The Walt Disney Company (US)

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Disney is almost certainly the world's most widely known and best-trusted entertainment brand. After years of ailing performance following the death of its founder, it found a whole new lease of life in the 1980s by reinventing the concept of the animated family movie. The huge popular success of The Little Mermaid, The Lion King and others encouraged the group to spread its wings into other areas; a key development was the takeover of Capital Cities/ABC to create one of the world's biggest media conglomerates. But by the end of the 1990s a good deal of the shine had come off the company's prestige as the house of mouse was rocked by management rows and lacklustre performance from both its core movies division and the ABC Television Network. The years of rumbling discontent culminated in a rift in the group's board, followed by an unexpected (but unsuccessful) takeover bid from cable giant Comcast. Peace was finally restored in 2005 when divisive CEO Michael Eisner agreed to step down in favour of his deputy Bob Iger. Performance continued to be mercurial for a few years, buffeted by recessionary forces, declines in DVD sales, and several under-performing movie releases. In fact, the group's most consistently profitable subsidiary for several years was not its high-profile movies, parks or ABC divisions but top-rated cable sports network ESPN. Disney finally got into its stride again with the takeover of Marvel and the astonishing success of the various movies inspired by its diverse collection of superheroes.

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Brands

ABC Network Animal Kingdom
Walt Disney Pictures Disney's California Adventure
Pixar Disney Television
Touchstone Pictures Disney Home Video
Hollywood Pictures Walt Disney Records
Disney Vacation Club Walt Disney Books
Disney Interactive Tokyo Disneyland
Disney Theme Parks Walt Disney Cruises
Disneyland Disney Theatrical
Disneyworld Disneyland Paris
DisneyQuest Hollywood Records

Recent stories from Adbrands Weekly Update:

Adbrands Weekly Update 22nd Dec 2016: The year hasn't quite ended yet but Walt Disney has already set a new record for global box office, having topped a combined total of $7bn earlier this week. That surpasses previous record-holder Universal which hit $6.98bn in 2015. The final surge was led by Rogue One: A Star Wars Story, which scored a spectacular $290m in its opening weekend; less than The Force Awakens this time last year, but significantly better than had been expected. Like Universal and Disney in 2015, Disney and Warner Bros have between them dominated the current year. Disney has no fewer than five of the ten biggest movies of the year, including all of the top four, and that doesn't even include Rogue One. Captain America: Civil War, Finding Dory and Zootopia all topped $1bn a piece, with The Jungle Book close behind at $967m. Warner scored three top ten releases in Batman v Superman, Suicide Squad and Fantastic Beasts.

Adbrands Weekly Update 17th Nov 2016: Walt Disney's movie studio delivered record performance for its most recent financial year, ended September, as did the company as a whole, but investors are still obsessing over the TV business, and especially cable sports network ESPN. New figures from Nielsen suggested the channel lost a record 621,000 subscribers during October alone, though that figure was hotly denied by Disney. Even more worrying was a 13% decline in ESPN's ad revenues, fed partly by lower ratings, but also competition from NBC's Olympics coverage and huge spending cuts by fantasy sports advertisers DraftKings and FanDuel. That contributed to a weaker than expected final quarter for the group, in which the media networks division generated less than half group operating profit for the first time for more than a decade. For the year as a whole, though, group revenues rose 6% to a best-ever $55.6bn, while net income was up 12% to a record $9.4bn.

The cornerstone of that growth was the movie studio, with divisional revenues soaring by 28% to $9.4bn on the back of global smashes led by Star Wars The Force Awakens, Captain America Civil War, Finding Dory and Zootopia. Parks & Resorts also enjoyed a strong year, helped by the opening of Shanghai Disney Resort. That offset weaker growth (but growth nonetheless) at the TV division, where better performance from the ABC network counter-balanced the worrying stagnation in revenues from cable channels including ESPN and a slight decline in divisional profits. Consumer Products & Interactive Media was dented by a slowdown - finally! - in sales of Frozen merchandise and exceptional costs associated with discontinuation of the Infinity console gaming platform. CEO Bob Iger's priority for the new year is to find a key to reigniting ESPN's appeal with viewers while also maintaining the contribution from the studio and other businesses.

