The Walt Disney Company: The Entertainment King XXXXXXXXXX R E V : J A N U A R Y 5 , XXXXXXXXXX HBS Professor Michael G. Rukstad; Professor David Collis (Yale School of Management,); and Research...

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The Walt Disney Company: The Entertainment King 9-701-035 R E V : J A N U A R Y 5 , 2 0 0 9 HBS Professor Michael G. Rukstad; Professor David Collis (Yale School of Management,); and Research Associate Tyrrell Levine prepared this case. This case was developed from published sources. Funding for the development of this case was provided by Harvard Business School and not by the company. HBS cases are developed solely as the basis for class discussion. Cases are not intended to serve as endorsements, sources of primary data, or illustrations of effective or ineffective management. Copyright © 2001, 2005, 2009 President and Fellows of Harvard College. To order copies or request permission to reproduce materials, call 1-800- 545-7685, write Harvard Business School Publishing, Boston, MA 02163, or go to www.hbsp.harvard.edu. This publication may not be digitized, photocopied, or otherwise reproduced, posted, or transmitted, without the permission of Harvard Business School. M I C H A E L G . R U K S T A D D A V I D C O L L I S T Y R R E L L L E V I N E The Walt Disney Company: The Entertainment King I only hope that we never lose sight of one thing—that it was all started by a mouse. — Walt Disney The Walt Disney Company’s rebirth under Michael Eisner was widely considered to be one of the great turnaround stories of the late twentieth century. When Eisner arrived in 1984, Disney was languishing and had narrowly avoided takeover and dismemberment. By the end of 2000, however, revenues had climbed from $1.65 billion to $25 billion, while net earnings had risen from $0.1 billion to $1.2 billion (see Exhibit 1). During those 15 years, Disney generated a 27% annual total return to shareholders.1 Analysts gave Eisner much of the credit for Disney’s resurrection. Described as “more hands on than Mother Teresa,” Eisner had a reputation for toughness.2 “If you aren’t tough,” he said, “you just don’t get quality. If you’re soft and fuzzy, like our characters, you become the skinny kid on the beach, and people in this business don't mind kicking sand in your face.”3 Disney’s later performance, however, had been well below Eisner’s 20% growth target. Return on equity which had averaged 20% through the first 10 years of the Eisner era began dropping after the ABC merger in 1996 and fell below 10% in 1999. Analysts attributed the decline to heavy investment in new enterprises (such as cruise ships and a new Anaheim theme park) and the third-place performance of the ABC television network. While profits in 2000 had rebounded from a 28% decline in 1999, this increase was largely due to the turnaround at ABC, which itself stemmed from the success of a single show: Who Wants To Be a Millionaire. Analysts were starting to ask: Had the Disney magic begun to fade? For the exclusive use of T. Phan, 2020. This document is authorized for use only by Trang Phan in MGMT 449_THUR_Spring 2020 taught by JUNG YEON LEE, Kennesaw State University from Jan 2020 to Jul 2020. 701-035 The Walt Disney Company: The Entertainment King 2 The Walt Disney Years, 1923–1966 At 16, the Missouri farm boy, Walter Elias Disney, falsified the age on his passport so he could serve in the Red Cross during World War I. He returned at war’s end, age 17, determined to be an artist. When his Kansas City-based cartoon business failed after only one year,4 Walt moved to Hollywood in 1923 where he founded Disney Brothers Studio5 with his older brother Roy (see Exhibit 2). Walt was the creative force, while Roy handled the money. Quickly concluding that he would never be a great animator, Walt focused on overseeing the story work.6 A series of shorts starring “Oswald, the Lucky Rabbit” became Disney Brothers’ first major hit in 1927. But within a year, Walt was outmaneuvered by his distributor, which hired away most of Disney’s animators in a bid to shut Disney out of the Oswald franchise.7 Walt initially thought he could continue making Oswald shorts with new animators and a new distributor, but after reading the fine print of his contract, he was devastated to learn that his distributor owned the copyright. Desperate to create a new character, Walt modified Oswald’s ears and made some additional minor changes to the rabbit’s appearance. The result was Mickey Mouse. When Mickey failed to elicit much interest, Walt tried to attract a distributor by adding synchronized sound—something that had never been attempted in a cartoon.8,9 His gamble paid off handsomely with the release of Steamboat Willie in 1928.10 Overnight, Mickey Mouse became an international sensation known variously as “Topolino” (Italy), “Raton Mickey” (Spain), and “Musse Pigg” (Sweden). However, the company was still strapped for cash, so it licensed Mickey Mouse for the cover of a pencil tablet—the first of many such licensing agreements. Over time, as short-term cash problems subsided, Disney began to worry about brand equity and thus licensed its name only to “the best companies.”11 The Disney brothers ran their company as a flat, nonhierarchical organization, in which everyone, including Walt, used their first names and no one had titles. “You don’t have to have a title,” said Walt. “If you’re important to the company, you’ll know it.”12 Although a taskmaster driven to achieve creativity and quality, Walt emphasized teamwork, communication, and cooperation. He pushed himself and his staff so hard that he suffered a nervous breakdown in 1931.13 However, many workers were fiercely committed to the company. Despite winning six Academy Awards and successfully introducing new characters such as Goofy