Walt Disney Case Summary, Disney 164y5x

The Walt Disney Company: The Entertainment King Introduction The Walt Disney Company has truly been “the entertainment king” in the 83 years since its founding. This is largely due to the vision of Walt Disney, as well as the strategic management skills of Michael Eisner. The work of these two men, as well as countless others at The Walt Disney Company has created an innovative business model with universal appeal. A History of Disney The Disney Brothers Cartoon Studio was founded in California in 1923 by Walt and Roy Disney. The brothers had a contract to produce “Alice Comedy” films about a live girl in an animated world. Over the next four years, around 55 films are produced in the series. In 1927, The Disney Studio began indirect production for Universal Pictures’ films “Oswald the Lucky Rabbit.” The brothers produced 26 films in their first year. In 1928, Universal took the contract from the Disney Studio, and Walt Disney created Mickey Mouse by widening Oswald’s ears and changing his clothes slightly. Mickey’s film debut was also in 1928 in the film “Steamboat Willie.” 1937 saw the release of Disney’s first feature-length animated film, Snow White and the Seven Dwarfs.

In 1940 the company made its initial public stock

offering, and ten years later, Treasure Island, Disney’s first entirely live-action film was released. Walt Disney himself also appeared on television for the first

time in 1950. In 1955, Walt Disney realized his dream for a family-based theme park with the opening of Disneyland in Anaheim, California. Eleven years later, Walt Disney died of lung cancer, and his brother Roy became the new chairman of The Walt Disney Company. The company opened its second theme park, Walt Disney World, in Orlando, Florida in 1971. Walt Disney World’s EPCOT Center was opened in 1982, with a central globe based on the Unisphere from the 1964 World’s Fair in New York City. EPCOT features pavilions representing eight countries. Disney expanded its international focus with the opening of Tokyo Disneyland in 1983. Tokyo Disneyland was designed by the creators of Walt Disney World and features a similar look and many of the same attractions. A shift in the company occurred with the board of directors unanimous decision to elect Michael Eisner as chairman and chief executive officer and Frank Wells as president and chief operating officer in 1984. Roy Edward Disney, son of Roy Disney became head of the animation division. The Reason for Disney’s Success The Walt Disney Company’s success up until the selection of Michael Eisner was due to Disney’s ability to create unique characters with universal appeal and then truly bring those characters to life. In addition to Mickey Mouse, the company created such well-known characters as Minnie Mouse, Goofy, and Donald Duck. The company’s family appeal has also had a large influence on its success. The theme parks and retail stores are based on the popularity of the original

animations. In addition to the company’s success with consumers, its films have also received critical acclaim, winning six academy awards. Walt Disney’s vision still influences the company’s strategies, and causes it to continuously search out creative new ideas.

The Michael Eisner Years The Walt Disney Company saw many changes under the command of Michael Eisner. Disney made a large entrance into the retail market in 1987 with the opening of the first Disney Store. In 1988, Disney-owned Touchstone Pictures released the first live-action and animated feature film.

Who Framed Roger

Rabbit cost over $80 million to create and market and received four of Disney’s six Academy Awards.

Another addition to Walt Disney World, Disney-MGM

Studios Theme Park, opened in 1989 further increasing the pull of the Orlando Park. After this success and the overwhelming popularity of Tokyo Disneyland, The Walt Disney Company decided to open The Euro Disney Resort and Euro Disneyland in Marne-la Vallée, . In 1992, Beauty and the Beast became the first animated picture nominated for best picture, a major milestone in the animation industry. The death of CEO Frank Wells in 1994 created a void in the company, and Eisner took over many of Wells’ duties, distributing very few among other of top management. In 1995, Disney purchased the ABC TV network for $19 billion, making it one of the largest players in the television and radio industry. In 1998, Disney further

expanded its reach by launching its first cruise ship, the Disney Magic. A further expansion to Walt Disney World was the opening of Animal Kingdom, also in 1998. Key Issues in the Case The case covers four key issues other than the management of Michael Eisner. These issues are the revitalization of TV and movies, expanding into new businesses, regions, and audiences, maximizing theme park profitability, and coordination among businesses. Revitalization of TV and Movies After the creation of the Disney Channel, Disney stopped production of network television shows. programming.

Michael Eisner decided to renew their quality network

In 1986, the Disney Sunday Night Movie premiered on ABC.

Disney also created independent shows such as the Golden Girls, Regis and Kathy Lee, and later, Who Wants to be a Millionaire. A syndication operation was begun to sell TV programming accumulated over 30 years of production. Disney’s movie department saw a 4 percent drop in box office shares in 1984. In Eisner’s first week, Touchstone had brought him the script to Down and Out in Beverly Hills, the first rated R movie that they had produced. Beginning with that, 27 of the next 33 movies produced by Disney Studios were profitable with six earning over $50 billion each. By 1988, Disney held 19% of box office shares and led the industry in ticket sales. Disney began a program of releasing 15–18 films per year.

