Walt Disney Assignment 5 and 6
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MoviesDisney.pptxCompetitive Analysis Report
MOVIES DISNEY
The Industry Analysis Checklist #1
Identify your Industry:
SIC: Movies & Entertainment 7812
NAICS: Arts, Entertainment & Recreation
Name: The Walt Disney Company
Industry Description
Operators in this industry produce and distribute motion pictures and videos. This industry excludes third-party distributors and disc manufacturers and products produced for TV, such as TV shows and made-for-TV movies.
Supply Chain
Identify 2 Second Tier and 2 First Tier Supplier (include industry reports)
1st Tier Suppliers:
Video Post production Services in the US
Performers & Creative Artists in the US
2nd Tier Suppliers:
Camera & Film Wholesaling in the US
Electronic Part & Equipment Wholesaling in the US
Identify 2 Second Tier and 2 First Tier Buyers
1st Tier Buyers:
Movie Theaters in the US
Movie & Video Distribution in the US
2nd Tier Buyers:
Television Broadcasting in the US
Cable Networks in the US
Identify all External Drivers, briefly describe each and provide current data
4. Identify all External Drivers, briefly describe each and provide current data (CONTINUATION)
Demand from movie theaters
Although domestic theaters represent a minority of industry revenue, studios remain reliant on box office sales to recoup their investments in production and promotion, as well as to attract subsequent licensing deals. Box office sales have grown sluggishly in recent years and movie theater growth has increasingly come from ancillary concessions. Demand from movie theaters is expected to rise only slightly in 2020, presenting a potential opportunity for the industry.
Per capita disposable income
Per capita disposable income determines consumers' propensity for spending on movie tickets. When incomes are higher, consumer will also be more likely to purchase or rent industry productions for home entertainment. Per capita disposable income is expected to decrease in 2020.
Total advertising expenditure
In recent years, film producers have begun to subsidize production costs through the sale of in-movie product placement. In addition, high-profile films often attract co-branding deals with marketers outside the industry. Total advertising expenditure is expected to decrease in 2020, posing a potential threat for the industry.
Trade-weighted index
The industry has become increasingly reliant on foreign distribution, and therefore more vulnerable to currency effects. When the value of the dollar rises, as measured by the trade-weighted index (TWI), the real value of revenue generated abroad declines. The TWI is expected to increase in 2020.
Identify Key Statistics (performance measures) with current data
Identify Key Statistics (performance measures) with current data (CONTINUATION)
Products & Services and Market Segments Percentages
6. Name Products and Services and market segments percentages (CONTINUATION)
Action and adventure
Over the five years to 2020, major motion picture production has generally consolidated within a few select genres that studios have determined to be the most likely to generate significant returns on investment.
Drama
Dramas are mostly dialogue-driven depictions of human stories and are therefore not bogged down by excessive special effects costs.
Thriller and suspense
Thriller and suspense movies, which touch on themes of insecurity or uncertainty, have increased in popularity over the past five years.
Comedy
Fewer comedy movies have been released over the past five years compared with previous years.
Other
Other genres include musical and documentary films, among others.
Name Top Competitors and Market Segment
Top Competitors:
AT&T Inc.
Viacom CBS
NBCUniversal Media LLC
Market Segment:
Movie & Video Production / MEDIA Conglomerate
Identify the Industry Cycle Stage and provide brief explanation
The Life Cycle Stage of this Industry is MATURE
The industry is growing in line with the overall US economy
The number of industry enterprises is growing moderately
Market share has consolidated among a handful of major studios
The Industry remains a stable component of the national economy. The IVA (Industry Value Added) is forecast to grow at a rate of 5.7% by 2025. The industry's products are well-defined, the number of industry enterprises is expected to increase at an annualized rate of 3.3% to 7,646 companies over the 10 years to 2025. Important to mention that six major companies are projected to consistently control more than four-fifth of industry revenue.