and Donald Duck, Walt realized that cartoon shorts could not sustain the studio indefinitely. The real money, he felt, lay in full-length feature films.14 In 1937, Disney released Snow White and the Seven Dwarfs, the world’s first full-length, full-color animated feature and the highest-grossing animated movie of all time.15 In a move that would later become a Disney trademark, a few Snow White products stocked the shelves of Sears and Woolworth’s the day of the release. With the success of Snow White, the company set a goal of releasing two feature films per year, plus a large number of shorts. Next, the company scaled up. The employee base grew sevenfold, a new studio was built in Burbank, and the company went public in 1940 to finance the strategy. Disney survived the lean years of World War II and the failure of costly films like Fantasia (1940) by producing training and educational cartoons for the government, such as How Disease Travels.16 Disney made no new full-length features during the war, but re-released Snow White for the first time in 1944, accounting for a substantial portion of that year’s income.17 Subsequently, reissuing cartoon classics to new generations of children became an important source of profits for Disney. After the war, the company was again in difficult financial straits. It would take several years to make the next full-length animated film18 (Cinderella, 1950), so Walt decided to generate some quick For the exclusive use of T. Phan, 2020. This document is authorized for use only by Trang Phan in MGMT 449_THUR_Spring 2020 taught by JUNG YEON LEE, Kennesaw State University from Jan 2020 to Jul 2020. The Walt Disney Company: The Entertainment King 701-035 3 income by making movies such as Song of the South (1946) that mixed live action with animation.19 Further diversification included the creation of the Walt Disney Music Company to control Disney’s music copyrights and recruit top artists. In 1950, Disney’s first TV special, One Hour in Wonderland, reached 20 million viewers at a time when there were only 10.5 million TV sets in the U.S.20 With the release of Treasure Island in 1950, Disney entered live-action movie production and, by 1965, was averaging three films per year. Most were live-action titles, such as the hits Old Yeller (1957), Swiss Family Robinson (1960), and Mary Poppins (1964), but a few animated films like 101 Dalmatians (1961) were also made. To bolster the film business, Disney created Buena Vista Distribution in 1953, ending a 16-year-old distribution agreement with RKO. By eliminating distribution fees, Disney could save one-third of a film’s gross revenues. And to further improve the bottom line, Disney avoided paying exorbitant salaries by developing the studio’s own pool of talent. Observed one writer: “Disney himself became the box office attraction—as a producer of a predictable family style and the father of a family of lovable animals.”21 Disney expanded its television presence in 1954 with the ABC-produced television program Disneyland (followed the next year by the very popular Mickey Mouse Club, a show featuring pre-teen “Mouseketeers” as hosts). Walt hoped Disneyland would both generate financing and stimulate public interest in the huge outdoor entertainment park of the same name, which he had started designing two years earlier at WED Enterprises (WED being Walt’s initials). This was kept separate from Disney Productions to provide an environment where Walt and his “Imagineers” could design and build the park free of pressure from film unions and stockholders. The park was a huge risk for the company, as Disney had taken out millions of dollars in bank loans to build it. But the bet paid off. The enormous success of Disneyland, which opened in 1955, was a product of both technically advanced attractions and Walt's commitment to excellence in all facets of park operation. His goal had been to build a park for the entire family, since he believed that traditional parks were “neither amusing nor clean, and offered nothing for Daddy.”22 Corporate sponsorship was exploited to minimize the cost of upgrading attractions and adding exhibits.23 To conserve capital, Disney also licensed the food and merchandising concessions. Once the park had generated sufficient revenue, the company bought back virtually all operations within the park.24 Disneyland’s success finally put the company on solid financial footing.25 With Disneyland still in its infancy, Walt dreamed of
Answered Same DayMar 08, 2021

Answer To: The Walt Disney Company: The Entertainment King XXXXXXXXXX R E V : J A N U A R Y 5 , XXXXXXXXXX HBS...

Ishita answered on Mar 10 2021
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Running Head: STRATEGIC INITIATIVE        1
STRATEGIC INITIATIVE        2
STRATEGIC INITIATIVE    
Profitability
The
Walt Disney Company, also known as Disney is an America based entertainment giant that provides several entertainment services to its customers including theme parks, studious, home DVDs, Television networks, and so on. In the year of 2000, The Walt Disney Company witnessed an increase in the revenue by 9 per cent and the net income also accelerated by 39 per cent (Collis, 2005). The majority of the profits was earned from the theme parks. The strategy implemented was to covert the theme parks into destination resorts where customers, especially the international tourists, can stay for longer durations.
It was seen that the tourists spent at least 3 days in the Disney resorts. The entertainment company had opened more than one park in a place in order to attract the attention of more number of customers. As for example, the Disney Animal Kingdom, the Disney MGM Studios and the EPCOT were comprised in the Walt Disney World, though with...
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