© Kellogg Crisis Simulation — Disney Confidentiality Pledge Disney Crisis Simulation: Pledge Please read, sign and put back into the provided envelope! A key purpose of crisis management training is to confront you with unexpected events, Because of the difficulty in creating suitable cases, I must ask you not to discuss or share any information about any part of the Disney crisis case with anyone outside of the workshop. To do so represents an honor code violation that may impact our ability to successfully use this case in fature classes and related teaching events. Please sign below to indicate your agreement to not reveal any information about the Disney case to others ‘Thank you. Signature Print Name Ths ere simasion was prepard by Profesor Tanah Fedderen. Case mattis re developed solely a the basis for hss cussion. Cases are not inended to serve as endorsements, oures of primary data or dastaatons of tfecaee oe tive management, Copyright © 2003 Timothy Fedderen al ges reserved - ooKetigg Schoo! of Management Kellogg ‘Ths case was prepared by Pte K Lenard and Tantei wah he reserchasaance of Willan, Minos and athe Sete. " riney has an expt ofan pig The WaltDstey Co. Amt Report 1985, fr the 12 months ening Sept > id Packet. Disney Case page | Disney: Where the (Gay) Magic Lives! (A) Introduction I is June 5, 1993, and tourists by the tens of thousands have crowded into Walt Disney World, the Walt Disney Company's Orlando, Florida based flagship resort. While the climate is typical of a Florida summer day—hot, humid, and sunny—the moods of many of Disney's customers are anything but typical—they are not only mad and outraged, they are also lining up at Disney ticket windows demanding refunds." This June day Disney is playing host to thousands of regular Disney customers—traditional families with children—and also gays and lesbians from across the nation, on the unofficial Gay and Lesbian Day at Wall Disney World, Many of those atthe park are sporting bright red tshirts bearing the “Gay & Lesbian Day at Walt Disney World Logo,” identifying them as part of the Gay Disney event. Gay and lesbian couples attending the event enjoy being able to be open about their homosexuality. But even relatively mild public displays of homosexual affection are offensive to many of Disney"s other guests. ‘Several months before the current crisis, Disney began to study the issue of extending health benefits to same-sex partners (Le. giving the same benefits to the partner of a gay employee that a husband of a female employee would receive). Disney has not yet reached a decision on this, sue and has not made its consideration of this issue a publicly known fact. Background Disney’s chief competitors in the family entertainment market include theme park competitors such as Universal Studios, Six Flags Theme Parks, Inc. and Anheuser-Busch Adventure Parks; and media competitors Universal Pictures, CBS, NBC, and Fox. While firms like Fox and Universal Studios offer media and theme park attractions intended to compete with Disney, the Disney brand is unique. In 1993, Disney theme parks showed revenue of slightly more than $3.4 billion.” ‘Theme parks represented 40.3% of the Disney's total 1993 revenues and 45.3% of operating income.’Cara ery 1993 Kellogg Schoo! of Management Most theme parks, including those of Six Flags and Universal Studios appeal to a regional audience. In contrast, substantial numbers of people travel from throughout the world for the sole purpose of visiting Disney World. In fact, Orlando, Florida was expected to be the number one vacation destination this summer.‘ Another example of Disney's dominance lies in its enviable track record of animated and family-oriented feature films. However, 1993, while profitable, was considered a disappointing year for Disney's three studio labels, Walt Disney Pictures, Touchstone Pictures, and Hollywood Pictures.’ Disney faced greater competition in the family segment as other studios released a record number of family-oriented films.® Despite releasing more than 30 films, compared with 22 in 1992, Disney had none of the year’s top ten grossing films.® Disney's most successful 1993 released film, “Cool Runnings,” grossed only $59.3 nillion® However, Disney's “Aladdin,” released at the very end of 1992, had recently passed the $200 million barrier" becoming Disney's, Targest grossing film to date—and ultimately grossing $217 million in 1993 alone.!" Disney's advantage over its competitors is due in part to the higher quality customers find in the Disney experience. It is also due in part to Disney's reputation for providing wholesome family entertainment Disney's American customer base is highly ambivalent towards gays and lesbians and only seven states and 42 cities have law banning discrimination against homosexuals in private employment. A USA TODAY/CNN/Gallup poll found that 80% of Americans support equal rights for homosexuals and the same number indicate that gays should bbe treated fairly in the workplace.” However, the poll also found that only 56% of women