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Walt Disney Company Report
Note that all information and graphs below are obtained from the websites sited on the reference sheet
at the end of the paper.
“Creativity continues to be the essence of Disney, even as our businesses expand across
borders and media platforms, it is the foundation for almost everything we do, the source
of our strength and our success, and the fuel that will power us into the future”
- Robert Iger, President and CEO -
When we hear the word Disney, what is the first think that comes up in our minds?
Most people think about Disney and relate it to magical, exciting and large attractions
parks and hotels, and the famous Mickey Mouse. However, they missed to see how big
and influential this organization really is. Walt Disney Company is one of the World
largest communications organizations. Everyone knows Disney! It is everywhere in our
lives, from TV, radio and movies, to parks, clothing, accessories and toys. Owning
diverse media markets, Disney has build a tradition of culture and niche by efficiently
managing its markets and products, allocating them among different cultures, age groups
and preferences. In this report I will be analyzing some of the major managerial decisions
within the Company, its influences over the market and the way it has established across
the years in our culture. We are now about to discover all the financial numbers, facts,
operational activities and responsibilities of the Walt Disney Company, the “Happiest
Celebration in World.” Let the Magic of Disney to begin…
A Little Bit of History
Walter Elias Disney founded the Walt Disney Company in 1923 as a dream to create a
movie studio, which hosted short film comedies. Few years later, in 1928, the
presentation of the company iconic character, Mickey Mouse, was a reality at the Colony
Theater in New York. Immediately after this, Walt Disney won his first Academy Award
and continued this trend for more than the following decade. His first business product
consolidation started when a man offered the company $300.00 to earn the right to apply
figures of Mickey Mouse to paper towels for school children. During the 1940s most of
their main films were created, including Pinocchio, Snow White, Dumbo and others. In
1955, the first Disneyland park opened its doors to the public in California. Over the
following decades the World Disney Company started growing until what we know
today, an international powerhouse and media entertainment corporation. The company
has four major business ventures: consumer products, media networks, studio
entertainment and parks and resorts, which will be discussed in the next sections of this
report. Today the company mission statement is “to be the world’s leading producers and
providers of entertainment and information.” The Walt Disney Corporation has created
an empire that is unmatchable in the entertainment industry in our days, an empire that is
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governed by a Mouse! The company continues striving for excellence and high quality
production to keep up with the continuously changing world.
Walt Disney Company Industry Purpose
The most suitable classification for the Walt Disney main purpose is in the Media and
Entertainment Industry also called the Movies and Entertainment Industry. It is hard to
classify the company in a single industry because it is formed as a conglomerate with
diversified business industries. The company main competitive theory statement is
constructed of five parts: strategic alliances, vertical integration, creative content,
corporate diversifications, and international agency. Let’s exemplify this five lines:
- Conglomeration: Walt Disney operates in three different fields, such as Media
Networking, studio entertainment and Consumer Products.
- Globalization: Walt Disney Products and Services are found all over the world in
different forms and areas, including parks, resorts, movies, books, clothes,
toys...etc.
- Horizontal integration: Walt Disney owns many studio entertainment, consumer
product companies, and media networks. These forms a horizontal integrated
industry because all of them are part of the same business line and act together to
increase efficiency.
- Vertical integration: Walt Disney is formed by different business line subcompanies, allowing the organization to plan, produce, advertise, and distribute
all of its products on its own, without looking for other companies services.
- Media synergy: Walt Disney Company bought Pixar Studios that allowed to make
more advanced animation movies which are distributed through Buena Vista.
- Buyer and Seller Concentration: World Disney Company is in an Oligopoly Seller
Concentration (along with others corporations), where there are few producers in
the market and in which the product can be either homogenous or differentiated.
In the other hand, there are a lot of buyers for the products this company offers,
ranging from different ages groups, cultures, sexuality, interests and preferences.
- Barriers to Entry: Walt Disney offers diversified barriers to entry for competitors
in the market place. In the last years there have been only few new production and
network companies development due to the high initial costs of operations and the
existence of strong established brands, as Disney is. Disney Company also
privileges from patents, trademarks and copyrights that prevent other companies
from copying their productions and ideas. For new companies it is also hard to
compete with this well-known and established organization due to long
development period to get known by customers and protected legal barriers of the
Walt Disney Organization.