Adbrands Weekly Update 7th April 2016: In a surprise development, Tom Staggs, group COO of Walt Disney and widely considered the heir apparent to current chairman-CEO Bob Iger, has resigned from the company "by mutual agreement". No reason was given for his departure, but Disney said it would now "broaden the scope of its succession planning process to identify and evaluate a robust slate of candidates for consideration". Iger is expected to step down in June 2018, and Staggs had been seen as the clear favourite to take over. His main internal challenger for the role, Jay Rasulo, left the company last year when Staggs was named COO. According to insider reports, Staggs had sought confirmation that he would succeed Iger, but the board declined to oblige. The New York Times says that "at least some board members were not convinced he had the skills required to maintain Disney’s creative momentum. While Mr. Staggs has extensive financial experience, his resume is light when it comes to the successful creation of movies and television shows." An external candidate now looks most likely.

Adbrands Weekly Update 7th Jan 2016: The movie industry enjoyed - superficially at least - a banner year in 2015, with global box office topping $38bn, as a result of behemoths like Universal's Jurassic World and Furious 7 and Disney's Avengers Age of Ultron and Star Wars. Jurassic was the world's biggest movie with global takings of $1.7bn, followed by Furious 7 ($1.5bn) and Star Wars (both $1.5bn), and Avengers ($1.4bn). US box office hit an all-time record of $11.1bn according to BoxOfficeMojo, with Universal and Disney both reaching unprecedented highs of $2.4bn and $2.3bn respectively. Only one studio had ever previously topped $2bn in a single year (Warner in 2009). However, the headline success masks a worrying overall picture. Just six films from two studios (the afore-mentioned four plus Disney's Inside Out and Universal's Minions) accounted for more than a quarter of US box office, with a combined haul of almost $2.9bn between them. Many more releases, including several expensively budgeted and promoted films, failed to find an audience. Confirmed big-budget flops included Pan and Jupiter Ascending (Warner), Tomorrowland (Disney) and Fantastic Four (Fox), all grossing under $100m. Several star vehicles - Lions Gate's Mortdecai with Johnny Depp, Warner's Our Brand Is Crisis with Sandra Bullock and Fox's Victor Frankenstein with Daniel Radcliffe - failed even to reach $10m at the box office. Audiences have become "very binary" in their moviegoing choices, Sony Movies chairman Tom Rothman told the WSJ. "Many younger people no longer feel compelled to go to the movies as an activity in general. Instead, they go to see a particular movie. Either a film is relevant to them and penetrates the pop-cultural zeitgeist, in which case the upside is enormous, or it doesn't rise to that level and they're out altogether."

Adbrands Weekly Update 10th Dec 2015: Walt Disney doubled its shareholding in Vice Media to 10%, with a purchase valuing the company at $4bn. Cable rival A&E Networks recently increased its own holding to 15% as part of the transfer to Vice of a dedicated cable channel. Fox also has a holding, along with WPP and investment fund Technology Crossover Ventures.


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Background

Free for all users | see full profile for current activities: In 1923 a 21 year-old aspiring cartoonist named Walter Elias Disney left Chicago for Hollywood. He secured a distribution deal for a cartoon series, the Alice Comedies, and brought older brother Roy Disney out west to form the Disney Brothers Cartoon Studio. The business chugged along for five years until Walt came up with the idea for a mouse character named Mickey. The short Steamboat Willie was released in 1928 and was an instant hit, not least because it was the first commercial film release with synchronised sound. Within two years, Mickey Mouse had his own syndicated newspaper strip and had spun-off a range of drawing pads and pencils. In 1932, Walt won his first Oscar for Flowers & Trees, the first Technicolor short. The company has taken home more than another 31 Academy Awards since then.

The Disney legend tends to centre around the series of full-length animated movies that the studio released from 1937 onwards. These were enormously expensive and time-consuming projects. The first, Snow White & The Seven Dwarfs, took three years to make. Although it was a huge commercial success, each of the films that followed - Pinocchio, Fantasia, Dumbo and Bambi - cost more and grossed less than its predecessor. From 1939 onwards, the Second World War blocked overseas distribution, from which Disney had hoped to make almost half of its profits. As a result Fantasia, released 1940, proved a box-office disaster. A year later, the studio was plagued by labour disputes during production of Bambi. In addition, the huge success of Snow White had inspired Disney to commit to the building of a $3.8m dream studio. By 1940, Disney owed its banks $4.5m, and the company was forced to offer stock to the public simply to raise enough operating capital to stay in business.

