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    7 views13 pages

    Walt Disney

    Uploaded by

    Sophia Santos

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    © All Rights Reserved
    Download as PDF or read online from Scribd
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    of 13
    Mernoush Banton Adjunct Faculty/Consultant Dis wwewdisney.com High unemployment, lingering recession, slow economic growth, and reduced consumer spend- ing all contributed to a 7 percent drop in revenue and a 46 percent drop in Walt Disney’s profit- ability for the first quarter of 2009. For eight decades, the Walt Disney Company has captured the attention of millions of people, offering family entertainment products and services such as theme parks, resorts, recreations, movies, TV shows, radio programming, and mémorabilia. Walt Disney brought Mickey Mouse and Donald Duck to the world, Walt Disney offers a variety of family entertainment all around the world. History Mr. Walt Disney and his brother Roy arrived in California in the summer of 1923 to sell his cartoon called Alice's Wonderland. A distributor named M. J. Winkler contracted to distribute the Alice Comedies on October 16, 1923, and the Disney Brothers Cartoon Studio was founded. (Over the years, the company produced many cartoons, from Oswald the Lucky Rabbit (1927) 10 Silly Symphonies (1952), Snow White and the Seven Dwarfs (1937), and Pinocchio and Fantasia (1940). The name of the company was changed to Walt Disney Studio in 1925. Mickey Mouse emerged in 1928 withthe fist cartoon in sound, In 1950, Disney completed its first live action film, Treasure Island, and in 1954, the com: pany began television with Disneyland anthology series. In 1955, Disney's most successful series, The Mickey Mouse Club, began. Also in 195, the new Disneyland Parkin California was ‘opened. Disney created a series of releases from 1950s through 1970s, including The Shagey Dog, Zorro, Mary Foppins, and The Love Bug. Mr. Walt Disney died in 1966. In 1969, the Disney started its educational films and materials. Another important time of Disney's history was opening the Walt Disney World project in Orlando, Florida, on October 1, 1971. In 1982, the Epcot Center was opened as part of Walt Disney World. And, on April 15, 1983, Tokyo Disneyland opened After leaving the network television in 1983, the company was ready to get into its cable net work, The Disney Channel. In 1985, Disney's Touchstone division began the successful Golden Giris and Disney Sunday Movie. In 1988, Disney opened Grand Floridian Beach and Caribbean Beach Resorts at Walt Disney World along with three new gated atrations: the DisneyiMGM. 4 new heights as Disney for the first time led Hollywood studios in box-office gross. Some of! the successful films were: Who Framed Roger Rabbit, Good Morning Vietnam, Three Men and 4 Baby, and later, Hones, 1 Shrunk the Kids, Dick Tracy, Pretty Woman, and Sister Act. Disney moved into new areas by starting Hollywood Pictures and acquiring the Wrather Corp. (owner of the Disneyland Hotel) and television station KHJ (Los Angeles), which was renamed KCAL I ‘merchandising, Disney purchased Childeraft and opened numerous highly successful and profit able Disney Stores. By 1992, Disney's animation began reaching even greater audiences with The Little | Mermaid, The Beauty. and the Beast, and Aladdin, Hollywood Records was formed to offer ‘wide selection of recordings ranging from rap to movie soundtracks. New television shows, such as Live with Regis and Kathy Lee, Empty Nest, Dinosaurs, and Home Improvement, expanded SeeEEEEEEenimeme CASE 19 + WALT DISNEY COMPANY — 2009 477 Y successfully completed many projects 1OWs, opening up to 725 Disney Stores, ac- hhockey team, opening Disney’s Wide World and acquiring Capital Cities/ABC. From 2000 to 2007, Disney rd bata, ttaetions in its theme parks, produced many successful films, opened new hotels, ‘nd built Hong Kong Disneyland, Internal Issues Organizational Structure and Mission indicated in Exhibit 1, Disney operates using a strategic business unit (SBU) type organi Scie eactue. Note that Disney's four SBUs consist of (1) Disney Conon, Products, (2) and (4) Media Networks and Broadcasting 178 MERNOUSH BANTON EXHIBIT 2_ Consolidated Income Statement (in millions, except per share data) 2008 2007 2006 Revenues Ss 37,843 $ 35,510 $33,747 Costs and