Provide a brief Industry Outlook (be sure to update for Covid global impacts)
The Industry revenue is anticipated to accelerate over the five years to 2025, rising at an annualized rate of 6.2% to an estimated $42.5 billion mainly due to strong growth in foreign distribution. The main threat comes from Digital Operators that have begun to enter film production (Amazon, Netflix), along with a sluggish box office and anticipated declines in physical copy sales.
The industry is expected to be adversely affected by the COVID-19 (coronavirus) pandemic in 2020. All industry metrics are expected to decrease. Some companies will not be able to survive the conditions of halted production and delayed releases in the industry in 2020. Therefore, corporate profit is expected to decrease 25.1% in 2020. The economy is expected to show signs of recovery in 2021 after the pandemic. The industry is also expected to start to rely more on technology while people are social distancing. As social distancing protocols loosen, and movie theaters reopen, the industry is expected to thrive.
Describe the Operating Conditions – Identify each category and provide a short summary
Describe the Operating Conditions – Identify each category and provide a short summary (CONTINUATION)
Capital Intensity:
A moderate level of capital intensity is seen among the Movie and Video production industry. One of the major reasons for this is the huge costs involved in the process that includes the gear, shooting equipment, locations, and software for professional editing. To overcome these costs these equipment are usually rented by the movie producers which brings down the cost by a huge margin and makes it easily accessible.
The industry still relies on highly skilled workers and artists in all facets of the production process, and talented employees are vital to plan, shoot, edit and distribute projects.
Describe the Operating Conditions – Identify each category and provide a short summary (CONTINUATION)
Technology and Systems
Both, the rate of new innovation and the concentration, are in line with the average across all industries.
Major market segments for industry operators are relatively diversified. The spread of market segments suggests that there are limited entry points other than those already served my incumbent operators.
The Movie and Video Production industry has been only somewhat affected by technological disruption.
The level of technology change is High. New technology is rapidly transforming the Movie and Video Production industry.
(CONTINUATION)
Revenue Volatility
The level of volatility is Medium.
The Movie and Video Production industry operates with a low degree of revenue volatility.
Film viewing, particularly at theaters, is a highly discretionary expenditure and is therefore influenced by consumer incomes and spending patterns. As a result, the industry's performance is affected by broader economic changes.
At the individual studio level, the industry has a very high level of volatility. Even if the overall industry grows steadily during a given period, major studios will simultaneously experience wild swings in industry-relevant revenue.
Describe the Operating Conditions – Identify each category and provide a short summary (CONTINUATION)
Regulation and Policy
The level of regulation is Medium and is Increasing.
Screen actors, directors, cinematographers and the Movie and Video Production industry's movie production employees are heavily unionized.
Firstly, union membership requires additional bureaucracy, which translates into added expenses for fulfilling union requirements, limiting daily workloads, extending project deadlines and filling in the necessary paperwork to confirm that production was completed in Movie & Video Production in the US 51211a July 2020 44 IBISWorld.com accordance with the requirements of all involved unions.
Unions set higher minimum wages than federal regulations mandate for production employees. Negotiations between unions can also become extremely costly; the threat of a potential strike may lead to across-the-board increases in wages or, in the event of a stalemate during negotiations, costly legal fees.
Another way that this industry conducts self-regulation is through age-specific movie ratings.
The Motion Picture Association of America (MPAA) conducts the ratings.
Ratings are an inexpensive way for the industry to help parents monitor the content that their children watch and decrease the potential costs of lawsuits. Ratings also help broadcasters abide by Federal Communications Commission regulations.
Describe the Operating Conditions – Identify each category and provide a short summary (CONTINUATION)
Industry Assistance
The level of industry assistance is High and is Decreasing.
The US government and various state government bodies often pass tax provisions to encourage domestic movie and video production.
Tax write-offs may be included to reduce tax payments on production expenditure or permit some flexibility in various revenue accounting methods.
In recent years, the code has widely expanded to provide substantial write-offs, grants, tax rebates and sales tax exemptions for independent producers of films that are shot either on a low budget or in a designated location.