- Product Differentiation: Walt Disney offers a wide variety of heterogeneous
products; its movies, shows, themes parks, music radio, and merchandize offer a
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-
range for all tastes, cultures and ages. Making its product really differentiated
\within its company and from products from other companies.
Production Costs: Walt Disney World, as many others media companies, has high
first copy costs and low reproduction costs of most of its media-content products.
Also, managers form this company has the initiative to re-distribute their media
products throughout different distribution channels (windowing); as repurposing
content (using the same content in different forms, as a movie to create a video
game, a book, a novel, clothes…), television syndication, Merchandising and Film
Distribution Windows (initiating from theatres, they to pay per view, video
releases, premium cable, basic cable and finally broadcast cable) reducing the
per-viewer contribution among time and down of the windows distribution; this is
also called temporary Price Discrimination.
Walt Disney Company Main Business Lines
Media Networks:
The Company media network segment manages Disney’s operations in television
networks – broadcast TV networks and stations at national and international level, cable/satellite networks, internet services, radio media industries, mobile operations and
Television content production and distribution. This division is centered around ABC TV
Network (American Broadcasting Company), as well as ESPN, Walt Disney TV and
SOAPnet. Others ownership interests are centered in Lifetime and A&E. In detailed the
focus companies are as follows: The Disney-ABC Television Group includes the ABC
Television Network (including ABC Daytime, ABC Entertainment Group and ABC
News divisions); the Disney Channels Worldwide global kids' TV business, ABC Family
and SOAPnet; as well as television distribution divisions Disney-ABC Domestic
Television and Disney-ABC ESPN Television. It also manages the Radio Disney
Network, general interest and non-fiction book imprint Hyperion, as well the Company's
equity interest in A&E Television Networks.
In the other hand, ESPN, Inc., which is the leader in sports network, includes ESPN on
ABC, six domestic cable television networks (ESPN, launched in 1979; ESPN2; ESPN
Classic; ESPNEWS; ESPN Deportes; ESPNU), ESPN HD and ESPN2 HD (highdefinition simulcast services of ESPN and ESPN2, respectively), ESPN Regional
Television, ESPN International (31 international networks and syndication), ESPN
Radio, ESPN.com, ESPN The Magazine, ESPN Enterprises, ESPN Zones (sports-themed
restaurants licensed by ESPN), and other growing new businesses including
ESPN360.com (Broadband), ESPN Mobile Properties (wireless), ESPN On Demand,
ESPN Interactive and ESPN PPV.
Parks and Resorts:
Not only in the USA, but also in different countries around the world, the operations of
parks and resorts are a great part of this company organization. This division owns and
operates the Walt Disney resorts, including parks, hotels, vacations units, retail products,
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dining, and entertainment, sports and conference complex. In the last years golf courses,
recreational facilities and water parks have been added into this division. One of the main
streams of revenues is the Disney Cruise Line. This business line was a significant
growth revenues driver before the 2008 Financial Crisis; however the company is still
striving to keep this business alive. Between the resorts locations are:
Disneyland Resort, Anaheim, California
Walt Disney World Resort, Lake Buena Vista, Florida
Tokyo Disney Resort, Urayasu, Chiba
Disneyland Resort Paris, Marne La Valle, France
Hong Kong Disneyland, Penny's Bay, Lantau Island
Studio Entertainment
This line produces and distributes live action and animated motion pictures , musical
recordings, home entertainment, pay-per-view, payTV, free-to-air TV markets, live-stage
theatrical plays…This is regarded as the most visible business within the Disney
company. Hit movies have been, and still, be released in main theaters, television and
home video, locating the company in the movie edge production. Even though the
existence flops movies (as Treasure Planet) there are Blockbusters, which have been
great source of revenues for the company (as Pirates of the Caribbean.) Disney’s Pixar is
the main line stream in the studio entertainment department of the company. The Walt
Disney Studios distributes motion pictures under Walt Disney Pictures - which includes
Walt Disney Animation Studios, Pixar Animation Studios and DisneyToon Studios Touchstone Pictures, Hollywood Pictures and Miramax Films. Walt Disney Studios
Motion Pictures International serves as the studio's international distribution arm. Walt
Disney Studios Home Entertainment distributes Disney and other film titles to the rental
and sell-through home entertainment markets worldwide. Disney Theatrical
Productions,one of the largest producers of Broadway musicals, also includes Disney
Live Family Entertainment and Disney on Ice. Disney Music Group distributes original
music and motion picture soundtracks under Walt Disney Records, Hollywood Records,
and Lyric Street Records.