During the War, the studio produced films to support the war effort; then returned to full-length cartoons in the late 1940s. But profits were still hard to come by. In 1950, after a series of money-making live-action wildlife shorts, the studio embarked on its first full-length live action movie, Treasure Island. It became the company's most successful picture since Snow White. Even so, the company was barely breaking even.

But in 1954, everything changed. At the time the film industry was reeling from the impact of its new competitor, television. Rather than fight, Walt Disney embraced the enemy, adapting the format of his short films to an anthology series, originally titled Disneyland, first aired on the ABC network, then a separate company. Renamed The Wonderful World of Disney, the show eventually ran for almost 30 years, the longest-running American prime-time series ever. Other ABC shows followed, including The Mickey Mouse Club and Zorro, and in 1955 the company opened its first theme park under the Disneyland name. The company's fortunes soared. Previously a very small business by Hollywood standards, Disney sales grew from $10m in 1954 to $116m within just 11 years. In 1966, the company reported record profits of $12.4m. Key factors were the enormous success not just of the Disneyland theme park, but another smash hit live action movie, Mary Poppins.

Walt's death in 1966 brought new challenges. Walt Disney World, a complete leisure village already in planning stages before Disney's death, opened in Florida in 1971 and became one of the US's leading resorts. The same year, Walt's brother Roy Disney died. With no distinctive creative vision on board, the company applied itself to business instead. The studio that had been the core of the business quickly dried up. After The Love Bug in 1969, Disney Movies didn't score another hit for almost 15 years, relying instead on re-releases of past animated successes to bolster its lacklustre collection of new features.

Rejuvenation came in 1984 with the appointment of Michael Eisner as CEO. Conscious that the company's squeaky clean image prevented it from reaching the developing sensibilities of a modern audience, he established a new studio brand, Touchstone Pictures, to produce a wider range of product than family pictures, and scored a big success with boy-meets-mermaid fantasy Splash! Over the following years, the company developed its commitment to television with the launch of cable operation The Disney Channel in 1983 and opened further theme parks. Most important of all, it scored huge hits with a new series of animated movies, overseen by inhouse production chief Jeffrey Katzenberg. The first of these was The Little Mermaid, released in 1989, which coincided with a new baby boom among parents who had themselves grown up on Disney's 50s and 60s classics. At the time, the scale of Little Mermaid's success took even Disney by surprise. The tide swelled with Beauty & The Beast (1991), and then Aladdin (1992), the first animated film to overtake Snow White in US box-office revenues. The run peaked in 1994 with The Lion King which generated a staggering $328m at the US box-office. In 1995, Eisner hired much-feared uber-agent Mike Ovitz as his new corporate president, but that move led to turmoil within the company when existing staff reacted badly to the appointment. Ovitz was fired after just 14 months with an estimated $140m severance package. (This later became the subject of a much-delayed shareholder lawsuit, which only finally came to court in 2004). Riding high by 1996, Disney announced what was then the second biggest entertainment merger in history (after Time Warner), with the acquisition of TV and publishing giant Capital Cities/ABC for $19bn.

Disney's purchase of ABC created a media giant, although the newspaper interests were sold off for $1.6bn. But by then the television company's ratings were on the slide. Once mighty ABC had slipped to third place by 1998. As a result, group net income that year fell almost 6%. Disney shrugged off the temporary setback, and took a step into the fast-expanding world of the internet, paying $70m for a 43% stake in search company InfoSeek. Another thorn in Disney's side came in 1999 in the shape of a lawsuit from Jeffrey Katzenberg, the former head of Disney Studios. Katzenberg had quit Disney in 1994 after he was overlooked for the job as Michael Eisner's deputy, and went on to form the Dreamworks studio with Steven Spielberg and David Geffen. Katzenberg earned more than $100m from his ten years with Disney, but claimed he was owed a further $200m from profit participation in the 700 films and TV shows he oversaw. To Disney's dismay, a US court agreed with Katzenberg, who then launched a further suit claiming that Disney had destroyed paperwork demonstrating that the former executive should have earned an even bigger bonus. Finally, the two sides settled for an undisclosed payout to Katzenberg, rumoured to be more than $250m.

