The aim of this report is to provide a thorough overview of The Walt Disney Company, also known as Disney. The group, along with its subsidiaries, operates in four market segments: Media Networks, Parks and Resorts, Studio Entertainment, and Consumer Products and Interactive Media.
Despite the business’s uncertainty, such diversity has culminated in a stable financial role and brand recognition, allowing the entity to hold a top position in the film industry. However, there are some reservations, especially regarding the ESPN section, as a result of the recent decrease in subscriptions. In spite of all this, Disney continues to appear confident of success and its outlook favorable. How long will it thrive? Will the flow of revenues be consistent? How will The Walt Disney beat such a stiff competition and remain relevant in the industry? These issues will be clearly addressed in the SWOT analysis of this research.
Founded on 16th October 1923, Disney firmly established itself in the animation industry before vastly expanding into the global mass media over the years. The Media Networks segment includes cable and broadcast television networks, television production and distribution operations, domestic television stations and radio networks and stations. Investments have also been made in entities that operate programming, distribution and content management services, including television networks, which generate a tremendous amount of revenue (The Walt Disney Company).
The businesses in the Parks and Resorts segment generate revenues from the sale of admissions to theme parks, sales of food, beverage and merchandise, charges for room nights at hotels, sales of cruise and other vacation packages and sales, as well as rentals of vacation club properties. Revenues are also generated from sponsorships and co-branding opportunities, real estate rent and sales, and royalties from Tokyo Disney Resort. The Company owns and operates the Walt Disney World Resort in Florida; the Disneyland Resort in California; Aulani, a Disney Resort & Spa in Hawaii; the Disney Vacation Club; the Disney Cruise Line; and Adventures by Disney. The Company manages and has effective ownership interests of 81% in Disneyland Paris, 47% in Hong Kong Disneyland Resort and 43% in Shanghai Disney Resort. The Company also licenses intellectual property to a third party to operate the Tokyo Disney Resort in Japan. The Company’s Walt Disney Imagineering unit designs and develops new theme park concepts and attractions as well as resort properties (The Walt Disney Company).
Large amount of revenue and profits emerge from the Studio Entertainment from distribution of films in the theatrical, home entertainment and television markets, stage play ticket sales, distribution of recorded music and licensing of Company intellectual property for use in live entertainment productions. The films are distributed primarily under the Walt Disney Pictures, Pixar, Marvel, Lucasfilm and Touchstone banners.
Lastly, the Consumer Products & Interactive Media segment is mainly involved with: licensing characters and content from the film, television and other properties to third parties for use on consumer merchandise, published materials and in multi-platform games, selling merchandise through the company’s retail stores, internet shopping sites and wholesale business, sales of games through app distributors and online and through consumers’ in-game purchases, wholesale sales of self-published children’s books and magazines and comic books and advertising through the distribution of online video content (The Walt Disney Company).
The company employs 195 thousand personnel as of October 1st, 2016 and generated 56.6 billion dollars in 2016 with a profit of over 9 billion dollars, a 12.04% increase in profit from 2015. This is promising, considering their profit increase from 2014-2015 was around 11.75%. Practical recommendations, evaluations and conclusions will be based on analysis of both the internal and external environment of the organization (The Walt Disney Company).
Strengths of the Company
Disney has grown to be one of the largest entertainment and media conglomerate globally. It has been benefiting from the investments it has made in various business segments. For instance, Parks and Resorts reported a 7% rise in revenues in 2015, driven by significant price increases at most of its properties (Hulkower). Big gains were also experienced in movie business, in particular via the Star Wars franchise as the Studio Entertainment continues to post good results since Walt Disney plans to be releasing a new Star Wars movie annually for the next half decade. The royalties received for Star Wars and Marvel related toys and other products in the Consumer Products segment has contributed much to its success (Hulkower).
Strong brand equity
Whether through its Disneyland theme parks or many of its other thriving business ventures, the company is globally known for its wholesome image. It is in most if not all times regularly listed among the best brands of all time. The theatrical releases, sales, management services and massive investments have earned it a positive reputation as well as strong brand equity.
The organization also boasts of a very strong balance sheet and generation of robust cash flows. The net income attributable to Walt Disney Company was $ 9,391, 8382, 7501 million dollars for the years 2016, 2015 and 2014 respectively. Such a positive trend has made it possible to not only make acquisitions of a 15% interest in BAMTech, 11% interest in Vice for $400 million of cash, 33% interest in Hulu but also pay a decent dividend (The Walt Disney Company).
Opportunities the Company Can take Advantage of
Disney’s geographical spread has been felt over the past few years, with its Parks and Resorts segment having properties in Shanghai, Tokyo, Paris and Hong Kong. The recent 5.5 billion dollar investment, Shanghai Disney, is expected to fish both the middle class and domestic tourists as more parks are opened in other parts of the country and the Asian region at large (The Walt Disney Company).
New Media Partnerships
The company is positive in regaining most of its cable subscribers lost over the few couple of years through the investments it has made in the recent past. $400 million has been invested in Vice Media, and talks are going on concerning the possibility of including Disney programs on Sling TV (The Walt Disney Company).
Problem Analysis and Description
Weaknesses of Walt Disney
As an entertainment, consumer product and travel Company, Walt Disney’s success is highly unpredictable since it relies much on the ever-changing tastes and preferences of its viewers and customers. The consistent creation of films, theme park attractions as well as cable programming that meets the desires of the broad spectrum of customers across continents also proves to be a challenge. Investing largely on a project that might not be acceptable in the market may results in significant losses for the entity (Hulkower).
Lowered subscription levels
The Walt Disney over the recent past has lost a significant number of media subscribers to their competitor ESPN. The multimedia entertainment company’s nearly eight million subscribers shifted to ESPN and/or the Internet since 2010 in an effort to cut down their cable bills (Saba).
Threats the Company experiences
On the cable segment of the business, the corporation faces competition from not only other satellite and cable services, including Comcast Corporation and Time Warner Inc., but also web streaming companies such as Netflix and Amazon Prime. In the movie and video production, according to IBIS World’s website and each company’s 10-k annual report, NBC Universal Media LLC obtains around 18.4% of the Revenue within the industry as The Walt Disney Company holds 20%. What a stiff competition! (Hulkower).
Solutions, Evaluation and Recommendations
It is clear that Disney’s threats and weaknesses are outweighed by the opportunities and strengths of the company. The growth and expansion potential will enable investors to benefit from the major Shanghai Disney Resort investment as well as the Star Wars franchise. On the other hand, a large number of parents believed that Disney World would be interesting for kids, but stressful and expensive for parents (Saba).
In order to gain more subscribers while maintaining the current, the entity should seek ways in which their services will be all round to fit every member of the family. The pricing of its products and services should cater more for the economy as well as the disposable income of the consumers. Traveling to the different parks and resorts across the countries exposes some of the subscribers to terrorism and crime. Therefore, distribution of such parks to more countries in order to increase accessibility and convenience will prevent decline of frequent visitors (Saba).
Hulkower, Billy. Content Consumption: TV and Movies – US – August.
Retrieved from http://academic.mintel.com/, 2016, August
Saba, J. ESPN streaming deal helps Disney step into the future, 2016.
The Walt Disney Company. Form 10-K 2016. Retrieved from SEC EDGAR website http://www.sec.gov/edgar.shtml