expenses 30,439) (28.681) 28,392) Other (expense)yincome 9) 1,004 38 Net interest expense (524) (593) (592) Equity inthe income of investees 581 485 43 Income from continuing operations before income OO taxes and minority interests 7.402 ms 5324 Income taxes (2,673) 2.874) 1.837) Minority interests (302) am (133) Income from continuing operations 407 4074 Discontinued operations, net of tax = B Net income 3 4az7 54687 s Diluted Earnings per share: Earnings per share, continuing operations S228 $224 isin 0} Earnings per share, discontinued operations = 001 0.03 Earnings per share S228 $2.25 S164 Basic Eamings per share: amnings per share, continuing operations oe Stee2'33) S165 Earnings per share, discontinued operations = 0.01 0.03 Earnings per share $ Semmes) oe Weighted average number of common and. 7 ‘common equivalent shares outstanding: Diluced 2,092 Basic 2,004 Source: Walt Disney Company, Ana Report (2008), Consolidated Financial Statements Disney's recent income statements and balance sheets are provided in Exhibits 2 and 3, respectively ‘Note the inerease in profit from 2006 to 2007, and the decline from 2007 to 2008, ‘The most recent Disney's Consolidated Balance Sheet, shown in Exhibit 3, reveals over $22 billion in Goodwill and nearly $3.8 billion in Long Term Debt. Financials by Segment Exhibit 4 demonstrates the company’s revenue and operating income by each business segment. Note that Disney's Media Networks brings in the most revenues and operating income for the company. This division, as well as the Parks and Resorts segment, is growing. However, the company’s Studio Entertainment business segment and their Consumer Products businesses have ‘experienced declining revenues in the last three years. As shown in Exhibit 5, Disney derives 76 percent of its revenue and 77 percent of its op- ‘erating income from businesses in the United States and Canada. The company's revenues and income are growing in all regions of the world, with Europe being second behind the United States/Canada in both revenues and income. Disney Business Segments In percentage terms, Disney revenues in 2008 were derived from Media Networks (43 percent), Parks and Resorts (31 percent), Studio Entertainment (20 percent), and! Consumer EXHIBIT 3 Consol EE CASE 19 » WALT DISNEY COMPANY — 2009 479 ridated Balance Sheets (in millions, except per share data) September 27, September 29, Sos S007 Asstt Cash and cash equivalens 8 3.001 $3670 i Receivables 5,373 5,032 loventores ioe it Television cons Sai 559 Deferd income taxes ont 862 Other current axes as 550 Tota curen assets 11666 ig lm and television cose Soa Sis investments 1563 os Pas, resorts and oer property, at cot traction, buildings and cauipmee 30.260 ‘Accumulated depreciation asi4s) ins Projects in progress fir Land Lint as AAR cic assets, nt 94 7 Goodwill 22,085 Pe over aces 1s 3 Total Assets UABILITIES AND SHAREHOLDERS’ EQUITY Accounts payable and other accrued liabilities Current portion of borrowings Uneamed royalties and other advances ‘otal current Liabilities Fonmitments and contingencies (Note 14) Pscholder’s equity F Preferred stock, $:01 E Issued-none {Common stock, $.01 par value Authorized-3.6 billion shares, Issued-2.6 billion shares Par value Authorized-100 milion shares, [Teasury stock, at cost, 777.1 million shares at September 27, 2008 and 637.8 million shares at September 29,2007 Total Liabilities and SE S 5,980 3,529 2,082 ~aLSoT 11,110 2.350 3.779 1344 26,546 24,207 28.413 24,805 1) as) 34,878 48,855 (18,102) 30,753 S 60928 180 MERNOUSH BANTON EXHIBIT 4 Revenue and Operating Income by Segment (2008 vs. 2007) | Percentage of change Gineilions) 2008 2007 2006 aera Revenues: i Studio Entertainment 7,348 7491 (2) (D Total Consolidated Revenues: $37,843 ‘$33,747 7 5 i Source: Wal Disney Company, AnnualReport (208), Products (8 percent). Operating income was derived from Media Networks (57 percent), Parks and Resorts (23 percent), Studio Entertainment (13 percent), and Consumer Products (9 percent). These percentages reveal a bit of a weakness in Studio Entertainment because this segment creates 20 per- cent of revenues but only 13 percent of operating income. Media Networks!Broadcasting Disney owns ABC Television Network, which includes ABC Entertainment, ABC Daytime, ABC News, ABC Sports, ABC Kids, Touchstone Television, and ABC Radio. Also included in is segment, Disney owns ESPN, Disney