Disney Case presentation

1. Strategic Management
Fall 2013
Bryan Claire
Rebecca Craig
Jeff Gloe
Christina Orndorff
1

2. Corporate Strategy
Centered on:
– Creating a high-quality family content
– Exploiting technological innovation to
make entertainment experiences more
memorable
– International expansion
* Disney is employing both a growth and
differentiation strategy
2

3. Walt Disney Company’s Portfolio
• Media
• Parks and Resorts
• Studio
• Consumer Products
• Interactive Media
3

4. Media Industry
Threats:
• Social Media and video on mobile devices
• User Generated Content
• Fragmentation
• Shift from traditional media outlets
Opportunities:
• Social Media
• Combining social media with traditional media for
expanded footprint
4

5. Parks and Resorts
Threats:
• High competition in U.S. Markets (Busch
Entertainment)
• Weak economy
• High unemployment
Opportunities:
• High barriers to entry
• Technology advancement
• Threat of substitutes are minimal
• Niche market for theme parks and resorts
5

6. Studio Entertainment
Threats:
• High competition
• Weak economy
• High unemployment
• Social Media
• Increasing box office prices
• Shorter time in box office
Opportunities:
• High barriers to entry
• Technology advancement
• Low consumer bargaining power
• Improved CGI and 3D capabilities
• Social Media
6

7. Studio Entertainment
(cont’d)
Global Box Office - All Films (US$ Billions)
US/Canada
International
$40
$32.6
$35
$34.7
$31.6
$27.7
$29.4
$30
$25
23.9
$20
18.8
21.0
22.4
(69%)
18.1
(66%)
$15
(65%)
(69%)
(64%)
$10
$5
9.6
10.6
10.6
10.2
10.8
2008
2009
2010
2011
2012
$0
7

8. Consumer Products
Threats:
• Consumer products industry is highly competitive
• Weakened global economy has significantly impacted bottom
lines
• Technological impacts
• Many available substitutes
Opportunities:
• High supplier power
8

9. Interactive Media
Threats:
• Low barriers to entry
Opportunities:
• Technology
• Inexpensive for consumers in a weakened economy
• Social Media
• Growing market
9

10. Long-Term Attractiveness of
Portfolio
Media - Attractive
Parks and Resorts – Attractive
Studio/Motion Picture – Neither Attractive nor Unattractive
Consumer Products – Unattractive
Interactive Media – Attractive
Overall the industries represented in
Disney’s portfolio are attractive.
10

11. Competitive Strength
Media Networks
• Business unit operates domestic and international
cable networks, ABC Television network, television
production, U.S. domestic TV stations
• Advancing in the global market with filmed
entertainment
• Most TV stations are number one in their market
• Very strong news brands with 238 affiliates that reach
99% of U.S. households
• Radio Disney is offered through multiple platforms
including SiriusXM, iTunes, and mobile phones
• Utilizing technology to reach viewers via apps for
mobile devices and online viewing
• Operating income increased 29% from 2009 to 2011
11

12. Competitive Strength
Parks and Resorts
• Disney has parks on both the west coast and east coast of the
U.S., as well as a cruise line with ports on both U.S. coasts
• Disney has ownership in other parks and resorts in the global
market
• Inclusive facilities so visitors never need to leave the area
which results in high revenues due to hotel lodging and food
sales
• All parks and resorts tie back to the themes of popular movies
produced by Disney
• Disney has the capital resources to expand attractions when
necessary
•
Two new cruise ships were deployed due to the existing fleet
operating at full capacity
12

13. Competitive Strength
Studio Entertainment
• Business unit produces live-action and animated
movies, pay-per-view and DVD home
entertainment, and Disney on Ice performances
• Pixar and Marvel were purchased by Disney for use
of technology as well as character use
• Disney knows exactly how many of each branded
movies will be produced each year: one animated
Pixar and Disney film, two Marvel films and six to
eight live-action Disney films
• Operating profits grew about 250% after
acquisition of Marvel
13

