Consumer Products- Disney Parks Online

If you want to buy great Disney parks merchandise, unfortunately the only real option is to go there in person. This makes little sense if you think about it. Disney has a strong online presence with multiple sites that sell goods. The Disney website sells Disney merch, then a few years ago Disney began selling Disney parks merch on the Disney site...getting better. However, the selection is very sparse and sad. The online Disney store has little selection of parks merch and offers little in the way of attractions/hotel specific merch. For example, if I want a Grand Floridian coffee cup, it should be on the Disney parks site. How about a Pirates of the Caribbean attraction poster? How about a Wide World of Sports T-Shirt? A Tokyo Disneyland hat?

 To fix this, I suggest a separate Disney parks site with strong filtering buttons. I should be able to filter by resort, by hotel, even by attraction or store. Imagine if you can shop specifically at the Emporium, etc. The goods are stored in warehouses after all, so this should not be very difficult.

Also, the inventory of the World of Disney store needs to be online. Doing so will could greatly increase revenues and will not interfere with vacation shopping for souvenirs. This is an area needing immediate assistance?  Thoughts?

Corporate- What to do with ESPN

ESPN. A strong business that is the thought leader and brand identifier for all sports programming. ESPN was bought in the 1990's when Disney bought Capital Cities, giving majority control of ESPN to Disney. The company (and its revenue) really took off in the early 2000's and continued throughout the decade. When ABC was struggling in the 1990's and when tourism at the parks struggled following 9/11, it was ESPN that saved the company more than any other part. ESPN was a solid producer for years...until they weren't. A few years ago technology has increased so that fewer subscribers continue memberships and prices for sporting rights continue to increase, creating a serious decline in revenue. So what should Disney do about this and what has Disney done about this? Let's start with the latter.

Disney has had two rounds of mass layoffs at ESPN and the future does not look any brighter. However, this might make good business sense for the foreseeable future, it fails to take the long term view into account. If this trend continues, Disney will likely sell off its stake in ESPN. That would just be wrong...so what should Disney do?

Disney should stop listening to the MBA's here. Traditional finance in a mega company such as Disney dictates that each subsidiary under the company umbrella must be independently profitable. However, the Disney company does not operate its businesses independently; the success of the company promotes and leverages cross pollination (a movie spurns a park attraction which spurns a tv show and merchandise, etc.). They all work together in a holistic way. When things go well, every subsidiary wins. However, when things are going bad, the company is seeking to stop the bleeding immediately at all costs. Instead of focusing on immediate course correction within the subsidiary, the parent company should seek to leverage the other subsidiaries in order to outlast and make appropriate corrections without drastic changes.

So what does this mean for Disney and ESPN? Be patient and give it time. Have ABC hold more ESPN promotional events, have Walt Disney World host some major event (i.e. not high school gymnastics) at Wide World of Sports. Continue to update technology to provide more options, but don't lose focus that ESPN is a worldwide brand for sports. These cuts (and possible divestment) will only hurt the Disney brand. Disney currently owns the concept of sports by owning ESPN, that is worth an awful lot and should be taken into consideration.

A family looks out for one another. When your sibling is struggling, the family must pull together in the tough times...layoffs and cost cutting are not the answer.

Disney Company Timeline- The Other Forgotten Era's (1966-1984)

There is a period of Disney Company history that is largely overlooked, where the company's performance was mediocre at best, films were stagnant, and the product was not as fresh as it once was. This short period had three CEO's and additional Chairman and power players in the company. However, each period has its own significant contributions.

Roy O. Disney (1966-1971)-

Though Roy Disney had always been at the forefront of the studio hierarchy, he took over primary duties (creative and business) upon Walt's death in 1966. He was old, he was tired, and he was looking to retire soon, but he stayed on to finish Walt's dream of finishing the Magic Kingdom at Walt Disney World. That was his primary focus as most everything else was delegated.

His tenure saw films such as The Jungle Book (already in development at Walt's death), The Aristocats, and Bedknobs and Broomsticks. Other live action films were also made, but nothing really noteworthy.

No significant changes to consumer products. At Parks and Resorts, Disneyland saw only minor improvements, but he did ensure the completion of the Magic Kingdom at WDW because he knew how to build that. He abandoned Walt's idea for the city of tomorrow because he did not know how to build this.

Roy's primary contribution though was his stability after Walt's passing. He leveled out the ship and got everyone on track.

