Walt Disney Case

Topics: The Walt Disney Company, Walt Disney, Roy E. Disney Pages: 64 (16876 words) Published: November 11, 2010
REV: JULY 25, 2001




The Walt Disney Company: The Entertainment King
I only hope that we never lose sight of one thing—that it was all started by a mouse. —Walt Disney

The Walt Disney Company’s rebirth under Michael Eisner was widely considered to be one of the th great turnaround stories of the late 20 century. When Eisner arrived in 1984, Disney was languishing and had narrowly avoided takeover and dismemberment. By the end of 2000, however, revenues had climbed from $1.65 billion to $25 billion under Eisner, while net earnings had risen from $0.1 billion to $1.2 billion (see Exhibit 1). During Eisner’s first 15 years, Disney generated a 27% annual total 1 return to shareholders. Analysts gave Eisner much of the credit for Disney’s resurrection. Described as “more hands on 2 than Mother Teresa,” Eisner had a reputation for toughness. “If you aren’t tough,” he said, “you just don’t get quality. If you’re soft and fuzzy, like our characters, you become the skinny kid on the 3 beach, and people in this business don't mind kicking sand in your face.” Disney’s performance in 1998 and 1999 had been well below Eisner’s 20% growth target. Net income rose just 4% in 1998 and fell 28% in 1999. Return on equity had averaged 20% through the first ten years of the Eisner era, but began dropping after the ABC merger in 1996, and fell below 10% in 1999. Analysts attributed the decline to heavy investment in new enterprises (such as cruise ships and a new Anaheim theme park) and the third-place performance of the ABC television network. While profits in 2000 had rebounded, this increase was largely due to the turnaround at ABC, which itself stemmed from the success of a single show: Who Wants to be a Millionaire. Analysts were starting to ask: Had the Disney magic begun to fade?

The Walt Disney Years, 1923-1966

At 16, the Missouri farm boy, Walter Elias Disney, falsified the age on his passport so he could serve in the Red Cross during World War I. He returned at war’s end, age 17, determined to be an 4 artist. When his Kansas City-based cartoon business failed after only one year, Walt moved to 5 Hollywood in 1923 where he founded Disney Brothers Studio with his older brother Roy (see Exhibit 2). Walt was the creative force, while Roy handled the money. Quickly concluding that he 6 would never be a great animator, Walt focused on overseeing the story work. ____________________________________________________________


Research Associate Tyrrell Levine prepared this case under the supervision of Professor Michael G. Rukstad and Professor David Collis of the Yale School of Management. This case was developed from published sources. HBS cases are developed solely as the basis for class discussion. Cases are not intended to serve as endorsements, sources of primary data, or illustrations of effective or ineffective management. Copyright © 2001 President and Fellows of Harvard College. To order copies or request permission to reproduce materials, call 1-800-545-7685, write Harvard Business School Publishing, Boston, MA 02163, or go to http://www.hbsp.harvard.edu. No part of this publication may be reproduced, stored in a retrieval system, used in a spreadsheet, or transmitted in any form or by any means—electronic, mechanical, photocopying, recording, or otherwise—without the permission of Harvard Business School.







The Walt Disney Company: The Entertainment King

A series of shorts starring “Oswald, the Lucky Rabbit” became Disney Brothers’ first major hit in 1927. But within a year, Walt was outmaneuvered by his distributor, which hired away most of 7 Disney’s animators in a bid to shut Disney out of the Oswald franchise. Walt initially thought he could continue making Oswald shorts with new animators and a new distributor, but after reading the fine print of his contract, he...
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