14. Competitive Strength
Consumer Products
• Business unit includes Disney Stores and
businesses focusing on merchandise
licensing and children’s books and
magazine publishing
• Global with 208 Disney Stores in North
America, 103 in Europe, and 46 in Japan
• Publishing includes print format as well as
electronic format that is viewed on mobile
or tablet devices
14

15. Competitive Strength
Interactive Media
• Business unit produces video games for
multiple devices as well as Disney’s
websites
• Acquired Playdom, Inc. which creates
online games for social networking
15

16. High
9-Cell Industry
Attractiveness/Business Strength
Matrix
Industry Attractiveness
Media Networks
Studio
Entertainment
Parks and Resorts
Interactive…
Low
Consumer
Products
Weak
Strong
Business Strength/Competitive Position
16

17. Strategic Fit: How do Disney’s
businesses build off each other’s
successes?
• Branding is king – leveraging to the max
• Costs incurred long ago by the Studios to develop
characters like Mickey Mouse and Cinderella now
continue to generate returns in hotels/cruise
ships, gaming/video production, theme parks
• Gaining Expertise in technology – also to be
shared, no borders, to catch up and potentially
overtake competitors
• Assets are deployed across all business lines to
drive shareholder value. Let’s look at three
examples.

18. Disney Growth by Strategic
Business Unit
FYE 9-28-2013
Revenue %
45%
Growth %
31%
26%
13%
8% 9%
9%
5%
3%
2%
Media Networks and Resorts
Parks
Studio Entert'mnt
Consumer ProductsInteractive
18

19. Parks & Resorts: An example of
Strategic Fit at Work in China…
19

20. 20

21. China and Theme Parks: What not to do
21

22. How Strategic Fit Informs
Disney’s Shanghai Plan
(http://skift.com/2013/11/08/how-disney-plans-to-build-a-brand-in-china-before-shanghai-park-opening)
There are risks: “Disney still has a far way before Mickey’s
famous ears are recognizable by every child and parent in China”.
Disney CEO Robert Iger addressed the issue during the
company’s 4th quarter call on Nov 7, 2013. He cited the
synergies of the Disney empire in addressing these risks:
LEVERAGING MEDIA In CHINA:
• Relying more on its mobile and online platforms than TV due
to national restrictions.
• The company is planning to increase marketing once park
attractions based on cultural or media interests are
announced. Chinese culture will be wedded to Mickey.
22

23. Disney’s Shanghai Plan, cont’d
(http://skift.com/2013/11/08/how-disney-plans-to-build-a-brand-in-china-before-shanghai-park-opening)
RETAIL: will also help Disney build a buzz before the 2015 opening .
“We’re also opening or developing our first big store in China and
that is actually in Shanghai, which will be used before it opens sort
of a quasi visitor center to let people know more about the park
itself,” said Iger. “Once the park opens we actually believe that we’ll
have a significant halo effect on the brand. There will be a lot more
interest in and appreciation of Disney stories and characters.”
DISNEY’S CRUISE LINE:
represents another opportunity for tapping into the Chinese
market. Iger says the company currently has no plans of adding to
its fleet or expanding itineraries; however, it could become an
option when Asia opens up to the family cruise business.
23

24. Another example of
Strategic Fit: Consumer
Products (9% growth) In
August 2013, Disney
Introduced its latest
“COLLECTION” – Disney
Fairytales Designer
Collection.
“Limited to an edition of 6,000
of each of the five couples
globally, each Doll Set retails
for $129.95”.
And what else? Apparel and
home décor, of course….
24

25. 25

26. Delivering on Strategy: Financial Performance
• Disney’s mission focuses heavily on financial performance:
“The Walt Disney Company's objective is to be one of the world's leading producers and
providers of entertainment and information, using its portfolio of brands to
differentiate its content, services and consumer products. The company's primary
financial goals are to maximize earnings and cash flow, and to allocate capital toward
growth initiatives that will drive long-term shareholder value.”
-thewaltdisneycompany.com/investors
43,000
EPS Trend 2010-2012
Net Income Trend 2010 - 2012
Revenue Trend 2010 - 2012
7,000
$3.50
6,000
$3.00
5,000
$2.50
4,000
$2.00
3,000
$1.50
2,000
$1.00
36,000
1,000
$0.50
35,000
0
$0.00
42,278
42,000
40,893
41,000
$MM
40,000
39,000
38,063
38,000
37,000
2010
2011
2012
2010
2011
2012
2010
2011
2012
26