Donn Tatum (1971-1976)-

This 5 year period was the first without a Disney at the helm and was largely a quiet time for the company in the parks and films, likely due to the tumult in the culture. The films saw Robin Hood as the sole animated feature, and the live action films continued to decline with films such as One little Indian or The Apple Dumpling gang. At the parks, Disneyland saw the creation of a new land "Bear Country", a small land to take on the new attraction "The Country Bears", one of the last attraction concepts ok'd by Walt. At Walt Disney World, Fort Wilderness and the hotels were completed, including the Contemporary and Polynesian resorts. At this point, discussions were starting to look at possibly opening a Disney resort in Asia, but that would not come during his tenure.

Tatum's contributions are measured, but perhaps his most significant one was that the company can be run as a corporation rather than just a family business.

Card Walker (1976-1983)-

Card Walker had worked at WDP for a long time and had worked his way up as one of "Walt's boys" (i.e. a creative employee). Walker's tenure was slightly better than Tatum's and did see some expansion in certain areas.

The films during this tenure included the Rescuers, The Many Adventures of Winnie the Pooh, The Fox and the Hound. Live action includes Tron, Pete's Dragon, Freaky Friday, etc. Not amazing films, but they did make some money. They began discussing the idea of the Disney Channel at this point. Consumer products saw some expansion of products. Parks and Resorts saw the opening of Thunder Mountain and Space Mountain. At Walt Disney World, the park turned into a real resort with new golf courses (because Card Walker was a golf addict). He oversaw the opening of the Tokyo Disneyland resort, and he opened up EPCOT (re-themed as a permanent world's fair) in 1982.

His greatest contribution was likely seeing expansion of the Walt Disney World resort into what it is today.

Ron Miller (1983-1984)-

The son in law of Walt, Ron had worked a few jobs at the company and worked his way up. His tenure at the top was short and was not very fruitful. There was a company recession and the company was under threat of corporate takeover. It didn't help that the Disney family was split over Ron because he and Diane Disney had separated. Films were very sparse during this time- No animated films and few live action ones.

However, this period was not all negative. His greatest impact was likely taking on more debt in order to stave off takeover. This broadened the company and its holdings. It kept Disney independent and whole. However, the stock price and lack of films had hurt the company to such a degree that Miller was ousted in favor of a film executive, Michael Eisner (see the post on the Eisner era).

Thoughts?

Disney Company Timeline- The Walt Disney Era (1923-1966)

 

Walt Disney was a fascinating man and he ran the company with his namesake with exacting precision. The impact he had upon the company and the work it produced was very significant and exacting. He is most known for his creativity, storytelling, exacting standards, and bold risk taking. Surprisingly, during his tenure the company was in dire straits just as often as it was wildly successful. He built this company (with his brother Roy) and is responsible for

- Forming the company. This was no small feat to create a major brand from nothing.

- The cartoon short period. Beginning in 1923 the company was exclusively in the cartoon short game. During this period he created the litany of Disney characters Mickey Mouse, Donald Duck, Goofy, as well as the Silly symphonies, and Three little Pigs.

- Disney merchandise. Walt and Roy hired Kay Kamen to run their merchandise department and this was wildly successful from the get go. Mickey mouse dolls, watches, and even the Mickey Mouse club all stemmed from this. Walt became the father of Mickey Mouse.

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Feature film production. In 1937 the first feature film "Snow White and the Seven Dwarves" was released to huge acclaim. This started the first Disney golden age for a string of five quality films (Snow White, Pinocchio, Fantasia, Dumbo, and Bambi). Walt made the studio the pre-eminent cartoon feature film studio.

- The 1940's brought a great depression to the company. There was not enough money to make a feature film and likely not enough audience able to see it. The company was just struggling to survive. The company began making government war documentary shorts. Additionally, Walt and the company had to endure a major studio strike. The company did continue to make features sparingly, but they were of much lesser detail and quality. These included Saludos Amigos, Three Caballeros, Song of the South, So dear to my heart, Fun and Fancy Free, Adventures of Ichabod and Mr. Toad, etc. Walt kept the company alive.

- The 1950's were a great time for Walt and the company. For features, his first animated feature out of the gate was Cinderella, a smash hit. This gave him enough money to make more films including Alice in Wonderland, Peter Pan, Lady and the Tramp, and Sleeping Beauty. Additionally, due to the locking of wartime revenue in Britain, he began making live action features and made such hits as Treasure Island, Robin Hood and his merry men, and many more. Walt ceased making shorts, but instead took a risk on an idea for a theme park called Disneyland. He purchased land in Anaheim, CA and mortgaged the company and it paid off wildly. He also began the "Disneyland" television show and made other shows including Davy Crockett and Mickey Mouse club, making him a national celebrity second to none. He became his new persona of Uncle Walt. By the end of the 1950's the company had ample revenue.

