I.
The Walt Disney Company has grown from the children’s cartoon dream-factory of brothers Roy and Walt Disney into the world’s second largest media conglomerate, behind Time-Warner (Hoover’s). Anyone with at least a peripheral knowledge of current popular culture knows there is not much Disney does not do.
While television and film are what the corporation originated as and constitute the majority of Disney’s profits and public identity, virtually every asset and product the conglomerate has exists in multiple forms through the many types of groups owned by Disney. The numerous companies under the Disney umbrella are divided into four segments: media networks (43% of fiscal year 2006 covering broadcasters like ABC and ESPN, radio, TV production and syndicate companies, and channel-related Internet sites); parks and resorts (29% fy 2006, including parks in all nations, the Disney Cruise Line, and ESPN dining); studio entertainment (21% fy 2006, in which movie studios Walt Disney Pictures, Pixar, and Miramax, and TV/DVD distributors belong); and consumer products (7% fy 2006, including merchandising licensing, retail stores, and children’s book publishing) (Amobi).
Ithaca College alum Bob Iger, President, CEO, and Director since 2005 has encouraged the use of synergy between the four segments, leading the Burbank, California based Walt Disney Company to its best shape ever, with 137,000 employees and a 2007 total revenue of approximately $35.51 billion (Hoover’s). With each year, new technologies emerge allowing for more cross-promotion and increased revenue. The Walt Disney Company will certainly not be filing for bankruptcy any time soon.
II.
As mentioned above, Disney’s media networks constitute the largest percentage of the company’s revenue, and in fact lead all other such media divisions of competing conglomerates (Bond). Though much of the money coming from Pirates of the Caribbean, High School Musical, Grey’s Anatomy, and Lost, among others, is from ticket revenue, airings, and DVD sales, Disney excels at bringing in larger amounts of income from cross promotion and collaboration between its partner companies (Schiller). For example, to promote the third Pirates movie, Disney associates Volvo, Verizon, Coca-Cola, Circuit City, Best Buy, Visa/Commerce Bank, Gibson Guitars, Toys “R” Us, Madame Tussauds, etc. each had promotions featuring characters from and prizes related to the film, and did so willingly (Shiller). This acts as advertising for the films and the other businesses involved, as well as increasing sales of Pirates merchandise and the products featuring that theme. Amobi notes, “Disney’s business strategy feeds a virtuous cycle of content creation that, with relatively minimal incremental costs, allows it to leverage its premier media and entertainment franchises across multiple platforms.” It is impossible to not notice the flooding of the marketplace with everything from toys to bathroom necessities to tie-in books whenever a new Disney film or show is going to be released soon.
One of the primary reasons for such successful synergy is the leadership of Iger. With the philosophy that he should create a business plan, but leave a great deal of the development to those senior executives who have a more intimate knowledge of task at hand, Iger has done a great deal in a mere three years at Disney (Steptoe). In this manner, company heads directly interact with those they would be cooperating with and are not being simply told what to do. Additionally, Iger is continually trying to keep Disney on top of the latest technology, making an exclusive partnership with Apple, Pixar, and iTunes owner Steve Jobs and completely revamping Disney.com as a more interactive property (Steptoe). III.
Despite the pressure Iger is putting on increasing Disney’s Internet presence, it in no way can compete to the popularity of properties such as Google.com, Youtube.com, and Myspace/Facebook.com, which are either owned or have lucrative deals with Disney’s top competitors Time Warner, CBS Corp, and News Corp. (Hoover’s). While the new Disney.com has used formats like those of Myspace and Youtube, they are targeted to a much younger audience, and thus not as successful (Steptoe). Though the Pirates films were all rated PG-13 and a number of television shows (like Grey’s Anatomy, Desperate Housewives, and Lost) are aimed at more mature audiences, Disney still has a public mystique as the children’s studio. And while merchandise aimed at children is a huge market, such a public image can have a kiddie-stigma attached for young adults.
Additionally, the attempt to get into video production and to stop licensing characters and other intellectual property to established video game makers has so far not paid off. The decision has reportedly cost $130 million in FY 2007 (Coolidge). A similar attempt to delve into Disney brand mobile phone service was not successful (Coolidge).
Finally, there is the continual cost of updating parks and resorts. This segment of the Walt Disney Company, while the second most lucrative, needs constant enhancement, to ensure safety and make sure the attractions are not outdated (Bond). Particularly in this next FY, a large sum will be spent updating the California Adventure theme park.
IV.
As mentioned earlier, when initially rising to his current position at Disney, Iger’s first act was to negotiate with Steve Jobs. The Pixar and Apple Computer chief executive did not have a good relationship with Iger’s predecessor, Michael Eisner (Steptoe), which cause a temporary split between Disney and Pixar. Now, many ABC programs and Disney Company produced films are available on iTunes, with the number increasing every day (Steptoe). It is also noted that just over two years ago, January 2006, Disney bought Pixar from Jobs for $7.4 billion, giving Jobs a seat on the Disney Company board. This close partnership between the content producing company and one of the developing major distribution channels of this new Internet-based age provides Disney with little risk: no need to put all its eggs in one basket (Steptoe).
