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The Walt Disney Company
“Content is King”
By Peter Louis
Instituto de Empresa

December 2001
1
© 2001 Peter Louis. All Rig...
Agenda






Disney’s strategy
Is there a competitive advantage?
Current strategic challenges
Recommendations
Conclus...
Disney’s strategy

1.
2.
3.
4.

Strong corporate culture
Innovative brands
Employee “buy-in”
Diversification

3
© 2001 Pet...
Strong corporate culture
 This was based on TCC:
– Teamwork
– Communication
– Co-operation

4
© 2001 Peter Louis. All Rig...
Innovative brands
 Develop brands that were:
– Highly differentiated
– Were wholesome and expressed American values
– Fun...
Employee “buy-in”
 Employee identification made them:
– Customer focused
– Customer friendly

6
© 2001 Peter Louis. All R...
Diversification
 Brand extension
– 2 versions of Winnie-the-Pooh

 Channel occupation
– Beauty & the Beast, the movie
– ...
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

Co...
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 ...
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?
V...
Recession & September 11


Slow down: Trans Atlantic / Pacific flights



US to grow by:
–
–



EU to grow by
–



0.7...
ABC
A strategic fit but:

1. How do we produce Disney hits?
2. How do we realize synergies in costs /
revenues?
3. How do ...
Talent drain
1994 – 2000, 75 high-level executive departures.


This can affect:
–
–
–
–

Employee morale
Productivity
Co...
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...
Disney’s Net Income Growth,
1984 - 2000
Net Income Growth, 1984 - 2000
Linear (% change NI)

Source: Annual reports

20
00...
Where’s Mickey’s magic touch?


7th most valuable brand, yet:
– Generates 82 per cent of revenue domestically
(2000 annua...
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 receip...
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
Ye...
Recently successful video games








Alien vs. Predator (Fox Interactive / News
Corp)
The Lost World (Dreamworks ...
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...
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%
Park...
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%

Broadban...
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 ...
Recommendations

43
© 2001 Peter Louis. All Rights Reserved
Recommendations





Reduce the attrition of executives
Licence (or buy) innovative content
Develop innovative local c...
Reduce the attrition of executives


Survey executives
–

–

Use independent consultants, say Holzschu, Jordan, Schiff
& ...
Licence (or buy) innovative
content


Source innovative international content (e.g.
programs, comic characters, cartoons,...
Develop innovative local content


Leverage the rich cultural heritage of host regions to
create local themes and program...
Create an Interactive Games
Division



Purchase an established publisher like Electronic
Arts (fiscal revenue of $1.3 b...
Conclusions

49
© 2001 Peter Louis. All Rights Reserved
Conclusions


Disney can achieve 20 per cent ROE. However, this
requires a focused strategy that:
–
–
–
–
–
–

Allows eff...
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
outso...
The Walt Disney Company
“Content is King”
By Peter Louis
Instituto de Empresa
December 2001
© 2001 Peter Louis. All Rights...
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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 maintain its industry-beating growth rate.

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Transcript of "Walt Disney - Content Is King"

  1. 1. The Walt Disney Company “Content is King” By Peter Louis Instituto de Empresa December 2001 1 © 2001 Peter Louis. All Rights Reserved
  2. 2. Agenda      Disney’s strategy Is there a competitive advantage? Current strategic challenges Recommendations Conclusions 2 © 2001 Peter Louis. All Rights Reserved
  3. 3. Disney’s strategy 1. 2. 3. 4. Strong corporate culture Innovative brands Employee “buy-in” Diversification 3 © 2001 Peter Louis. All Rights Reserved
  4. 4. Strong corporate culture  This was based on TCC: – Teamwork – Communication – Co-operation 4 © 2001 Peter Louis. All Rights Reserved
  5. 5. Innovative brands  Develop brands that were: – Highly differentiated – Were wholesome and expressed American values – Fun and fallible 5 © 2001 Peter Louis. All Rights Reserved
  6. 6. Employee “buy-in”  Employee identification made them: – Customer focused – Customer friendly 6 © 2001 Peter Louis. All Rights Reserved
  7. 7. 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
  8. 8. Is there a competitive advantage? 8 © 2001 Peter Louis. All Rights Reserved
  9. 9. 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
  10. 10. Yes! 10 © 2001 Peter Louis. All Rights Reserved
  11. 11. Is it sustainable? 11 © 2001 Peter Louis. All Rights Reserved
  12. 12. Yes… 12 © 2001 Peter Louis. All Rights Reserved
  13. 13. but only if Disney continues to both: 1. Innovate 2. Update the competitive advantage 13 © 2001 Peter Louis. All Rights Reserved
  14. 14. Current Strategic Challenges 14 © 2001 Peter Louis. All Rights Reserved
  15. 15. 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
  16. 16. 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
  17. 17. 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
  18. 18. 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
  19. 19. 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
  20. 20. 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
  21. 21. 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
  22. 22. Is there life still in myths, history and fairy tales? 22 © 2001 Peter Louis. All Rights Reserved
  23. 23. Yes, there is for AOL Time Warner 23 © 2001 Peter Louis. All Rights Reserved
  24. 24. The Bottom Line    Warner Bros. expects to make 7 movies Gross revenue expected to be > $2 billion (box-office receipts, merchandise, DVDs, etc.) Current estimates suggest that this is an underestimation 24 © 2001 Peter Louis. All Rights Reserved
  25. 25. Video Games 25 © 2001 Peter Louis. All Rights Reserved
  26. 26. Video Games Actual and projected Value of Video Game Industry 21.3 25 20 Revenue 15 ($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
  27. 27. 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
  28. 28. And of course, the hit… 28 © 2001 Peter Louis. All Rights Reserved
  29. 29. Lara Croft: Tomb Raider, became… 29 © 2001 Peter Louis. All Rights Reserved
  30. 30. Lara Croft: Tomb Raider, grossing… 30 © 2001 Peter Louis. All Rights Reserved
  31. 31. $700 million for the game publishers EIDOS 31 © 2001 Peter Louis. All Rights Reserved
  32. 32. $223 million for Viacom’s Paramount 32 © 2001 Peter Louis. All Rights Reserved
  33. 33. If content is king then… 33 © 2001 Peter Louis. All Rights Reserved
  34. 34. Context is Queen 34 © 2001 Peter Louis. All Rights Reserved
  35. 35. 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
  36. 36. However, looking at the Internet… 36 © 2001 Peter Louis. All Rights Reserved
  37. 37. 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
  38. 38. But who wants to play Video games over the Internet? 38 © 2001 Peter Louis. All Rights Reserved
  39. 39. 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
  40. 40. Is 20 per cent growth still achievable? 40 © 2001 Peter Louis. All Rights Reserved
  41. 41. Yes… 41 © 2001 Peter Louis. All Rights Reserved
  42. 42. but only if Disney continues to both: 1. Innovate 2. Update the competitive advantage 42 © 2001 Peter Louis. All Rights Reserved
  43. 43. Recommendations 43 © 2001 Peter Louis. All Rights Reserved
  44. 44. 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
  45. 45. 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
  46. 46. 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
  47. 47. 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
  48. 48. 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
  49. 49. Conclusions 49 © 2001 Peter Louis. All Rights Reserved
  50. 50. 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
  51. 51. Thank you 51 © 2001 Peter Louis. All Rights Reserved
  52. 52. 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
  53. 53. The Walt Disney Company “Content is King” By Peter Louis Instituto de Empresa December 2001 © 2001 Peter Louis. All Rights Reserved 53

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