Company Analysis

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Running Head: GROUP PROJECT PART 1 – WALT DISNEY COMPANY

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GROUP PROJECT PART 1 – WALT DISNEY COMPANY

Walt Disney Company

Walt Disney Company is an American multinational mass media and entertainment company with its headquarters in Burbank, California. Walt Disney company multiple theme parks internationally, an animation studio, live-action film production, and many business franchises. It also has the biggest movie studios in the world, and it is one of the largest media companies in the world. The other main business units include television and streaming services. The cartoon character Mickey mouse created by Disney is the official mascot of the company. Walt Disney Company includes Marvel Entertainment, Lucasfilm, ABC, ESPN, and Pixar Animation Studios. It also includes streaming services Hulu, Disney+, and Hotstar. Disney also has a presence in the travel industry with its Disney cruise line.

History

Walt Disney Company originally called the Disney brothers cartoon studio was founded in 1923 by Walt Disney and Roy O. Disney. The company initially started as a cartoon studio. Alice’s wonderland was the first cartoon made by Walt Disney. Within few years the company had produced two movies and they also purchased their movie studio in Hollywood. But later the company almost collapsed due to downsides in its distribution rights. The creation of Mickey mouse in 1928 saved the company and it completely changed the position of the company in the industry. In the 1930s the company won the first Academy Award for the best cartoon for an animated short film series and later the company started producing full-length feature films. World war II halted the company’s movie production and instead they started producing war propaganda movies for the US government. In the 1950s again the company started producing live-action films and also launched various television series. In 1955 Disney launched Disney theme park in California and later additional theme parks opened around the globe. In the 1980s the company expanded its business in cable TV and established several studios which helped the company make its mark in the entertainment industry. In 2006 Disney purchased Pixar studios and started focusing on digital animation. Bob Iger became the chairman of Disney in 2009 and he shifted the company’s focus to family-oriented products. In 2009, the company also acquired Marvel studios and in 2012 it had acquired Lucasfilm which gave full rights to the Star Wars franchise. In February 2020, Bob Chapek was announced as the CEO of the Walt Disney Company (Adrien-Luc, 2019)

Disney in the Digital age

With the advancements in digital media, consumers started showing interest in online streaming services. This has forced all media content producers to adapt to the new digital methods of broadcasting the content. To remain competitive in the industry and to adapt to the interests of the consumers, the media industries started switching from cable programming to over-the-top (OTT) streaming services. In 2012, Disney agreed with Netflix to bring all its movies to the Netflix platform. This partnership has brought approximately $325 million in cash stream for Disney. In 2017, Disney invested in BAMTech a streaming-video company, and decided to introduce two subscription services with one focused on sports through the ESPN app and the other focused on television shows and movies. In 2018, Iger announced that Disney would be introducing a subscription service named Disney+, and the service was later launched in 2019 (Matt, 2017).

Disney’s organizational position and its competitors

Since its foundation in the 1920s, Walt Disney has built a diverse empire in the field of mass media and entertainment, and it has proven to be the leader in the media industry. Because of its involvement in different sectors of the entertainment industry, Disney has many competitors. The main competitors are Sony, Comcast, Charter Communications, Viacom CBS, Warner Media, Amazon Prime Video, Netflix, Six Flags which compete mainly through TV cable services, online streaming services, and theme parks. Theme parks are the main source of income for Walt Disney company which generated a revenue of $26.2 billion in 2019. The second-largest source of income for the Walt Disney Company is media networks which generated $24.8 billion in 2019. The total revenue made by the Walt Disney company in 2019 was 31.82% of the revenue made by all of its competitors combined. The company also makes profits from its online streaming services and its affiliation with ABC networks. Warner media is the biggest competitor of Walt Disney company. Warner media company includes HBO, Warner Bros. Pictures, and Turner broadcasting system. Along with Comcast and Viacom CBS, Warner media is the biggest competitor for Disney in terms of media and entertainment corporation. Comcast is the competitor of Disney in TV, cable, and filmed entertainment. Walt Disney company’s online subscription service Disney+ competes with major entertainment companies like Netflix, Apple TV+ and Amazon Prime Video. Cedar Fair and Six flags compete with Walt Disney company in the amusement parks industry. The exclusive content of Disney gives it a competitive advantage as the content cannot be licensed or distributed to other media networks (Troy, 2019).

