Walt Disney - Content Is King by Peter Louis

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

Agenda     

Disney’s strategy Is there a competitive advantage? Current strategic challenges Recommendations Conclusions

Disney’s strategy

1. 2. 3. 4.

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

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

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

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

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

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

Is there a competitive advantage?

Disney’s brand equity World's Most Favorite Brands

90 80

$ billions

Rank 1999 2000 1 1

Company Coca Cola

Disney

Sony

Source: Interbrand, Citigroup

2001 1

30 20 Coca Cola

Disney

0 1999

Sony 2000

2001

Years

Source: Interbrand, Citigroup

Company Coca Cola

Brand Value 1999 2000 2001 83.8 72.5 68.9

Disney

32.3

33.6

32.6

Sony

14.2

16.4

Source: Interbrand, Citigroup

Yes!

Is it sustainable?

Yes…

but only if

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

Current Strategic Challenges

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)

ABC A strategic fit but:

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

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

Source: Annual reports

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.)

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

Yes, there is for AOL Time Warner

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 © 2001 Peter Louis. All Rights Reserved

Video Games

Video Games Actual and projected Value of Video Game Industry

21.3

25 20 Revenue 15 ($billions) 10

5 0 2000

2003 Year

CAGR=45 per cent

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 © 2001 Peter Louis. All Rights Reserved

And of course, the hit…

Lara Croft: Tomb Raider, became…

Lara Croft: Tomb Raider, grossing…

$700 million for the game publishers EIDOS

$223 million for Viacom’s Paramount

If content is king then…

Context is Queen

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

However, looking at the Internet…

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% Source: Annual reports

AOL Time Warner Revenue Streams, 2000

Publishing 12%

Filmed Enterntainme nt & Music 33%

AOL 21%

Cable & Networks 34%

Source: Annual reports

AOL Time Warner’s Internet segment earns 21 per cent

But who wants to play Video games over the Internet?

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 Â˝ hours per day

Is 20 per cent growth still achievable?

Yes…

but only if

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

Recommendations

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”)

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



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  ?

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 ?

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

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)

Thank you

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).