and just 35% of men agree with extending ci rights protections to gays.”” Highlighting the ambivalent views, the poll also found that 37% say hhomosexuals should remain in the closet and 44% think gays are vying for special rights others don’t have." A later Gallup poll found that 67: sme: Vacation: Preicing Where Americans Will Hud” Si Louis Post-Dispatch. St Louis Post-Dispatch, Ie June 6, * sms, Cavin, “Wal Disney Reinventing KIC” The New York Times The New York Times Company, Api! 28,1994. Walt Dine acguied the Rams Flim Corpration on Jute 30,1983. Disneys wl box ace i 1993 was S64 milion Dese)'s. 193 Anal Report iiss ‘ha the Filmed Entrainment Divison bad revenues of $37 bilon (4% higher tan 1992) and operating income of $622 ilo (22% phe ‘tan 1992). * Ds, Elie. ~The Family Way’ Pays OFT al the Hox Ofice” Chicago Sunes Chicago Sun-Times, ne Apa 1, 1998 Mackst ales” St Peterburg Times. Times Publishing Company, December 25,1992 ‘Fos, David} “The Vearin Moves: 93 Record Sather the Box Offi" Lor Angles Tnes. The Times Mitr Company, Set 3, 199 * i * Fos, Davi). “Aladin Becomes a $200-Milion Genie oD Los Angeles Tnes Te Times Moe Company, Apt 21,193 "id By Octobe, “Aadding's” worldvie ticket sles, excluding Europe, approached 300 million. “Aladdin” ser sod 10 6 millon vdeo copes in isis tre ay release n October 1993, "protect Bsc Rigs of Gays and Lesbians.” US4 Today, Ganet Company In, April26, 1993 id Packet, Disney Case page 2.Kellogg School of Management of Americans believe marriages between homosexuals should not be legally recognized by the courts or granted the same rights as traditional marriages." Americans are also very concemed about interactions between homosexuals and children. The issue of adoption placed a majority of Americans in opposition to homosexuals, with a poll indicating that 61% of Americans disapproved of adoption by a lesbian couple and 65% disapproving of a male couple."® Many states ban gay adoption, including California and Florida. Such bans enjoy significant popular suppor. Gay Disney: Opposing Views “Gay Disney” is a phenomenon bom from the Gay and Lesbians ‘Community Center (GLCC) of Orlando. The first such event occurred in 1991, when members of the GLCC publicized a “Gay Day at the Magi Kingdom” which took place June 8th and attracted 2,500 people. Participants agreed to wear red shirts so they would be easily identifiable, as the spirit of the weekend lay in being open about their homosexuality. Doug Swallow, a board member of GLCC, publicized the event on Compuwho, the first gay computer bulletin board service, attracting a limited, but growing, audience from outside Florida to the annual event at Disney, held on the first Saturday of June. Attendance has grown significantly since 1991, despite the lack of official sanction from Disney itself and the fact that the event is not widely publicized ‘outside of central Florida." Last year, approximately 5,000 people attended Gay Disney and this year an estimated 8,000 are expected.” ‘This year's Gay Disney includes events at the Magic Kingdom, Pleasure Island, and a brunch at Disney's Grand Floridian Beach Resort. While Disney docs not sanction the event, the company began working with organizers in advance to ensure a successful event without disruption Disney also posted signs at the entrance to the Magic Kingdom.” ‘The Walt Disney Company is experiencing a tight labor market that limits its access to the human capital necessary to grow its business.”” ‘This is especially true in the film production and entertainment industries, which has 2 disproportionately high-number of gay and lesbian employees in its ranks, tie " callp,Gevige J The Gallup Poll 1996, Sehoaly Resures, Ine 1957, 9p. 66:57 "Las ai and Asoc, repo in The Plan Dealer August 19,196, Pe eve, until publicized as “Gay Disney by unincorporated suppers, has since tenon the mor oral monies "Gay Day "pvr gaya combistory ef sp New Vor Ti * Sura, nt 8 ews Service “Gaye Descend on Dney Wedd to Constmation of Sox hicaga Tribune, lane 5,19, "the signs said he folowing: “Member ofthe gy community hae chosen to visit the Mage Kingdon today inter ecogition of Gay and Leshan Pride Mont anda Dis doesnt Gzcmint gaits anyone's ight to visit the Mope Kings." fi of Disneys approximately 60.000 employees work! the company’s theme parks, Sehodlsi, Vincent). “Extension of Benefits to Gay Parnas on Rie) Economies, Desi for Tle, Diets Drivingte Trend” Chisago Tribune, Chicago Tribune, November 6,195. Packet, Disney Case page 3.Kellogg Sehoo! of Management In 1992, MCA Inc., parent of Universal Pictures, became the first entertainment company to provide same-sex benefits to its employees citing the need to recruit talented people and a desire to foster a more diverse work environment, among other reasons.”” In addition, Fox Inc, has indicated that it is “definitely considering” a similar policy.” Disney's most visible step along these lines came in 1992 when it codified its long-standing policy opposing discrimination against homosexuals. Opponents of “Gay Disney” events as well as same-sex benefits are both formidable and vocal. They include not only the Souther Baptist Convention and its 16 million members, but also the Assemblies of God and the American Family Association that represents an additional 2.5 rillion members. Members of these religious groups represent a significant fraction of Disney's total customer base. Among the convictions that these groups hold in regards to homosexuality are the following: “Homosexuals can only lead moral lives. by remaining celibate” and “discrimination against gays and lesbians is proper, in the areas of: employment, to protect the (presumably heterosexual) ‘family’, and to protect other social insttutions.”