Walt Disney - Content Is King

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

Disney’s strategy

1.
2.
3.
4.

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

3

Strong corporate culture
 This was based on TCC:
– Teamwork
– Communication
– Co-operation

4

Innovative brands
 Develop brands that were:
– Highly differentiated
– Were wholesome and expressed American values
– Fun and fallible

5

Employee “buy-in”
 Employee identification made them:
– Customer focused
– Customer friendly

6

Diversification
 Brand extension
– 2 versions of Winnie-the-Pooh

 Channel occupation
– Beauty & the Beast, the movie
– Beauty & the Beast, the Broadway musical

7

Is there a competitive
advantage?

8

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

Yes!

10

Is it sustainable?

11

Yes…

12

but only if

Disney continues to both:
1. Innovate
2. Update the competitive advantage

13

Current Strategic
Challenges

14

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


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

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

Talent drain
1994 – 2000, 75 high-level executive departures.


This can affect:
–
–
–
–

Employee morale
Productivity
Company direction
Bottom line
18


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

Disney’s Net Income Growth,
1984 - 2000
Net Income Growth, 1984 - 2000
Linear (% change NI)


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


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

Is there life still in myths,
history and fairy tales?

22

Yes, there is for AOL Time
Warner

23

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

Video Games

25

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

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

And of course, the hit…

28

Lara Croft: Tomb Raider,
became…

29

Lara Croft: Tomb Raider,
grossing…

30

$700 million for the game
publishers EIDOS

31

$223 million for Viacom’s
Paramount

32

If content is king then…

33

Context is Queen

34

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


35

However, looking at the
Internet…

36

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%

AOL Time Warner Revenue Streams, 2000

Publishing
12%

Filmed
Enterntainme
nt & Music
33%

AOL
21%

Cable &
Networks
34%


AOL Time Warner’s Internet segment earns 21 per cent

Disney’s internet segment earns 2 per cent
37

But who wants to play Video
games over the Internet?

38

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

Is 20 per cent growth still
achievable?

40

Yes…

41

but only if

Disney continues to both:
1. Innovate
2. Update the competitive advantage

42

Recommendations

43

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

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

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

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

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


Conclusions

49

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

Thank you

51

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

The Walt Disney Company
“Content is King”
By Peter Louis
Instituto de Empresa
December 2001

53

Walt Disney - Content Is King

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