A high degree of government programs benefiting movie producers, the industry is also heavily unionized.
The Motion Picture Association of America Movie & Video Production in the US 51211a July 2020 45 IBISWorld.com (MPAA) represents all six major Hollywood studios and is one of the most powerful lobby groups in the country.
The MPAA has historically served to issue film content guidelines and administer its MPAA film rating system, but in recent years it has become an increasingly vocal advocate for strengthening the US government's antipiracy laws.
Identify the Company Your Team chooses to Analyze Legal Company Name, official company website
Legal Name: AT&T Inc.
It is an American conglomerate company that is Delaware registered and has it’s headquarter situated at Whitacre Tower in Downtown Dallas, Texas.
It is actually the parent company of Warner Media which is a mass media conglomerate. This is what that makes it the largest company in the media and entertainment sector in terms of earnings.
Official Website:
AT&T® - Official Site www.att.com/
Warner Media www.warnermedia.com
External Environment Analysis #2
Policy Trends
Covid19 State Restrictions on public gatherings caused the closing of most movie theatres in the US and Canada at some point in 2020. As of November 28, 646 movie theaters in the U.S. closed for the second time in 2020, virtually overnight amid an alarming surge in COVID-19 cases that led to a new round of public restrictions.
There were 2,154 theaters open in the U.S. over the Nov. 20-22 weekend, or roughly 40 percent of the country's 5,449 locations. That's down from 2,800 locations open over the Nov. 13-15 weekend, or 51 percent of all cinemas.
companies which got shut down during the covid
Economic Trends
Key External Drivers:
Demand from movie theaters: 2.4%
Per capita disposable income: 2.8%
Total advertising expenditure: -1.0%
Trade-weighted index: 1.6%
Social Trends
Increased demand for live-streaming due to stay at home restrictions - live-streaming games grew by 45% in mid-March 2020 and saw a global rise in streaming audiences, with Twitch’s viewership up by 10% and YouTube Gaming up by 15%.
consumer behavior trends impacting the industry, Ch. 3
Technology Trends
Fully integrated, all encompassing movie production facility that combines live action, animation, video game and LED lighting technology breakthroughs to allow a complete on location production, eliminating the need for set scouting (finding geographic location).
The WIMI’s AR+ live system, a holographic technology will enhance the user experience, allowing the user to become part of the movie by interacting with the movie content.
Environment Trends
Extreme weather events resulting in power outages.
In 2020 (as of October 7), there have been 16 weather/climate disaster events with losses exceeding $1 billion each to affect the United States. These events included 1 drought event, 11 severe storm events, 3 tropical cyclone events, and 1 wildfire event. Overall, these events resulted in the deaths of 188 people and had significant economic effects on the areas impacted. The 1980–2019 annual average is 6.6 events (CPI-adjusted). This is a threefold increase in just one year.
how weather impacts entertainment industry
Legal Trends
Legal Trends
The new cybersecurity laws introduced in different states will affects the company. For instance, California Privacy Act Rights Act of 2018 (CCPA) empowers consumers to take control of their personal information collected by businesses (Becerra, 2020). This comes at a time when Disney is switching to online streaming. Do NOT use as an opportunity
Global Lockdown on sporting events
The outbreak of COVID-19 pandemic disrupted Walt Disney operations. The government imposed a nationwide lockdown following the outbreak, forcing Disney to shut down its theatres and parks. Vengattil and Richwine (2020) indicates the shutdown caused the company $5 billion in losses, of which $3.5 billion was due to the loss of park’s operating profit. Overall, the company’s revenues declined by 42% to $11.78 billion.
