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Walt Disney - Content Is King walks you through Walt Disney's successful business strategy that led to an annualized growth rate of 20% and makes specific recommendations as to how Disney could ...

Walt Disney - Content Is King walks you through Walt Disney's successful business strategy that led to an annualized growth rate of 20% and makes specific recommendations as to how Disney could maintain its industry-beating growth rate.

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Walt Disney - Content Is King Walt Disney - Content Is King Presentation Transcript

  • The Walt Disney Company “Content is King” By Peter Louis Instituto de Empresa December 2001 1 © 2001 Peter Louis. All Rights Reserved
  • Agenda      Disney’s strategy Is there a competitive advantage? Current strategic challenges Recommendations Conclusions 2 © 2001 Peter Louis. All Rights Reserved
  • Disney’s strategy 1. 2. 3. 4. Strong corporate culture Innovative brands Employee “buy-in” Diversification 3 © 2001 Peter Louis. All Rights Reserved
  • Strong corporate culture  This was based on TCC: – Teamwork – Communication – Co-operation 4 © 2001 Peter Louis. All Rights Reserved
  • Innovative brands  Develop brands that were: – Highly differentiated – Were wholesome and expressed American values – Fun and fallible 5 © 2001 Peter Louis. All Rights Reserved
  • Employee “buy-in”  Employee identification made them: – Customer focused – Customer friendly 6 © 2001 Peter Louis. All Rights Reserved
  • Diversification  Brand extension – 2 versions of Winnie-the-Pooh  Channel occupation – Beauty & the Beast, the movie – Beauty & the Beast, the Broadway musical 7 © 2001 Peter Louis. All Rights Reserved
  • Is there a competitive advantage? 8 © 2001 Peter Louis. All Rights Reserved
  • Disney’s brand equity World's Most Favorite Brands 90 80 Rank 1999 2000 1 1 70 60 Disney 50 Sony 40 $ billions Company Coca Cola 2001 1 Source: Interbrand, Citigroup 6 8 7 18 18 20 30 20 Coca Cola 10 Disney 0 1999 Sony 2000 Disney 2001 Years Company Coca Cola Brand Value 1999 2000 2001 83.8 72.5 68.9 Source: Interbrand, Citigroup 32.3 33.6 32.6 Sony 14.2 16.4 15 Source: Interbrand, Citigroup 9 © 2001 Peter Louis. All Rights Reserved
  • Yes! 10 © 2001 Peter Louis. All Rights Reserved
  • Is it sustainable? 11 © 2001 Peter Louis. All Rights Reserved
  • Yes… 12 © 2001 Peter Louis. All Rights Reserved
  • but only if Disney continues to both: 1. Innovate 2. Update the competitive advantage 13 © 2001 Peter Louis. All Rights Reserved
  • Current Strategic Challenges 14 © 2001 Peter Louis. All Rights Reserved
  • Current strategic challenges 1. 2. 3. 4. 5. 6. Recession & September 11 ABC Talent drain Where’s Mickey’s magic touch? Video Games Context is Queen 15 © 2001 Peter Louis. All Rights Reserved
  • Recession & September 11  Slow down: Trans Atlantic / Pacific flights  US to grow by: – –  EU to grow by –  0.7 per cent in 2002 (IMF) 3 per cent in 2003 (OECD) 3 per cent in 2003 (OECD) Japan, perhaps recovering in in 2004 (OECD) 16 © 2001 Peter Louis. All Rights Reserved
  • ABC A strategic fit but: 1. How do we produce Disney hits? 2. How do we realize synergies in costs / revenues? 3. How do we reconcile different business cultures? 17 © 2001 Peter Louis. All Rights Reserved
  • Talent drain 1994 – 2000, 75 high-level executive departures.  This can affect: – – – – Employee morale Productivity Company direction Bottom line 18 © 2001 Peter Louis. All Rights Reserved
