Professional Documents
Culture Documents
Walt Disney
Walt Disney
Creativity continues to be the essence of Disney, even as our businesses expand across
borders and media platforms, it is the foundation for almost everything we do, the source
of our strength and our success, and the fuel that will power us into the future
- Robert Iger, President and CEO When we hear the word Disney, what is the first think that comes up in our minds?
Most people think about Disney and relate it to magical, exciting and large attractions
parks and hotels, and the famous Mickey Mouse. However, they missed to see how big
and influential this organization really is. Walt Disney Company is one of the World
largest communications organizations. Everyone knows Disney! It is everywhere in our
lives, from TV, radio and movies, to parks, clothing, accessories and toys. Owning
diverse media markets, Disney has build a tradition of culture and niche by efficiently
managing its markets and products, allocating them among different cultures, age groups
and preferences. In this report I will be analyzing some of the major managerial decisions
within the Company, its influences over the market and the way it has established across
the years in our culture. We are now about to discover all the financial numbers, facts,
operational activities and responsibilities of the Walt Disney Company, the Happiest
Celebration in World. Let the Magic of Disney to begin
A Little Bit of History
Walter Elias Disney founded the Walt Disney Company in 1923 as a dream to create a
movie studio, which hosted short film comedies. Few years later, in 1928, the
presentation of the company iconic character, Mickey Mouse, was a reality at the Colony
Theater in New York. Immediately after this, Walt Disney won his first Academy Award
and continued this trend for more than the following decade. His first business product
consolidation started when a man offered the company $300.00 to earn the right to apply
figures of Mickey Mouse to paper towels for school children. During the 1940s most of
their main films were created, including Pinocchio, Snow White, Dumbo and others. In
1955, the first Disneyland park opened its doors to the public in California. Over the
following decades the World Disney Company started growing until what we know
today, an international powerhouse and media entertainment corporation. The company
has four major business ventures: consumer products, media networks, studio
entertainment and parks and resorts, which will be discussed in the next sections of this
report. Today the company mission statement is to be the worlds leading producers and
providers of entertainment and information. The Walt Disney Corporation has created an
empire that is unmatchable in the entertainment industry in our days, an empire that is
products; its movies, shows, themes parks, music radio, and merchandize offer a
range for all tastes, cultures and ages. Making its product really differentiated
\within its company and from products from other companies.
Production Costs: Walt Disney World, as many others media companies, has high
first copy costs and low reproduction costs of most of its media-content products.
Also, managers form this company has the initiative to re-distribute their media
products throughout different distribution channels (windowing); as repurposing
content (using the same content in different forms, as a movie to create a video
game, a book, a novel, clothes), television syndication, Merchandising and Film
Distribution Windows (initiating from theatres, they to pay per view, video
releases, premium cable, basic cable and finally broadcast cable) reducing the
per-viewer contribution among time and down of the windows distribution; this is
also called temporary Price Discrimination.
Walt Disney Company Main Business Lines
Media Networks:
The Company media network segment manages Disneys operations in television
networks broadcast TV networks and stations at national and international level, cable/satellite networks, internet services, radio media industries, mobile operations and
Television content production and distribution. This division is centered around ABC TV
Network (American Broadcasting Company), as well as ESPN, Walt Disney TV and
SOAPnet. Others ownership interests are centered in Lifetime and A&E. In detailed the
focus companies are as follows: The Disney-ABC Television Group includes the ABC
Television Network (including ABC Daytime, ABC Entertainment Group and ABC News
divisions); the Disney Channels Worldwide global kids' TV business, ABC Family and
SOAPnet; as well as television distribution divisions Disney-ABC Domestic Television
and Disney-ABC ESPN Television. It also manages the Radio Disney Network, general
interest and non-fiction book imprint Hyperion, as well the Company's equity interest in
A&E Television Networks.
In the other hand, ESPN, Inc., which is the leader in sports network, includes ESPN on
ABC, six domestic cable television networks (ESPN, launched in 1979; ESPN2; ESPN
Classic; ESPNEWS; ESPN Deportes; ESPNU), ESPN HD and ESPN2 HD (highdefinition simulcast services of ESPN and ESPN2, respectively), ESPN Regional
Television, ESPN International (31 international networks and syndication), ESPN Radio,
ESPN.com, ESPN The Magazine, ESPN Enterprises, ESPN Zones (sports-themed
restaurants licensed by ESPN), and other growing new businesses including
ESPN360.com (Broadband), ESPN Mobile Properties (wireless), ESPN On Demand,
ESPN Interactive and ESPN PPV.