In 1999 Disney acquired the shares in Infoseek it did not already own, and amalgamated it fully into a new company, Go.com, comprising all the group's online interests. Other online assets were acquired and the business, renamed the Walt Disney Internet Group, was fattened up with a tracking stock IPO. Meanwhile, facing a storm of criticism for its slowing group finances, Disney began disposing of selected non-core assets. One of the first of these was magazine division Fairchild Publications (previously part of ABC), which published a range of glossy fashion and trade magazines including W and Women's Wear Daily. These were sold to Conde Nast for approximately $650m.

ABC's fortunes received a welcome boost in 1999 from the success of new game show Who Wants To Be A Millionaire. As a result the company announced that it was on course to make a profit for the first time since the merger. But a year later the group's struggle to restore its fortunes were given a fresh blow by the announcement of AOL's merger with Time Warner. Fearing its hold on US broadcast and online audiences would be weakened, Disney lobbied US regulators to block the merger. A few months later this ill-feeling spilled out into an embarrassing public row after the two companies failed to agree terms for transmission of ABC and Disney's entertainment channels on Time Warner cable stations. After four months of negotiation, TW pulled the plug on all Disney-owned channels, blacking out 3.5m homes, and blaming Disney's "excessive and unreasonable" demands. Disney hit back by saying the high-handed action demonstrated the danger of allowing the Time Warner/AOL merger to proceed. Eventually the two sides called a truce and renegotiated.

As the internet boom turned to a bust in late 2000, Disney began restructuring its extensive, but lossmaking interests in that sector. In early 2001 the group shocked the market by announcing it would close its separate Disney Internet Group subsidiary, absorbing parts of the business into the parent group. One of the biggest parts of the business, search portal Go.com, was shut down. Meanwhile the movie division was rocked by a string of disappointing releases in 2000 and 2001, not least underperforming blockbuster Pearl Harbor. That very same year, the company's animation crown was snatched by Dreamworks' hugely successful Shrek, which notched up US box office receipts of almost $270m, surpassing every Disney animated hit except The Lion King. By early 2002 critics had even begun to talk of Disney becoming a takeover target. After a net profit of $920m in 2000, the group slipped into the red, notching up a net loss of $158m. As attendances fell at the group's cash-generating theme parks in the wake of the Sept 11th attacks, Disney began new moves designed to cut costs. In 2002, although the group scored a hit with Lilo & Stitch, another traditional hand-drawn animated movie Treasure Planet performed disastrously at the US box office, taking just $38m against a cost estimated at $140m. The scale of this failure (followed by a similar flop for Dreamworks' Sinbad movie) was widely interpreted as the death-knell for traditional animation, which seemed unable to match the popularity of more three-dimensional computer animation.

In 2003, however, the group pulled not one but two rabbits out of its hat. Almost erasing memories of Treasure Planet, Disney scored the unprecedented coup of topping $300m at the US box-office with two films in a single year. Pixar's Finding Nemo, distributed by Disney, overtook The Lion King to become Disney's most successful animated picture to-date with box office receipts of over $328m in the US alone, a figure matched by live-action adventure Pirates of the Caribbean, based on the company's crowd-pleasing theme park ride. Shortly afterwards the DVD release of Nemo generated more than $500m more, making it the best-selling DVD release to-date. Miramax's Chicago musical also performed well and accumulated a clutch of Oscars. At the same time, on Mickey's 75th birthday towards the end of 2003, Disney began an 18-month campaign to celebrate the character upon which the business was founded. This included the unveiling in California of 75 statues designed by celebrities ranging from Tom Hanks to Elton John, two full-length films, postage stamps, a touring ice show and a string of promotions in key markets around the globe.