The animation department took longer to revive than television or movies. When Eisner took over, the animation was averaging a new film every four to five years. Eisner expanded the department, and reduced the time it took to release a film to 12-18 months. $30 million was invested in the Computer Animated Production System (CAPS), which was used to create movies such as Who Framed Roger Rabbit. This investment quickly paid for itself, as Who Framed Roger Rabbit earned $220 million in box office sales and also sold large amounts of related merchandise.

Expanding into New Businesses, Regions, and Audiences An extremely beneficial move for Disney was the operation of its consumer products division as a “retail-as-entertainment” concept.

This helped Disney

generate sales per square foot at twice the average rate for retail stores. Disney also incorporated high-end collectors’ items to target a more mature consumer. In the late eighties to early nineties, Disney founded Hollywood records (a pop music label), Disney Press (publisher of children books), and Hyperion Books (an adult publishing label). Each of these divisions proved to be successful because of their low start up costs and huge profits. Disney believed that in the creation of Euro Disney, it should follow the same format as Disneyland, Walt Disney World, and Toyko Disneyland, rather than adapting to the French Culture. This proved to be a mistake, and the cultural differences almost caused the park to fail. This problem could have been avoided

by greater market research in Europe. However, Disney had the foresight to sell Euro Disney S.C.A. shares on several European exchanges. Disney held 49 percent ownership of the park, with the other 51 percent owned by outside shareholders.

Michael Eisner was forced to focus in particular on the

revitalization of this park. Disney began releasing a series of highly profitable and successful animated features. Some of these animated movies include The Little Mermaid (1989), Beauty and the Beast (1991), and Aladdin (1992). Disney also produced bigbudget, live-action films through their Touchstone label. The film Splash, which featured partial nudity, caused an out roar among Disney customers, eventually leading to a public apology by the company. The purchase of Miramax proved to be a good acquisition because it is an independent production studio with a history of success with low-budget art films. Maximizing Theme Park Profitability The Walt Disney Company broadened its scope with the opening of Walt Disney World in 1971 on land secretly purchased by Walt Disney.

Walt Disney World

became the top-grossing park in the world, with $139 million in sales and 11 million visitors the first year.

Disney made its park into a full-service travel

destination with the creation of hotels and an in-house travel company that coordinated vacation with travel agencies, airlines, and tour companies. The company added $1 billion worth of new attractions to keep up with cultural changes over the next few years. These attractions included water-based

attraction Typhoon Lagoon, Disney-MGM Studios, and Toontown. The constant addition of new attractions not only increased the length of customer visits, but also the number of return visitors. By the year 2000, Walt Disney World qualified as a destination resort, as the average tourist visit lasted three days. Disney raised ticket prices and lowered restrictions on the maximum number of park visitors.

Overcrowding and high prices could have caused a loss of

customers. Luckily for Disney, guests still felt that they were receiving an incredible value for their money. Disney’s first international theme park was in Japan. Tokyo Disneyland was solely owned by a Japanese partner and designed by WED Enterprises to closely resemble Disney World. Disney received 10% of gate receipts and 5% of other sales as well as ongoing consulting fees. Euro Disney nearly proved to be a disastrous decision for The Walt Disney Company. Cultural clashes as well as weather issues shocked a company which had previously experienced only success. A professor of French literature was recruited to oversee the park’s development and integrate the company’s culture into the culture of . Disney made the decision to allow wine in on-site restaurants; but male cast were still required to shave. The changing weather caused numbers of guests that the park could barely handle in summer and also the near-desertion of the park in the cold winter months. Disney is still forced to lay off employees and reduce hotel and ission prices as well as management fees during the winter months to keep the park open. Again, these

problems could have been avoided simply through market research on Disney’s part. Coordination Among Businesses Overlaps necessitated the need for coordination among Disney’s various businesses. Campaigns with outside corporate sponsors had to be arranged through all aspects of the business. Conflicts also arose over the Disney-owned minute of advertising during The Disney Sunday Movie. This could be resolved by using general company advertising and only using specific advertising for large events. Disney used internal transfer prices for activities that one division performed for another. For example, when any division wanted to use material from the Disney film library, it paid a price to the Disney film studio. If a conflict arose between division executives, Eisner and Wells encouraged them to resolve it among themselves, but they also provided the option of arbitration for difficult problems.

Management focused on quick resolution,

allowing more time to focus on important business matters. In 1987, a corporate marketing function was installed to stimulate and coordinate company-wide marketing activities.

A marketing calendar was introduced to

coordinate marketing across the company and was updated at weekly meetings with divisions across the company.

All divisions were responsible for the

generation of new ideas, and a monthly meeting of 20 divisional marketing a promotional executives was initiated to discuss inter-divisional issues.

Conclusion The Walt Disney Company has been extremely successful in the past 83 years due to both the vision of Walt Disney himself, and the strategic management skills of Michael Eisner. Eisner took a profitable company and revitalized and expanded it until it truly became “The Entertainment King.” It is possible that the immense diversification within the company will be its downfall, as it may simply become too large to manage. However, it has managed to stay strong and will most likely continue on its upward path.