Do not mention companies’ name in PESTEL
Laws enacted that shut down entertainment (restaurants, theaters, etc)
Five Forces Analysis #3
Power of Substitutes: Strong
Low-cost switching:
While companies such as Amazon and Netflix act as buyers to the leading players in this market, the substitution threat comes in the form of original content. Netflix original series such as Stranger Things, Orange is the New Black, and House of Cards have become worldwide hits, as well as a spate of original movies. The move towards online distribution also widens the other forms of entertainment that can be substituted, such as online gaming, social networks and learning, yet also provides further opportunities for advertising and film related merchandise. However, this form of distribution substitute can also be carried out illegally, which can affect market player revenues. Consumers can illegally buy films that have just left the cinema that are not available to buy legally, though they can often be of poor quality.
Cheap Alternative:
Sales of recorded music are currently being hugely undermined by the growth of digital music streaming. Music streaming sites such as Spotify have grown in popularity and had a detrimental impact on not only physical music sales, but also digital downloads. Globally, music streaming grew by over 40% in 2018, while other forms of music sales declined. In the US, revenue from music streaming grew with a CAGR of 49.0% between 2014 and 2018 to reach a value of $5.4bn.
Power of Supplier: Moderate
Importance of Quality Cost
Major industry players, including Walt Disney identify high quality as an important factor in film production (MarketLine, 2019). As such, suppliers with skills and knowledge to supply differentiated services and products have higher negotiating power.
Player Independence
The emergence of skilled freelance and independent artists and crews may also increase suppliers’ power.
Power Of Buyers: Moderate
Buyer Size:
Buyers in this market range in size from large retail and multiplex cinema chains through to small independent shops and cinemas. These larger buyers experience strong financial muscle which translates into a higher negotiating power.
Such buyers include retailers such as Wal-Mart and Amazon, and cinema chains such as AMC Entertainment, Cineplex Entertainment, and Cinépolis.
Low-Cost Switching:
Brand loyalty is weak, with buyers likely to switch between players due to the absence of switching costs.
Essentially, players all offer the same products (films or music), although the differentiation in quality can be stark. Buyers are prone to switch as they must buy films that are likely to be successful at the box office and so generate revenues.
Power Of Rivals: Moderate
Your points for the following slides need to be. Please use the North America Report (DONE)
Low cost switching (DONE)
Competitor Size (DONE)
Easy to expand (DONE)
Zero sum game (Need some Help)
Low fixed Cost (DONE)
Power Of Rivals (continuation)
Size:
There are a large number of players in the industry that not only includes the big multinational players like Amazon, Ebay, etc. but also a high level of competition by the domestic rivals along with independent players.
This brings wide range of diversity in the entertainment world not only in terms of good content but also, more genres. Therefore, this helps in limiting the rivalry.
Many big companies also use consolidations and acquisitions in order to increase their size and reduce the competition. This could be seen as to how in 2016, Lion’s Gate Entertainment acquired Starz Entertainment, LLC for $4.4bn. Another example consists AT&T acquiring Time Warner in 2018. Similarly, Disney acquired 21st Century Fox for $71bn, in order to change their competitive size and structure.
Fixed cost:
Fixed costs lead to intensify the rivalries when fixed costs are huge and reduce the same when they are low. High fixed cost and intense rivalry is not always a solution to the problem.
Leading market players usually spend huge amounts on films, so that they can earn huge profits with the sale in form of theatrical release, DVD sales, and online sales which intensifies the competition due to the huge fixed costs.
Moving towards digital downloads, fixed costs are reducing quite a lot as everything is available online.
But in the box office only a handful of companies enjoy success as in 2018 6 out of top 10 movies at box office were productions of Disney’s subsidiaries, whereas, other were produced by Universal Pictures, WarnerMedia (AT&T), and Paramount Pictures (Viacom). Therefore, reducing the rivalry significantly.
Power Of Rivals (continuation)
Cost of switching:
Low switching costs give buyers an advantage of always going towards the rivals especially when the products are close substitutes.
Companies are so competitive that their pricing policies are very aggressive and they don’t give much margin to rivals to cut through. This may lead to low switching costs which can intensify the competition.