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The 1960's continued this trend of wildly successful ideas. In films, he had taken a much reduced role and created 101 Dalmatians, Sword in the Stone, and Mary Poppins. He continued making live action films, he expanded Disneyland with New Orleans Square and then began the process for making Walt Disney World in Florida. During this time he was also trying to build the Mineral King ski resort and other projects.

Walt's contribution is the company itself, but the company today is very different from what he had created.

Disney Company Timeline- The Eisner era (1984-2005)

The era of Eisner is a fascinating one. Coming into power in 1984, a definitive low point during the company's tenure, Eisner transformed Walt Disney Productions into a Wall street big wig knows as the modern Walt Disney Company.

At his best, Eisner was creative, a risk taker, pragmatic when he needed to, and a strong evaluator of talent, and vast expansion. He gave us

Wild expansion in films, jumping movie production from an average of four movies per year to ten per year. His movie strategy was also very effective; low budget movies (singles and doubles) live action movies that are family friendly while also overseeing large large action movies such as Pearl Harbor, Pirates of the Caribbean, etc. He oversaw the resurgence of the Disney animated films of Little Mermaid, Beauty and the Beast, Aladdin, and Lion King. He oversaw the first hits with Pixar as Toy Story, Monster Inc., Finding Nemo, Cars, etc. Though much of his tenure had bad animated movies, the strong brand of the company was able to propel the company past the weak films (i.e. Disney animated films 1995-2005)

New attractions at Parks and resorts, such as Splash Mountain and others...but perhaps most strongly he realized that he may have to go outside the company for a good attraction IP, such as Star Tours, etc. He also opened up new parks (Disney MGM studios, Animal Kingdom, and California Adventure). He also saw the opening of the Disneyland Paris resort.

Consumer products was greatly expanded with the Disney Stores and with the advent of the Internet.

Broadcast networks was also greatly expanded with he purchase of Capital Cities, where the company bought ABC and ESPN, what a deal!

Eisner is sometimes a controversial figure. He is a creative businessman who surely saved the company and established it as a dominant media company, however many feel his focus was never on the quality or detail the company once knew. Under Eisner (and now Iger) the company was clearly out to make a profit at all costs. The "upcharge" was established after continually raising prices. No longer was a Disney vacation a cheap expense, now it's an event that must be saved for.

His pragmatism is also worth commending as he avoided any deal with Time Warner when he believed the soaring stock price was not credible.

Eisner's greatest weakness though was his cling to power and lack of a succession plan. He was forced to take Bob Iger as President, but given his heart condition a succession plan was absolutely necessary. He viewed succession as a threat to his power. However, by putting all the power on himself, he got overworked and his ideas got tired. When the company had a bad spell the writing was on the wall, but once he got rid of Roy E. Disney, the namesake of the company, then the Save Disney campaign went to war with Eisner.

Eisner's tenure was necessary, he should be applauded and thanked for his work. He paved the way for where we are today. There was some recovery that had to happen, but he truly made it a modern company.

Disney Company Timeline- The Iger Era (2005-Present)

What is the Iger era known for?

The Iger era can undoubtedly be considered a success through and through. Let's look at the successes, pillars, and shortcomings.

Most notable
  Acquisitions. Iger is adept at purchasing a company or IP when the stakes are high. His most notable purchases include Marvel and Lucasfilm for over $4 Billion each, and Pixar for over $7 Billion.

Studios-
 Disney's studios films have seen a general quality increase (and certain revenue increase) since he took power. Marvel and Lucasfilm films have been strong additions to the studios bottom line. Pixar's films have generally been strong and many have made lots of money. Walt Disney animation studios films have been hit or miss, but the hits have been significant (i.e. Frozen). Walt Disney pictures films have also had a few hits (i.e. Beauty and the Beast) which have helped propel the studios revenue into the black. Iger also is responsible for the creation of Disneynature. The studios also encompasses live theater, music, radio, etc. Good 12 years so far for the studios.

Parks and Resorts- International expansion in Disneyland Hong Kong and Disney Shanghai. Expansion in Magic Kingdom's Fantasyland, Redo of California Adventure. Pandora and of course, Star Wars land is in the mix. Some new attractions and technology. Again, good year for Parks and resorts.