Additionally, despite having no financial stake in big-name Internet sites, Disney products are increasingly using television channel-associated sites to build buzz and interest for properties (Steptoe). Iger has said, “it’s now an entertainment medium, and so it’s essential for us to find ways to use it to deliver our branded products and programs (Steptoe).” Transmedia storytelling for some Disney properties have thus formed. Lost in particular has used not only ABC.com, but fake sites for companies featured on the show to expand the universe of the show.
The huge juggernauts that are High School Musical and Hannah Montana have shown the incredible power of tween audiences, with HSM bringing in over $100 million for the company over the past two years (Bond) and Miley Cyrus (whose alter ego is Hannah Montana) creating a frenzy for both live concert and filmed concert tickets. Cyrus had a successful predecessor, Hilary Duff, which makes it likely that the conglomerate will be able to produce such runaway tween hits in the future.
V.
While Disney’s divestment of ABC Radio has garnered a great deal of additional money this past FY, there is some question as to whether it was a smart move. Radio Disney is a popular station, both on FM and satellite radio, for children and tweens to listen to. Coolidge sees the divestment of the profitable business as a mistake, as the money garnered from the sale is not likely to fund new ventures to equal what would have been made if ABC Radio was maintained.
With so much revenue generated from the tween sensations, there is the chance that Disney will be lulled into a false sense of security, resting on the money brought in. Though we can never be certain how specific trends will ebb and flow, most trends do eventually wind down (Amobi). The company must ensure it stays prepared with ideas for new, equally huge cash cows should interest in Cyrus and HSM wan as the tweens that love them now grow into the age of Youtube and Myspace. Already, sales from these assets, while incredibly large, have not been able to stop a slightly lower revenue for the first three quarters of last FY (Bond).
Finally, despite the success of theme parks throughout the world, there is reason to be hesitant about how much revenue they will likely take in in the future. The notoriously exorbitant prices of Disney parks and resorts, coupled with rising gas, expensive airplane ticket prices and the general economic downturn make traveling to Disneyland or Disney World, at least in the United States, less attractive (Coolidge).
VI.
Though coming from those disturbing outlooks, overall the Walt Disney Company is poised very well for the future. The leadership of Bob Iger is particularly important to the continuing success of the company. An unassuming head, Iger does not assume autonomous control of the hugely influential conglomerate, instead putting much trust in his associates, creating an incredibly positive working environment.
Though Disney is not the innovator behind the new forms of media consumption and distribution online (iTunes, Youtube, Google), the Company has begun to run with and profit from the ideas of such advances. Iger’s monumental deal with Jobs, creating a partnership between Disney and iTunes, provides a legal, revenue-creating manner for products to be distributed. Additionally, many Disney television channels and shows have taken off using the Internet as a means of delivering additional material and creating sprawling, successful examples of Transmedia storytelling. Obviously Iger understands the benefits and opportunities this creates—and knows how to develop goodwill among those creating said material. EW.com has quoted the Writers’ Guild president Patric Verrone as a crucial leader in the development of the potentially strike-ending agreement.
By continuing to build on the pre-exiting Internet developments and using it to further the use and success of the superb synergy skills of Disney affiliate companies, the corporation can remain on top. Staying stuck on a certain type of success, creating huge blockbuster films (a-la Pirates) and relying on racking in the cash from tween-targeted films and shows (HSM) will not provide a stable future for the company should interest in those types of media change or diminish.
Such warnings are, for the most part, unneeded as the Walt Disney Company, through its more than eighty year history, has always been able to prove itself as adaptable. Under the current leadership, Disney is not just poised, but already a real part of the new environment of digital media.
Sources
Amobi, Tuna. “Disney: Mouse on the Move; S&P says the media and entertainment giant has several catalysts for growth and a solid balance sheet, and rates the shares a strong buy.” Business Week Online (May 8, 2007): NA. General OneFile. Gale. Ithaca College Library. 5 Feb. 2008 .
Bond, Paul. “ ‘HSM’ sounds good to Dis.” Hollywood Reporter 402.44 (Dec 27, 2007): 7(1). General OneFile. Gale. Ithaca College Library. 5 Feb. 2008 .
Coolidge, Carrie. “Mouse Trapped.” Forbes 180.13 (Dec 24, 2007): 110. General OneFile. Gale. Ithaca College Library. 6 Feb. 2008 .
Hoover’s. “Disney – Company Overview.” Hoover’s Inc. (2008). 5 Feb. 2008 .
Juarez, Vanessa. “WGA Members to vote Tuesday on ending strike.” EW.com. (Feb 10, 2008) .
Schiller, Gail. “Partner ship: 13 sail with ‘Pirates’: Disney’s sequel laden with promotions, cooperation.” Hollywood Reporter 399.35 (May 22, 2007): 6(2). General OneFile. Gale. Ithaca College Library. 6 Feb. 2008 .
Steptoe, Sonja. “Building a Better Mouse.” Time 169.26 (June 25, 2007): Global 1. General OneFile. Gale. Ithaca College Library. 6 Feb. 2008 . *Note: websites for the sources are not showing up*