Consumer Products and Services
Brand licenses merchandise and products offers a great variety of Disney stuff for
different ages, styles and preferences. Products bearing the Disney logo range from toys,
apparel, home decorations, to electronic games. The revenues from this business line
come mainly from retailer stores and the profits made by selling licenses to other
producers. Disney Publishing Worldwide (DPW) is the world's largest publisher of
children’s books and magazines, reaching more than 100 million readers each month in
75 countries. Disney's imprints include Disney Libri, Hyperion Books for Children, Jump
at the Sun, Disney Press, and Disney Editions. Disneystore.com, the company official
shopping website, is also involved in consumer products sales.
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Disney Online/ Disney Interactive Media
A new business division was created in 2006 when Disney bought Kaboose.com,
babyzone.com and other 6 parent-oriented sites. This new division is now called “Disney
Online Mom and Family,” which is focused to mothers who make the most household
buying decisions in order to generate new revenues for the company. In this division it is
also include television shows formatted for video iPod users.
The Disney Interactive Media Group is responsible for the creation and delivery of
Disney branded interactive entertainment and informational content across multiple
platforms including online, mobile and video game consoles around the globe.
Segment
Media Networks
Parks and Resorts
Studio Entertainment
Consumer Products
Interactive Media
Revenue
$15,857
$11,504
$7,348
$2,415
$719
Operating Income
$4,942
$1,897
$1,086
$778
$258
In Summary, the Company Main Industry Divisions are:
1. Entertainment Industry – The Walt Disney Studios, Disney Movies, Walt Disney
Animation Studios, Pixar Animation Studios, Disney Toon Studios, Touchstone
Pictures, Hollywood Pictures and Miramax Films.
2. Academics and Institutions – Disney School of Animation
3. Consumer Industry –Theme Merchandising, disneystore.com
4. Media and Animation Services – Disney Online and Games, Disney Interactive
Media Group (DIMG).
5. Media Networks – Disney-ABC Television, ESPN Inc, Walt Disney Internet
Group, ABC Television Stations,
6. Leisure Activities – Theme Parks, Hotels, Disney World
Geographical Markets and its Revenues Proportion
Company’s Affiliates
The Walt Disney Company main offices and Studios are located in 500 S. Buena Vista
St., Burbank, California 91521-9. However, Disney have not only stayed concentrated
there, within their years of story it has expanded in the national and international arena.
For this I will analyze each business line division and point in which geographic area
each has presence. Let’s see…
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The Walt Disney company, as well as its subsidiaries, are focused on a diversified
worldwide entertainment market. Each of its business lines are distributed in different
markets around the world, having ownership of multiple corporations. The Walt Disney
Company has a 51% ownership in Disneyland Paris, manages a 40% interest in euro
Disney S.C.A, holds 18% interest in the Active Network, Inc; owns 47% interest in Hong
Kong Disneyland Resort and Parks. These are the main international market forces lead
by Disney. Following is a more detailed explanation.
Media Networks Geographic Areas
Nationally, the ABC network has affiliation agreements with 234 local stations and it
reaches 99% of the USA television households. As for October 2, 2010, the revenues
generated from this division were as follows: (in millions) $8.802 from affiliate fees,
$7,028 from advertising and $2,052 in other, reaching a total of $17,162. In order to
reach more costumers in the United States geographic market, media networks can be
seen in both cable and broadcast TV.
Parks and Resorts
The Walt Disney Company operates parks and resorts in Florida (Disney World Resort),
in California (Disneyland Resort), the Disney Vacation Club (offering ownership in 11
resort facilities), the Disney Cruise Line, and Adventures by Disney. The company has
ownership sin Disneyland Paris (51%) and Hong Kong Disneyland (47%). The Tokyo
Disney Resort in Japan is also part of the company. Revenues from these parks can be
categorized as Domestic $ 8,404 and International $2,357, given a total of $ 10,761 (in
millions).
Studio Entertainment
The company produces and acquires live-action and animated motion pictures, musical
records, direct-to-video content and live stage plays and performances. The primary
banners films of the company are Walt Disney Pictures, Touchtone pictures, Pixar,
Miramax and Dimension. Walt Disney distributes and markets its films in different
markets in the United States and internationally, produced directly or by joint ventures
companies. In the domestic market, the company distributes films directly, having
acquired for about 1,800 active produced titles. In the case of the International
marketplace, more than 2,700 acquired titles have been produced. Revenues vary from
Theatrical distribution $ 2,050, Home entertainment $2,666, Television distribution and
other 1,985, giving a total revenue of $ 6,701 (in millions).