Parks and Resorts:
Not only in the USA, but also in different countries around the world, the operations of
parks and resorts are a great part of this company organization. This division owns and
Segment
Media Networks
Parks and Resorts
Studio Entertainment
Consumer Products
Interactive Media
Revenue
$15,857
$11,504
$7,348
$2,415
$719
Operating Income
$4,942
$1,897
$1,086
$778
$258
100
100
74
41
5
74
Estimated International
Subscribers
Estimated
International
Subscribers
Disney Channel
100
109
Playhouse Disney
--
45
Disney XD
78
84
Disney
Cinemagic
--
10
Hungama
--
Disney Channel
Worldwide
A&
ABC Family
SOAPnet
A&E
Lifetime
Television
The
History
Channel
Lifetime
Movie
Network
The
Biography
Channel
History
International
Lifetime
Real
Women
Estimated
Domestic
Subscriber
(millions)
99
76
100
100
E Demographics
4.
5.
6.
7.
8.
9.
6.57%
5.29%
As seen from the previous information Disney Companys revenues have been rising
through the years. Revenues for 2010 changed 5.29% from the previous year. Having
dropped from 2008 to 2009 by 4.48% (decrease in revenues that year). So, the total
change from 2008 to 2010 is for about 0.58% increase in revenues.
Incomes:
Net Income for 2010: 3,963 (Million $)
Net Income for 2009: 3,307 (Million $)
Net Income for 2008: 4,427 (Million $)
Net Income for 2007: 4 674 (Million $)
Income Growth from 2007 to 2008:
- 5.28% (dropped)
19.83%
As observed from the information above, net incomes in the company have changed
its trend during the last 3 years. First decreasing, and then, increasing again, but not
surpassing the ones from 2008 (as in revenues). The change from 2008 to 2009 was a
drop in income of 1,120 (million $) or a change decrease of 25.29 %. For 2009 to 2010
the change was an increase of 656 (million $) or 19.83% increase in income.
From the previous information one can see that revenues dropped from 2008 to 2009,
but it recovers back during 2010; actually gaining 0.58% more than in 2008. In the other
hand the trend with net profits is clearly the same. It decreased during the 2009, where
revenues and income were less and it rises again during the 2010. However this time, the
greatest net profits are for 2008 (as seen in the table). This is because net incomes were
greatest than during 2010. A decrease of 21.79 % was observed from 2008 to 2009; and a
decrease of 11.02% from 2008 to 2010.
Oct 2, 2010
Oct 3, 2009
Sep 27,
2008
3,307
4,427
Company (Disney)
Revenues
38,063
36,149
37,843
10.41
9.15
11.70
4.34
2.87
The net profit margin indicates how much of every dollar of sales the company keeps in
earnings. Disneys 2010 profit margin of 10.41% means that the company has a net
income of $0.14 for each dollar it sells.
Based on the information presented above, the profitability of the industry can be
determined. As it is seen net profits have been decreasing since 2008, it recovered a little
bit from 2009 to 2010, but still not at the levels of 2008. However, revenues are now
higher than during 2008. But the profits are still lower due to lower net incomes and
lower earnings and cash flow through the industry. Due to these changes, we can say that
even the company is making now more revenues; their other expenses make profits to be
less for the company. If revenues will continue to grow at this margin, we could get to the
point were profits would be as high as they were before. The profitability of an industry
also accounts for operating income (depreciation and amortization) and EBIT (Less
income taxes and interests.) Presented on the Standards and Poor Industry Report,
Depreciation is now higher than it was in 2008 (from 1,582 to 1,713 (in millions$)) and
operating income is less than it was during 2008 (from 8,986 to 8.439). From this and
other information we can determine how the company has been performing and even
calculate expected performances for the next years. For example, according to the Henry
Fund Research, it is expected that for this year (2011) the total revenues would be of 39,
657 (millions $).
Long term Debt and Current Liabilities from the last 3 Years:
Current Liabilities:
Liabilities for 2010: 11,000 (million $)
Liabilities for 2009: 8,934 (million $)
Liabilities for 2008: 11, 591 (million $)
Long Term Debt:
Adding the Liabilities for 2010: 11,000 (million $), Liabilities for 2009: 8,934 (million
$), and Liabilities for 2008: 11, 591 (million $); to the long term debt, the debt to
capitalization is calculated as follow:
% Debt to Capitalization 2010: 40.77 %
% Debt to Capitalization 2009: 42.45%
% Debt to Capitalization 2008: 48.43%
Total Capital has been increasing in the last three years. However, the debt to
capitalization rate has been decreasing, due to decreases in the long-term debt. However,
what does all these mean? A debt-to-capital ratio mean is a measurement of a
company financial leverage. Debt includes all short and long term obligations.
Companies are usually able to finance their operations through either debt or equity. The
debt-to-Capital ration give people an idea of how the company is financing its operations
and their strengths and weaknesses. The higher the debt-to-capital ratio, the more debt
the company has compared to its total equity; telling investors and customers how does
Oct 2, 2010
Selected Financial Data (USD $ in millions)
Net income attributable to The Walt Disney
3,963
Company (Disney)
Total Disney Shareholders equity
37,519
ROE (%)
Walt Disney Co.