As the movies are one click away now because of the online platforms. This makes it easy for the customers to switch between the players more easily than ever. This is why this factor has the ability to intensify the rivalry.
Expansion:
As the movies are easily available digitally now, this makes the scope of expansion easy.
All the new content is available to consumers in a click which means the companies need to expand digitally and the digital space is abundant. Therefore, it's easy to expand sales from time to time.
Also, exit barriers are tend to be low due to the external suppliers. therefore, making a film takes efforts but once it is made, it’s very easy to expand sales with the help of online platforms.
This in fact intensifies the rivalry.
Power of New Entrants: Low
Threat of new entrantindustry
Power of New Entrants: Low
Low-Cost Switching
Buyers in film industry are more likely to switch from one player to another (MartketLine, 2019). However, companies with a history of producing successful and popular films command high brand loyalty.
Supplier Accessible
Even though access to suppliers in the film industry in North America is easy, the threat is not substantial to established players. This is because the cost of protecting intellectual property reduces the threat of new small companies (MarketLine, 2019).
Internal Company Analysis: Resources and Capabilities #4
Name your Company, SIC Code, website and company products and services
The Walt Disney Company
SIC Code: 4833
Website: www.thewaltdisneycompany.com
add images for brands
Name 3 Competitor Companies (SIC Code and website)
AT&T Inc.
SIC: 4812
Website: www.att.com
NBCUniversal Media LLC
SIC: 4833
Website: www.nbcuniversal.com
Viacom CBS Inc.
SIC: 4833
Website: www.viacomcbs.com
S1: Technological Innovation
Resource: The Volume
Stars Wars Mandalorian uses the most impressive piece of technology: a room called the volume
A higher resolution room allowing to load in pre filmed environments
Capability
Capability of being able to accomplish any film within in the volume and eliminating travel for external environment scenery
S2: Online Streaming
Resource: Acquisition of 21st Century Fox by Disney
Capability: The streaming importance has tremendously increased for the sports events niche during the COVID era (previously WWE Super Stars used to perform in front of live audiences, but in the times of pandemic they are performing in virtual setting, i.e. live streaming on Fox)
S3: Travel Expansion
Resource:
Earth Star which is a private airline used for company executives globally
Capability:
to expand Earth Star services beyond Disney companies to grow market share
What kind of suggestion do you have for this?
Strategic Actions #5
CA 1: Technological Innovation
opportunity 1
found in PESTEL
R1:Stars Wars Mandalorian uses the most impressive piece of technology: a room called the volume. A higher resolution room allowing to load in pre filmed environments
C1: Capability of being able to accomplish any film within in the volume and eliminating travel for external environment scenery
THESE COME FROM PESTEL - copy paste from External Env. Analysis
an externality, or a situation, it exists and impacts the entire industry
CA 2: Online Streaming
Opportunity 2
take from PESTEL’s legal (can be the world, not necessarily USA)
New laws, restrictions on live sporting events has reduced the number of people
R2: Acquisition of 21st Century Fox including Fox Sports by Disney
C2: The streaming importance has tremendously increased for the sports events niche during the COVID era
CA 3: Travel Expansion
R3:Earth Star which is a private airline used for company executives globally
C3:to expand Earth Star services beyond Disney companies to grow market share
Opportunity 3
Licensing to Fortune 100 global firms - Earth Start Services this is a strategic action
Strategic Actions
SA1:
O1: The Volume has minimized traveling and production expenses. Digital scenery available instantly, endless capabilities.
