.
This trend also affects Disney’s other TV properties, including ABC
 Disney is in the process of launching its own streaming services, Disney+ and ESPN+, there
appears to be room for only a few, if not just one or two winners in a competitive landscape
where Apple, Netflix, Comcast, AT&T, and Amazon are all chasing after the same costumer.
The question is for how many different services will the average consumer in the United
States and else- where pay for?

“I sure hope that the force is with me, and I can create some more magic for Disney going
forward

Recommendations
 Focus on success in international markets
 focus and resolve the issues in organisation
 continue innovations
 needs to convert Tv into internet services
 adopting new technologies competitors used
 issue – decreasing no. of subscribers
 needs to maintain quality along with affordable price