Yet the bad times were not yet over. The final months of the year were over-shadowed by a high profile row between Michael Eisner and Walt's nephew, Roy E Disney, previously the group's vice chairman. After several years of simmering tension within the boardroom, Roy Disney resigned abruptly from the board of directors in late November, calling for Eisner's resignation, and bitterly attacking his management of the group. A few days later, Roy Disney's long-standing ally and fellow director Stanley Gold also resigned, criticizing not just Eisner, but also several other board members. Problems came thick and fast in 2004. The rollercoaster dipped again as a result of poor performance from animated Home On The Range, big-budget flop The Alamo and under-performing King Arthur.

Even more worryingly, Disney's partnership agreement with Pixar was also up for renewal. Under the original deal, Disney received a percentage fee for distributing Pixar's movies theatrically and on video/DVD, and also received 50% of all profits as well as marketing rights. No one could have predicted the unbroken string of hits Pixar turned out, from the original Toy Story and its sequel to Monsters Inc, The Incredibles and of course Finding Nemo. However this arrangement was set to terminate with Pixar's sixth film Cars, due for release in 2006, and Pixar was known to be demanding a substantial reduction in Disney's cut in any renewal of the deal. Negotiations broke down in 2004, with personal friction between Michael Eisner and Pixar boss Steve Jobs cited as the main cause. That dispute was soon followed by an equally public row with Miramax after Disney blocked the distributor's plans to distribute Fahrenheit 911, Michael Moore's documentary savaging President George W Bush. Again, Eisner's high-handed management style was blamed for the row.

These developments were compounded by a wholly unexpected hostile takeover bid from Comcast, America's foremost cable group. Once again, fingers were pointed at Eisner. Comcast justified its hostile $48.7bn bid as the result of Eisner's blunt refusal to enter friendly discussions regarding a merger. Disney's board unanimously rejected the Comcast bid, claiming it was under-valued, and emphasized its support for Michael Eisner. But the pressure on Eisner reached a head at the group's Annual Meeting in March 2004, when 43% of shareholders withheld their votes over his re-election as chairman & CEO, a virtually unprecedented vote of no confidence. The Disney board responded by agreeing to split the dual roles, leaving Eisner as CEO but appointing his ally and fellow director George Mitchell as chairman.

For a while the softly-softly approach appeared to have paid off. Luckily for Eisner, Comcast's shareholders also failed to rally behind the hostile bid. The company refused to raise its offer, and formally dropped its bid in May 2004. A strong set of interim financial results also helped to defuse the tension. However, Eisner did finally agree to plan an exit route, announcing that he would step down at the end of his contract, due to expire in September 2006. But then, the skeleton closet was opened once more as the lawsuit brought by shareholders over the severance bonus paid to former president Mike Ovitz eight years earlier finally came to court, leading to further acres of unflattering media coverage. (Disney was later exonerated of any wrongdoing, although the judge said that the directors' conduct fell short of best practice, and also criticized Eisner for having populated the board with friends and supporters). The implications of all these public humiliations were hard to ignore. Once the saviour of Disney, Eisner was now more of a liability than an asset. After several months of stalling, he finally agreed to step down a year ahead of schedule, in favour of Bob Iger, formerly the group's COO.

Even before taking up his new role in September 2005, Iger began stamping his mark on the group, attempting to draw a line under past problems. One of his first actions was the dismantling of Disney's internal strategy group headed by Peter Murphy. Originally conceived by Eisner, this central decision-making unit was behind a number of Disney's key corporate moves including the acquisitions of Miramax and Fox Family Worldwide, but was unpopular with divisional heads. At the same time, Iger resolved another long-running contract dispute with Miramax founders Harvey and Bob Weinstein, who agreed to leave the group with a pay-off estimated at $140m. Iger also made peace with activist shareholders Roy Disney and Stanley Gold, who agreed to drop their lawsuit challenging his selection as CEO. However the most pressing item on Iger's To Do list was undoubtedly to find a way of salvaging the company's relationship with Pixar, especially after Disney's own first inhouse attempt at computer animation, Chicken Little, proved disappointing. The first step towards rapprochement was a pioneering deal to distribute ABC TV programming for viewing on the handheld iPod devices marketed by Apple, also run by Pixar's Steve Jobs. Shortly afterwards, in January 2006, Disney agreed a deal to acquire Pixar, and more importantly its creative team, for around $7.4bn. See full profile for current activities


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