27. Strategic Business Unit Contribution
2011
Amounts in $MM USD
MEDIA
Operating Expense
Selling & General Expense
Depreciation & Amortization
Other
OPERATING INCOME
STUDIO
18,714
Revenue
PARKS &
RESORTS
11,797
10,376
2010
CONSUMER
INTERACTIVE
MEDIA
MEDIA
PARKS &
RESORTS
STUDIO
CONSUMER
INTERACTIVE
MEDIA
6,351
3,049
982
17,162
10,761
6,701
2,678
761
7,383
3,136
1,334
732
9,888
6,787
3,469
1,236
581
2,539
1,696
2,465
794
504
2,358
1,517
2,450
687
371
237
1,165
132
105
54
222
1,139
89
78
43
1,318
693
677
(234)
(584)
6,146
(438)
1,553
618
816
(308)
Total Operating Income from SBUs
8,825
7586
CONTRIBUTION
2011
2010
70%
68%
18%
17%
7%
9%
9%
9%
-3%
-3%
MEDIA
PARKS & RESORTS
STUDIO
CONSUMER
INTERACTIVE MEDIA
5,132
• Media by far the strongest strategic unit
• Parks & Resorts, Studio and Consumer are all
effectively leveraging the Media / Broadcast unit
• Disney has not effectively capitalized on Interactive
Media. Why?
27

28. Strategic Business Unit Contribution
The roll out of the “Disney Infinity” game has had a massive impact
http://thewaltdisneycompany.com/sites/default/files/reports/q4-fy13-earnings.pdf
28

29. Interactive Media Sales
• Disney’s fiscal year runs October – September
• Anticipated holiday sales of “Infinity” may take unit to profitability
Interactive Media Revenue Trend $MM
2010
2011
2012
2013
761
982
845
1,064
Interactive Media Revenue Trend
1200
1000
800
600
400
200
0
2010
2011
2012
2013
29

30. Interactive Media Operating Income
• Disney is erasing the huge operating losses in the division slowly
• Infinity’s Q4 release led to the first profitable quarter in years for the division
2010
-234
Operating Losses
2011
2012
-308
-216
2013
-87
Operating Losses Last 4 Years $MM
0
-100
2010
2011
2012
2013
-200
-300
-400
30

31. Interactive Media Sales Forecasts
• Currently not providing guidance
• Key Factors for Sales:
• Holiday Season for “Infinity”
• Leveraging the Lucas Arts and Marvel intellectual properties
• New Platforms: Playstation 4 and Xbox One
31

32. References
http://www.iaapa.org/resources/by-park-type/amusement-parks-and-attractions/industry-statistics
http://www.mpaa.org/Resources/92be6469-1d3c-4955-b572-1d3f40f80787.pdf
http://stateofthemedia.org/2013
http://www.disneyabctv.com/division/index_stations.shtml
http://www.ibisworld.com/Common/MediaCenter/Fastest%20Growing%20Industries.pdf
http://www.joystiq.com/2013/08/07/disney-interactive-loses-58-million-in-q3/
http://www.nintendolife.com/news/2013/11/disney_interactive_sees_big_financial_boost_in_q4
http://www.gamasutra.com/view/news/32919/Disney_Interactive_Losses_Up_Slightly_On_Continuing_Playdom_Acquisitio
n_Costs.phphttp://www.iaapa.org/resources/by-park-type/amusement-parks-and-attractions/industry-statistics
http://www.mpaa.org/Resources/92be6469-1d3c-4955-b572-1d3f40f80787.pdf
http://stateofthemedia.org/2013
http://www.disneyabctv.com/division/index_stations.shtml
http://www.ibisworld.com/Common/MediaCenter/Fastest%20Growing%20Industries.pdf
http://www.forbes.com/sites/scottmendelson/2013/11/10/weekend-box-office-analysis-thor-2-sets-marvel-record-withmighty-86-million/
32