Disney Case Study

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Disney Case Study
By
Ronak Patel
In July 1923, Walt Disney and his brother Roy started their film business but they got their first real break in 1928. Walt produced Steamboat Willie, the first cartoon with sound and also introduced a new star Mickey Mouse. In the decades it followed, Walt became an extraordinary filmmaker, a motion picture innovator and pioneer. The name “Walt Disney” became universally known as the symbol of the finest family entertainment. The business activities of the company are in four segments: (1) theme parks, (2) films, (3) consumer products and (4) real estate development. The theme parks segment caused Disney not to grow. Disney’s attendance growth had been low or zero over the preceding decade, though as recently as 1978 the entertainment and recreation segment had shown a pretax return on assets of 15.7 percent. With 25 major theme parks in competition for an aging population, demand thoroughly saturated and park attendance grew no more than 5% per year, which was one third the rate of 1970s. The Walt Disney Company's objective is to be one of the world's leading producers and providers of entertainment and information, using its portfolio of brands to differentiate its content, services and consumer products. The company's primary financial goals are to maximize earnings and cash flow, and to allocate capital profitability toward growth initiatives that will drive long-term shareholder value. The Walt Disney Company is the world’s largest media and entertainment conglomerate with assets encompassing media networks, theme parks and resorts, consumer products and real estate development. The Walt Disney Company’s film library is consisted of 25 full length animated features in color, 123 full lengths live action features, 8 true life adventure films and over 500 short films. The film Snow White was proved to be an enduring source of cash. Annual revenue for Snow White is as under (in millions). Year| Revenue|

1937| $10.00|
1944| 4.0|
1952| 5.0|
1958| 6.5|
1965| 13.0|
1967| 23.0|
1983| 28.5|

Theme parks and resorts include the operations of the Walt Disney World Resort in Florida, Disneyland Park, the Disneyland Hotel and the Disneyland Pacific Hotel in California. Consumer products segment includes its animated characters, literary properties, songs and music to manufacturers, publishers and retailers. In 1978, this segment gave a pretax return on assets of 179 percent. Real estate includes Arvida Corporation, acquired on June 6, 1984. Arvida controlled the development of 17,334 acres of land in Florida, Georgia and California. In 1983, Ron Miller became the CEO. After just a month, Miller gave up his post to Ray Watson (a close friend and his right hand man in the company). These constant changes in leadership led to a steep fall in the company's share price. The share price fell sharply from $84 in 1983 to $45 in 1984. The lowered share price and the lack of stability in the top management resulted in a number of corporate houses attempting to take over Disney in the early-1980s.  Saul Steinberg started making serious bids to acquire Disney stock. By April 1984 he had acquired 6.3% of the stock and announced his intention to acquire 25 percent of the company before long. Recognizing the threat, Disney management started making defensive moves. It announced its decision to buy back shares at a premium. Roy and Gold played a very important role at this stage and helped muster shareholder support to prevent Disney from being taken over. They enlisted the support of the Bass family, who were the largest shareholders in Disney, to regain a majority. Steinberg finally agreed to re-sell his stock to the company at a premium of $32 million and an additional $28 million for his expenses. All this added to the huge debt of the company. By the mid-1980s, what was needed was a change in leadership to bring about a turnaround. Corporate level strategy: Disney’s...
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