  • Disney’s Revenue, 1983 - 2000 Revenue, 1983-2000 30,000 ($millions) 25,000 20,000 1995 ABC m erger 15,000 10,000 5,000 - 1983 1985 1987 1989 1991 1993 1995 1997 1999 Years Source: Annual reports 19 © 2001 Peter Louis. All Rights Reserved
  • Disney’s Net Income Growth, 1984 - 2000 Net Income Growth, 1984 - 2000 Linear (% change NI) Source: Annual reports 20 00 19 98 19 96 19 94 19 92 19 90 19 88 1995 ABC m erger 19 86 300% 250% 200% 150% 100% 50% 0% -50% -100% 19 84 Percent % change NI Years 20 © 2001 Peter Louis. All Rights Reserved
  • Where’s Mickey’s magic touch?  7th most valuable brand, yet: – Generates 82 per cent of revenue domestically (2000 annual report) – Increasing European per capita expenditures could raise $2 billion (1999 annual report) – Lack of new innovative content (themes, movies, etc.) 21 © 2001 Peter Louis. All Rights Reserved
  • Is there life still in myths, history and fairy tales? 22 © 2001 Peter Louis. All Rights Reserved
  • Yes, there is for AOL Time Warner 23 © 2001 Peter Louis. All Rights Reserved
  • The Bottom Line    Warner Bros. expects to make 7 movies Gross revenue expected to be > $2 billion (box-office receipts, merchandise, DVDs, etc.) Current estimates suggest that this is an underestimation 24 © 2001 Peter Louis. All Rights Reserved
  • Video Games 25 © 2001 Peter Louis. All Rights Reserved
  • Video Games Actual and projected Value of Video Game Industry 21.3 25 20 Revenue 15 ($billions) 10 7 5 0 2000 2003 Year CAGR=45 per cent Source: IDC's 2001 Videogam e Survey 26 © 2001 Peter Louis. All Rights Reserved
  • Recently successful video games       Alien vs. Predator (Fox Interactive / News Corp) The Lost World (Dreamworks Interactive) Metal Gear Solid 2 (Sony Computer Entertainment) Fifa 2002 (Electronic Arts) Command & Conquer (Electronic Arts) Half Life (Sierra / Vivendi Universal) 27 © 2001 Peter Louis. All Rights Reserved
  • And of course, the hit… 28 © 2001 Peter Louis. All Rights Reserved
  • Lara Croft: Tomb Raider, became… 29 © 2001 Peter Louis. All Rights Reserved
  • Lara Croft: Tomb Raider, grossing… 30 © 2001 Peter Louis. All Rights Reserved
  • $700 million for the game publishers EIDOS 31 © 2001 Peter Louis. All Rights Reserved
  • $223 million for Viacom’s Paramount 32 © 2001 Peter Louis. All Rights Reserved
  • If content is king then… 33 © 2001 Peter Louis. All Rights Reserved
  • Context is Queen 34 © 2001 Peter Louis. All Rights Reserved
  • Context is Queen Rationale behind CapCities / ABC acquisition. It gave Disney:  ESPN, ESPN2 –  ABC –  cable access for NHL “The Might Ducks” franchise mass distribution network for Disney program library Publications – To distribute Disney material and promote Disney © 2001 Peter Louis. All Rights Reserved 35
  • However, looking at the Internet… 36 © 2001 Peter Louis. All Rights Reserved
  • Disney / AOL Time Warner Revenue Streams Walt Disney Co Revenue Streams, 2000 Consumer Products Internet Group 10% 2% Parks and Resorts 27% Media Networks 37% Studio Entertainment 24% Source: Annual reports AOL Time Warner Revenue Streams, 2000 Publishing 12% Filmed Enterntainme nt & Music 33% AOL 21% Cable & Networks 34% Source: Annual reports AOL Time Warner’s Internet segment earns 21 per cent Disney’s internet segment earns 2 per cent 37 © 2001 Peter Louis. All Rights Reserved
  • But who wants to play Video games over the Internet? 38 © 2001 Peter Louis. All Rights Reserved