Channel, ABC Family, Toon Disney, SOAPnet, and | Buena Vista Television. Disney has equity interest in Lifetime Entertainment Services, A&E EXHIBIT 5 Revenue and Operating Income by Region {in millions) 2008 2007 2006 Revenue United States and Canada $28,506 $27,286 $26,027 Europe 6,805 5,898 266 Asia Pacific 1,811 1,732 1917 Latin America and Other TA 594 $37,843 $35,510 $33,747 ‘Segment operating income United States and Canada $ 6472 $ 6,026 $4797 Europe 1,423 1,192 918 Asia Pacific 386 437 542 Latin America and Other 175 156 93 $8,456 $7811 $6,350 Source: Walt Disney Company, Annat Repo (2008), CASE 19 + WALT DISNEY COMPANY — 2009181 Television Networks, E! Enertainment, ESPN, History Channel, The Biography Channel, Hyperion Books, and Disney Mobile, Tre increase in evenue in this segment was primarily dv to growth from eable and stlite operators, which are generally derived from fees charged on per subseber bane, contractual rae increases, and higher advering rats at ESPN, The increas in broadcstng a revenue was de to growth at the ABC Television Network and increased sales of Touchstone Television series as well as an increase in prime-time advertising revenes, Increase in sales from Touchstone Television series was asa result of higher intemational syndication and DVD sles of hit dramas sich as Lot, Grey's Anatomy, nl Desperate Housewives well as higher tir pry license fes led by Snubs; which completed is ith season of network television 4 ‘Two major TV networks of Disney (ABC and ESPN) recently struck a deal with cable operator Cox Communication whereby these companies now offer hit shows and football games on demand, Although advertising in the network ism source of addition a | revenue for the broadcasters, it requires selectivity for charging for each episode. Video- on-demand isa major industry ands expected to grow to $3.9 billion by 2010, JAM Pisney recently unveiled Disney Xtreme Digital, networking ste aimed at children } younger than 14 years of age. This service will be competing against MySpace (owned } by News Corporation) Disney has reported an increase in seal 2009 second:quasir net income mostly a8 a result of strong gains at cable network ESPN. Higher advertising ter enues are reflected due to NASCAR programming at ESPN, an ineretse at ABC Family Wrimarily due to higher rates, higher other revenues by DVD sales primarily from High School Musical, anda favorable settlement of a claim with an international ditribator Exhibit 6 provides specific segment information forthe Media Networks division, Disney's domestic broadcast television stations ae listed in Exhibit 7. Disney intention iedia network operations sce described in Exhibit 8. In primetime, higher advising a fates and sold inventory were partially offset by lower rating from some of the problems = Inereased sales of ABC Studios productions reflected higher international and DVD sales of = hit drams such as Desperate Housewives, Grey's Anatomy, and Ugly Betty Parks and Resorts Disney owns and operates Walt Disney World Resort & Cruise Lines in Florida, Disneyland a Resort in California, ESPN Zone facilities in many states, 17 hotels at the Walt Disney in QM World Resort, Disney's Fort Wilderness Camping and Recreation, Downtown Disney, nd Disney's Wide World of Sports, Disney Cruise Line, 7 Disney Vacation Club Resorts, xB Adventures by Disney, and 5 resort locations with 11 theme parks on three continents, ‘With theme parks, Disney has 51 percent ownership in Disneyland Resort Paris, 43 percent ‘a EXHIBIT 6 Media Network Segment: Revenue and Operating Income Change q 2008 2007 od “sve 7 AE fo mitions) 200820072008 20072006 7 UP Revenues: a Cable Networks $ 10041 $ 9,167 $ 8159 10% 12% Broadcasting 6075 5.937 6027 2% (Iy% $16,116 $ 15,104 $ 14,186 7% 6% Segment operating income: Cable Networks $ 4100 $ 3577 $ 3001 15% 19% Broadcasting 655 698 480 )% 45% 8 $4275 § 3481 11% 23% 182 MERNOUSH BANTON EXHIBIT 7_Disney’s Domestic Broadcast Television Stations Television Analog Market Market TVStation Channel Ranking New York, NY WABC-TV 7 1 Los Angeles, CA KABC-TV 7 A Chicago, IL WLS-TV 7 3 Philadelphia, PA WPVETV 6 4 San Francisco, CA, KGO-TV 7 6 Houston, TX KTRK-TV 1B 10 Raleigh-Durham, NC WIVD-TV u 28 Fresno, CA KFSN-TV 30 55 Flint, MI WIRT-TV 12 Toledo, OH WIVG-TV 13 2 Source: Walt Disney Company, Form 10K (2008).

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