Consumer Products/Broadcast networks- Nothing really exciting here. These divisions have been fairly stable with a few hits. No major investments to speak of, but the current problems with ESPN have been bogging down the company for the past year.

Biggest Weakness- Succession. Iger's contract keeps getting extended time after time. You'd think that the company would have learned their lesson after Eisner that having an all powerful CEO with no clear succession plan is a bad idea. Nope, Disney repeated this very process. The company HAD a succession plan with both Jay Rasulo and Tom Staggs in place. Iger chose Staggs, so Rasulo left. Then Iger got rid of Staggs. This reeks of holding onto power.

Was Staggs not capable? He was a CFO and head of parks and resorts (as was Rasulo). Perhaps Iger should have made Staggs President instead of just COO (just like Eisner was forced to make Iger). It is this type of attitude towards succession that worries many company investors. If Iger was hit by a bus, the company will once again be in turmoil. So what's next? Iger's contract got extended another year until 2019. Rumors continue to swirl that he will eventually run for office...is their a clear successor today? No. There is no President or COO today.

Also, power continues to be consolidated into Iger by making him Chairman and CEO. This too is a dangerous combination that can be separated. Learn the lessons from the Early 2000's!!!

In the future, there will still likely be some great things coming and with certain hits. Hopefully another large acquisition that will spur excitement and cross utilization across the company. Thoughts?

Parks and Resorts- Competition spurs creativity

The rivalry between Disney and Universal is probably the best its ever been, which is great news for customers (though it will likely take its toll on the wallet). This was not always the case; for much of the last 30 years, the rivalry was nearly non-existent. Universal would try something, if it was a success, Disney might copy it, etc. However, they really operated in different genres; Disney as a family friendly immersive THEME park while Universal was a movie studio with rides tailored to older patrons. This all changed once Comcast bought out Universal and decided to compete in a new type of attraction; the fully immersive themed land. Wizarding World of Harry Potter was a game changer for the industry, becoming the new standard of top notch attractions, stores, and restaurants in a FULLY IMMERSIVE environment. This also drove the cost up considerably for new developments.

Universal did not stop there. Universal made a master plan where they are coming out with a Major attraction every year for the foreseeable future. This is ambitious. How did Disney respond? They tried to match it with Pandora: the world of Avatar. Not quite Harry Potter, but it does create a vivid environment.

More importantly though we need to understand what this represents...it's an arms race. Disney is going to struggle to keep up, but Disney's pace is must slower (5-7 year avg by my calculations). Will this give Universal a distinct advantage?

Additionally, this arms race of themed environments has created a new type of expansion. I call it the Billion Dollar land. It is these improvements which cost anywhere between $800M-$1.2B, (a lot of money), but which actually don't offer much. Examples include

DISNEY

Fantasyland expansion- Two terrible attractions, repurposed Dumbo, One nice restaurant, one quick service restaurant

Cars land- Two attractions, One large one, counter service food

Pandora- Two attractions, one restaurant

Star Wars land- Two attractions, likely some restaurant

Toy Story land- Likely two attractions

UNIVERSAL

Harry Potter- Several attractions across two parks, two restaurants

Simpsons- two attractions, one major, restaurant

Nintendo land- ???


The cost of the themed environment is so high that the actual land provides little to do. The companies need to plan for this. A new land should be all encompassing and be able to pass a LOT of time, i.e. 5-7 attractions (good ones too, not repurposed ones), 1-2 restaurants, shops, etc. Take star wars land; there should be a hoth planet with an attraction, a death star, and several more. The land should take up considerable size, not only a few acres. This SHOULD cost a lot of money to do it well, so the companies should allocate that a new redevelopment should get at least $1.5B if they are trying to go all in. Disney cannot compete with Universal if they try to do this on the cheap; i.e California adventure. If it is too much money then they should not try to engage.

Many will read this and say something like "that's easy for you to say, etc." I agree, spending $2B is a tough call, but that's the business their in.

For Disney, Star Wars and Marvel should get their own theme park (or at least a substantial part of a park) if done right. These are game changer IP's.

For Universal, Harry Potter is making them a FORTUNE. Why is the Lost continent still there? Get rid of it and expand Harry Potter. Get rid of MIB or other dated attractions in USF. For Nintendo, the options are plentiful and could really do some damage.

Unless a company chooses to bow out, the arms race will continue and we should be happy about it! Thoughts?