10.56
Oct3,
Sep 27,2008
2009
3,307
4,427
33,734
32,323
9.80
13.70
The Returns on equity (ROE) is a profitability ratio calculated as net income divided by
shareholders equity. In the case of Walt Disney company, as seen from the picture above
the returns on equity deteriorated from 2008 to 2009, but then they slightly improved
from 2009 to 2010. We would like ROE to be higher through the years, because it is an
indicator of improvements in the economy.
Oct 2, 2010
3,307
4,427
69,206
63,117
62,497
5.73
5.24
7.08
Returns on Assets
Returns on Assets refer to the profitability ratio calculated as net income divided by total
assets. Walt Disney Company returns in assets also deteriorated from 2008 to 2009, and
again slightly improved from 2009 to 2010. We also want ROA to be higher trough the
years, because it means the company is getting more income per investment.
ROE numbers would be higher than ROA, because the denominator side of the
equation (Shareholders equity) would be lower than the one of ROA (which includes
all assets). The more liabilities the company has, the bigger the ROE would be
compared to the ROA.
Current Ratio Liquidity or Risk Assessment
From the information above, taking the information for current liabilities and now using
the current assets. We can calculate the current ratio of the Company.
Oct 2, 2010
Oct
2009
Current Assets
12,225
11,889
11,666
Current Liabilities
11,000
1.1
8,934
1.3
11,591
1.0
Current Ratio
3, Sep 27,
2008
This ratio is used to give an idea of the companys ability to pay back its short term
liabilities with its short term assets. The higher the ratio, the more capable the company is
of paying its obligations. So, from the chart you see that Disney was more capable during
the 2009, having increase from 2008 and again decrease in 2010. Higher current ratios
are better, because you would like to have more money available (assets) than the money
you need (liabilities). Normally, companies want current ratio to be at 1.5 or higher,
Selected
Financial
(USD $ in millions)
Operating income
Revenues
Operating Profit Margin (%)
Walt Disney Co.
Oct 2, 2010
Oct 3, 2009
6,456
38,063
5,205
36,149
7,404
37,843
16.96
14.40
19.57
Data
From the previous table you can see the profits margin calculations, which is a
profitability ratio calculated as operating income divided by revenue. Walt Disney
Company s Profit Margin also deteriorated from 2008 to 2009 and slightly improved
from 2009 to 2010.
In Summary from all the information above the next table, which includes return on sales
and returns on Investment is presented:
Oct 2, 2010
Oct 3, 2009
16.96
10.41
14.40
9.15
19.57
11.70
10.56
5.73
9.80
5.24
13.70
7.08
Oct 2, 2010
21,130
Oct 3, 2009
20,429
69,206
30.53 %
63,117
32.37%
62,497
36.71%
As seen from the graph above the leverage ratio has been lowering in the last three
years, which is a good indicator for the company. It is a positive sign, because it means
that the company debt is going down in overall. This ratio, implies that relative to the
industry the Walt Disney Company takes a less aggressive method to finance its growth
with its debt, reducing its risk as a company.
Debt to Equity Ratio:
(million $)
Total Debt
Total Equity
Debt to Equity Ratio
Oct 2, 2010
21,130
37,519
56.32 %
Oct 3, 2009
20,429
33,734
60.56%
As seen from the graph above the debt to equity ratio has been lowering in the last
three years, which is a good indicator for the company business and capital structure. It is
a positive sign for the company in overall.
The Company also features ESPN network, which have the dominant position in
sports. And will continue to be for the prospect years; it is a key revenue driver in
the Disney cable segment and for the Company in general.
Besides these positive remarks on investment, there are also the negative arguments for
the company; generally expressed as the company main challenges, which were discussed
previously in this report and that are basically focus on competition and vertical
integration from other companies and providers.
Overall, the Walt Disney Company seems to be doing well in the past years; and even
economic recessions, the company market share is still high: there are some fluctuations
in its total revenue and income, but the company is still in a good spot and market
dominance. In the next few years, according to my research, I see the company entering
to even new markets nationally and internationally and exploring new business segments.
I see the company revenues growing for this year too, and this can even influence the
growth in total income (which has been low mainly due to the acquisition of new firms in
the previous years.). Also, we need to realize that the United States is almost recover
from the last economic recession, pushing up our economy and thus influencing Walt
Disney revenues to go up.
Walt Disney Company goal has been and will always be To make people happy and to
be creative Since 1923 to the present the company has been producing films and
contents for different age people. The companys ability to invoke a feeling of eternal
youth is clearly present in all of its content; so generally I can say the company has been
doing an excellent job fulfilling both of their goals!
Works Cited
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<https://tippie.uiowa.edu/henry/reports09/dis_fa09.pdf>.
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<http://www.stock-analysis-on.net/NYSE/Company/Walt-DisneyCo/Ratios/Profitability#ROE>.
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<http://www.stock-analysis-on.net/NYSE/Company/Walt-DisneyCo/Ratios/Profitability>.
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