S1:
Reasoning:
SA2:
O1: Expansion into Sports Industry
S1:
Reasoning:
SA3:
O1: Licensing to Fortune 100 global firms - Earth Start Services
S1:
Reasoning:
Strategic and financial objectives
FINAL REPORT SUBMISSION
Works Cited:
https ://en.wikipedia.org/wiki/AT%26T#:~:text=The%201982%20United%20States%20v,the%20latter%20changed%20its%20name
https ://cmo.adobe.com/articles/2018/6/5-industry-trends-shaping-the-future-of-media-and-entertainment.html#gs.iamgmz
CFI. (2020). Bargaining Power of Suppliers. Retrieved from https://corporatefinanceinstitute.com/resources/knowledge/strategy /bargaining-power-of-suppliers/
Pratap, A. (2019). Disney Five Forces Analysis. Retrieved from https://notesmatic.com/disney-five-forces-analysis/
Works Cited:
Disney. (2020). Disney - Leadership, history, corporate social responsibility. The Walt Disney Company. https://thewaltdisneycompany.com/about/#our-businesses
Macrotrends. (2020). Disney free cash flow 2006-2020 | DIS. Macrotrends | The Long Term Perspective on Markets. https://www.macrotrends.net/stocks/charts/DIS/disney/free-cash-flow#
Thompson, Crafting and Executing Strategy: The quest for competitive advantage, 22nd edition
Barbosa, M. S. M. F. (2020). Equity research-The Walt Disney Company (Doctoral dissertation, Instituto Superior de Economia e Gestão).
Bizzi, L. (2017). The strategic role of financial slack on alliance formation. Management Decision.
Krafczyk, M. P. (2019). A media and entertainment colossus: the acquisition of 21st Century Fox by The Walt Disney Company (Doctoral dissertation).
Mattila, M. (2017). Coping with friction during technology commercialization. IMP Journal.
Sutjipto, M. R., Sule, E. T., Kaltum, U., & Prasetio, A. (2019). The Role of Company Resources and Strength of Industrial Competition on Competitive Strategy in Indonesian Wholesale Network Industry. Academy of Strategic Management Journal, 18(5), 1-8.
Works Cited:
https://filmdaily.co/news/digital-technology/
https://www.iii.org/fact-statistic/facts-statistics-wildfires
https://learn-us-east-1-prod-fleet02-xythos.content.blackboardcdn.com/5ddc0af50a34e/8467203?X-Blackboard-Expiration=1607223600000&X-Blackboard-Signature=mjx3cfYsD2w%2BeeASXxvH4YAT3lbRlyOXZKDvsmwkXhs%3D&X-Blackboard-Client-Id=100302&response-cache-control=private%2C%20max-age%3D21600&response-content-disposition=inline%3B%20filename%2A%3DUTF-8%27%27CFRAEquityResearch_MediaEntertainment_Sep_28_2020%2520%25281%2529%25282%2529.pdf&response-content-type=application%2Fpdf&X-Amz-Algorithm=AWS4-HMAC-SHA256&X-Amz-Date=20201205T210000Z&X-Amz-SignedHeaders=host&X-Amz-Expires=21600&X-Amz-Credential=AKIAZH6WM4PL5SJBSTP6%2F20201205%2Fus-east-1%2Fs3%2Faws4_request&X-Amz-Signature=dd761957472f59b52658b67e2a940a7220c6fec6bd77de0e5ea1f54b63dab64a
Works Cited:
CFI. (2020). Bargaining Power of Suppliers. Retrieved from https://corporatefinanceinstitute.com/resources/knowledge/strategy /bargaining-power-of-suppliers/
MarketLine. (2019). MarketLine industry profile: Movies and Entertainment in North America. MarketLine.
Pratap, A. (2019). Disney Five Forces Analysis. Retrieved from https://notesmatic.com/disney-five-forces-analysis/
Becerra, X. (2020). California Consumer Privacy Act (CCPA). State of California Department of Justice, Retrieved from https://oag.ca.gov/privacy/ccpa#:~:text=The%20California%20Consumer %20Privacy%20Act,that%20businesses%20collect%20about%20them.&text =The%20right%20to%20opt%2Dout,for%20exercising%20their%20CCPA%20r ights.
Vengattil,M. & Richwine, L. (2020). Disney takes $5 billion hit but pandemic impact not as bad as feared. Reuters, Retrieved from https://www.reuters.com/article/us-walt-disney-results-idUSKCN2502Q7