Recent developments in the company

In October 2020, the company announced its strategy to reorganize its business to accelerate the growth of the Direct-to-Consumer (DTC) strategy. DTC services are offered directly to consumers on a subscription basis through mobile and connected devices. Under the new structure the company will focus on creating content for the streaming services and the legacy platforms. In April 2020, Hotstar service in India was converted to Disney+Hotstar. By the end of 2020, Disney+ services were made available in Europe, Latin America, Japan, Indonesia, and various other Asian-pacific territories. By October 2020, there were approximately 74 million subscribers to the streaming service. Outside of the US, the company is planning to launch a streaming service under the Star brand. In its annual meeting with the shareholders, the company discussed the success of the disney+ app in its first year. Three content groups of the company will be responsible for providing content. Studios – This will focus on creating theatrical and disney+ content. General Entertainment – This will focus on creating content for the streaming platform, cable, and broadcast networks. Sports – This group will focus on the sports programs for ESPN+ and ABC (“The Walt Disney Company Announces Strategic Reorganization of Its Media And Entertainment Businesses”, 2020)

Covid 19 Impact and recovery

In the form 10-K filed with SEC for the year 2020, Disney mentioned the impact of the COVID-19 Pandemic. The measures to prevent the spread of the COVID-19 have impacted different segments of the Walt Disney Company, especially the theme parks. The theme parks were closed for a certain period and also operated with reduced capacity for most of 2020. Cruise ships and guided tours were also suspended for a significant portion of 2020 and the retail stores were also closed for a significant portion of the year. Due to the closure of the theme parks, there was approximately a $7.4 billion revenue loss. The company was also impacted in the entertainment segment by the suspension, delays, or cancellations of theatrical releases and stage performances. Reopening the businesses also incurred additional costs to address the regulations set by the government and to ensure the safety of the employees and the customers. Covid 19 impact may continue for an unknown length of time which could impact the key sources of revenue. The company also continued to pay for certain sports rights despite the cancellation of those events. COVID-19 has also impacted the reservations at the hotels and cruises. The company has also experienced an increase in returns and refunds. The economic turndown resulted in a decrease in the purchase of goods. To mitigate the impact the company decided to delay certain projects, suspending capital spending and implementing furloughs in the workforce. Overall COVID-19 harmed the financial performance of the company which reduced its credit ratings. With the decline of the covid cases in 2021 and also with people getting vaccinated the company reopened its businesses in April 2021 and hired most of the furloughed employees. The stock price of the company has increased to $200 in March 2021 from a COVID low of $79 (Chang, 2020)

Social Responsibility

Walt Disney Company believes that being socially responsible will strengthen its operations and give a competitive advantage. In 2020, the Disney conservation fund contributed more than $100 million to support nonprofit organizations around the globe to help protect wildlife and forests. The company is also committed to reducing greenhouse gas emissions, conserving resources, and protecting the planet. The company also continues to monitor and reduce the environmental effects of its supply chain. Every year the company provides a report on their performance in environmental, governance, and social issues.

Future of the company

Reflecting on the massive disruptions in the year 2020, the company has evolved and reinvented itself. The events of 2020 have tested the responsiveness and the ability of the company to adapt to the changes. With the expansion in DTC services, the company continues to find innovative ways to provide exceptional content. Streaming services are considered to be the future of the Walt Disney Company. However, film production is important for Walt Disney Company to maintain its trademark brand.

Conclusion

Over the decades the Walt Disney Company has gone through different changes in its organizational structure and culture. These reforms were brought to improve the performance of the business and to adjust to the changes in the global markets. The organizational culture of the Walt Disney company gave the company a competitive advantage and helped them in gaining loyal fans that help the business to have stability in financial performance. Implementing organization-wide innovation strategies helped Walt Disney Company to grow internationally. The company was also successful in establishing their identity in new markets. Innovation and efficient operation would help the company gain success in global markets. Walt Disney Company also needs to continuously evolve to meet the expectations of the customers in the Over-the-top (OTT) platforms and to be competitive and distinguished in the eyes of the customers.

References

Adrien-Luc Sanders. (2019). A Brief History of the Walt Disney Company. Retrieved from https://www.lifewire.com/the-walt-disney-company-140911

Chang Amy. (2020). Form 10-K Walt Disney Co. Retrieved from https://sec.report/Document/0001744489-20-000197/#i6261866521954ef19f64de03269f40a7_157

Matt. (2017). A Whole New World: The Digital Evolution of Disney. Retrieved from https://digital.hbs.edu/platform-rctom/submission/a-whole-new-world-the-digital-evolution-of-disney/

The Walt Disney Company Announces Strategic Reorganization of Its Media And Entertainment Businesses. (2020). Retrieved from https://thewaltdisneycompany.com/the-walt-disney-company-announces-strategic-reorganization-of-its-media-and-entertainment-businesses/

Troy Segal. (2019). Who are Walt Disney’s main competitors? Retrieved from https://www.investopedia.com/ask/answers/052115/who-are-disneys-dis-main-competitors.asp