** ‘These groups are calling for Disney to no longer facilitate “Gay Disney” events and would likely demand that the company not extend benefits to gay partners. With respect to the benefits issue, opponents not only battle on the moral merits but also on the basis of inequity and costs. Because most states do not legally recognize same-sex marriages, many wonder how Disney could regulate the validity of same-sex relationships without legal documentation. The opponents argue that extending benefits to gay couples without also extending the benefits to unmarried heterosexual partners would be unfair, echoing the sentiments of homosexual interest ‘groups such as Pride at Work. At the same time, extending benefits to unmarried heterosexuals might undermine the institution of marriage Other companies that have extended benefits to same-sex domestic partners, but denied them to opposite-sex partners have argued that the two situations are not equivalent because legal marriage is not an option for homosexual couples. ‘Another argument is that giving additional benefits would place a large financial burden on the firm due to the additional expense of health costs related to HIV and AIDS. However, independent research suggests that the costs of providing same sex benefits for homosexuals are comparable cr lower than providing benefits to heterosexuals. Disney has a very active legislative agenda. Over the last several years, Disney has had a close relationship with the Democratic Party in the US. Congress. During the 1992 election cycle, Disney contributed Fox Davi) “Gay ad Lesbian Fund-Rase to Tap Hollywood Powe Players” Los Angeles Times The Times Mir Company, August 21,1892 ® Mullis, Thomas S. “Big Step for MCA: Entersinret Fm Exends Heath Benefits Same-Sex Parnes" Los Angeles Times The “umes Mir Company, May 16,1992 ® bp relgioustleranceor/hom. sb hun, “Souhum Baptist Convention and Hemexexaliy Packet. Disney Case page 4.®t, Alin Ca Dwight Mors Ccngany, Jnr, 10, 1993 Pad Keliogg School of Management $50,000 to the Democratic National Committee and $50,000 to the Republican Party in Florida.” In addition, three Disney executives contributed $131,208 to the DNC and $10,000 to the Democratic Congressional Campaign Committee.”” Gays and lesbians represent an important constituency for Democratic politicians, particularly in Florida and California. Democratic politicians were being lobbied by advocacy groups representing gays and lesbians to pressure large corporations to extend benefits to same-sex partners. In turn, these Democratic members of the Senate and House of Representatives have lobbied Disney to offer this benefit to its gay and lesbian employees. On the other hand, while many national Democratic legislators are supportive of gay and lesbian causes, many Republican and even some Democratic Florida state legislators are just as strongly opposed Disney is caught between two very organized, very vocal groups — the Christian Right and gay and lesbian activists. Disney has been an icon in the family entertainment business for a generation or more. In contrast to other media companies, Disney"s main product lines are all essentially family oriented. As such, Disney represents a unique target for critics of Hollywood. Disney has traditionally aggressively protected its brand. Where possible, Disney does everything it can to avoid negative publicity, Assignment You are a member of Disney's crisis management team. Your task is to \work withthe other members of the team to develop both short and long ‘erm responses to the day’s events in the park. You have | hour and 20 minutes to create a one-page memo detailing your recommended strategy and implementation steps. Your memo should be written under ‘the assumption that it will be forwarded as is under your names to Disney CEO Michael Eisner. Your memo must be printed out and handed in after you return from the break. In addition, you should prepare to appear before the media in a short, 10 minute press conference. The format for the press conference will include a short statement from your company followed by a question and answer period. You need not prepare overheads for this presentation. Note you may receive new relevant information during the simulation. ‘Lea Fines Spend Heavily on Campaign Contibutins,” Los Angeles Times. The Time Minor Packet. Disney Case page 5.