  • Video Gamers! High Interest Responses to Potential Connectivity Applications 76% Download new games/levels 65% Broadband Gaming Service 62% Pay-per-view games 60% Online Gaming 51% Web surf/email 0% 10% 20% 30% 40% 50% 60% 70% 80% Percent Source: IDC's 2001 Videogam e Survey Predominately male, 21 years, 2 ½ hours per day Key: Content, New and Compelling Experience 39 © 2001 Peter Louis. All Rights Reserved
  • Is 20 per cent growth still achievable? 40 © 2001 Peter Louis. All Rights Reserved
  • Yes… 41 © 2001 Peter Louis. All Rights Reserved
  • but only if Disney continues to both: 1. Innovate 2. Update the competitive advantage 42 © 2001 Peter Louis. All Rights Reserved
  • Recommendations 43 © 2001 Peter Louis. All Rights Reserved
  • Recommendations     Reduce the attrition of executives Licence (or buy) innovative content Develop innovative local content Create an Interactive Games Division (to target the “serious gamer”) 44 © 2001 Peter Louis. All Rights Reserved
  • Reduce the attrition of executives  Survey executives – – Use independent consultants, say Holzschu, Jordan, Schiff & Associates Determine causal factors (moral, culture fit, remuneration, lack of authority, change of location, etc.)  Review findings at board level  Implement recommendations  Create future guidelines 45 © 2001 Peter Louis. All Rights Reserved
  • Licence (or buy) innovative content  Source innovative international content (e.g. programs, comic characters, cartoons, etc.) – –  Transferable to the US market (e.g. The Weakest Link) Can be leveraged internationally (e.g. Walking With Dinosaurs) Seek extension opportunities (e.g. Teletubbies) – Program  Cartoon  Video  Park theme  ? 46 © 2001 Peter Louis. All Rights Reserved
  • Develop innovative local content  Leverage the rich cultural heritage of host regions to create local themes and programs (e.g. Japan) – –  Themes include movies (The Seven Samurai or Yojimbo), unique shopping experiences, etc Create characters that can be leveraged internationally (e.g. Pokemon) Seek extension opportunities (e.g. Power Rangers) – Program  Movie  Cartoon  Park theme ? 47 © 2001 Peter Louis. All Rights Reserved
  • Create an Interactive Games Division   Purchase an established publisher like Electronic Arts (fiscal revenue of $1.3 billion, 2001) Develop games for successful movie releases –  Use new video expertise to create new Disney themes that are: –  Con Air, Pearl Harbor Interactive, immersive or simulations Leverage publisher to position for emerging subscription based Web gaming services that allow: – Individual, cooperative or combative play 48 © 2001 Peter Louis. All Rights Reserved
  • Conclusions 49 © 2001 Peter Louis. All Rights Reserved
  • Conclusions  Disney can achieve 20 per cent ROE. However, this requires a focused strategy that: – – – – – – Allows effective managers to manage (à la GE) Realizes brand values Kindles internal and external innovation Exploits areas of growth Realizes synergies, and Maintains incremental revenue growth (e.g. gate receipts) 50 © 2001 Peter Louis. All Rights Reserved
  • Thank you 51 © 2001 Peter Louis. All Rights Reserved
  • About the author    Peter is the Founder and CEO of p2people (http://www.p2people.co.uk), the innovative micro outsourcing service. Formerly a freelance consultant, Peter has extensive international experience in data warehousing and IT & HR outsourcing. Peter has an MBA (Instituto de Empresa) and MSc in Knowledge Management (Cranfield). 52 © 2001 Peter Louis. All Rights Reserved
  • The Walt Disney Company “Content is King” By Peter Louis Instituto de Empresa December 2001 © 2001 Peter Louis. All Rights Reserved 53