Consumer Products
Throughout the World the company engages in licensees, manufacturers, publishers and
retailers services, serving our society with a whole variety of Disney products. These
include a range of products categories as the ones mentioned before. Disney Publishing
Worldwide publishes children’s books in multiple countries and languages supporting
Disney franchises. Also in Shangai and Beijing there are 15 diverse Disney English
language learning centers, giving education to native children. As for October 2,2010
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revenues were as follows: from Licensing and publishing $ 1,725 and from Retail and
other $953, giving a total of $2,678.
Interactive Media
Disney-branded entertainment content is delivered across interactive media platforms. Its
primary business operation line is Games and Online, which produces internet websites
in the USA and internationally. The company also manages the Disney branded mobile
phone business in Japan. Different Internet sites integrate the whole world in diverse
media markets. In overall revenues were as follow by October 2, 2010: from Game sales
and subscriptions internationally $563 and Advertising and others $198, giving a total of
$761 (in millions).
In Summary, North America currently accounts for 78 percent of Disney’s total revenue
(Reuters) and Disney's international operations (in Japan, France, other parts of Europe,
the former Soviet Union, South America, and China) contributed 22 percent of total
revenues
Disney’s Primary Customers
Be “one of the world’s leading producers and providers of entertainment and
information,” is Disney primary mission. For this goal Disney had to develop products
and services for different audiences, children, teens, and adults of all ages. For example,
ABC for news and families, the Disney channel for children, ESPN, ESPN2, ESPNEWS
and ESPNU for sports fanatics and SOAPnet for mothers and fathers. Disney themes
parks and cruise lines usually attract families with younger children.
For example, in the following table it can be seen how the cable network demographics
of the company are distributed nationally and internationally;
Estimated Domestic
Subscriber (millions)
ESPN
ESPN
ESPN 2
ESPNNEWS
ESPN Classic
ESPN Deportes
ESPNU
100
100
74
41
5
74
- Median age: 29 (66% between 18 and 34)
- Men: 94% | Single: 47%
- College educated: 87%
- Employed Full Time: 74%
- Average (Mean) HHI: $72,100
- Attended sporting events within the last 12 months: 81%
Estimated International
Subscribers
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- Purchased products online in the last 12 months: 89%
Estimated
Domestic
Subscriber
(millions)
Estimated
International
Subscribers
Disney Channel
100
109
Playhouse Disney
--
45
Disney XD
78
84
Disney
Cinemagic
--
10
Hungama
--
7
Disney Channel
Worldwide
ABC Family
SOAPnet
A&E
Lifetime
Television
The
History
Channel
Lifetime
Movie
Network
The
Biography
Channel
History
International
Lifetime
Real
Women
Estimated
Domestic
Subscriber
(millions)
99
76
100
100
99
79
62
61
16
A&E Demographics
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Other customers also include Disney affiliated companies, which are mentioned in the
second part of this report (above).
Another Disney Business customer that deserve to be mentioned is the cable provider
Comcast…
Comcast Corporation and The Walt Disney Company entered into long-term
comprehensive distribution agreements for 10 ABC-owned broadcast television stations
and other Disney network and services, including: Disney Channel, ABC Family, Toon
Disney, ESPN, ESPN2, ESPN Classic, ESPNEWS, ESPN HD, ESPNDeportes and
SOAPnet.
Disney’s Primary Competitors
World Disney Company competition consists of about 5 diversified players that capture
media networks, as well as parks,
TV/films producers, and resorts. The main
competitors are listed in the table below.
As one can see from the table,
competition is greatest at film production
and
network
services,
including
competitor as CBS, Times Warner, and
Viacom. However only NBC offers
themes park attractions.
Premium networks as HBO/Cinemax,
Showtime, Encore… have an advantage over basic cable Disney networks, because of
subscriptions fees. Competition is really intense between major communications and
entertainment players, since these Big 6 companies primarily own most of the channels
and networks. In relation to its competitors, Disney had a room for additional leverage if
there are attractive investments to emerge, as a new cable network company, which might
launch channels in underserved countries.
The presence of powerful competitors with well-known brands and services create an
environment of price wars and poses a strict product differentiation requirement between
those companies. Mergers and acquisitions are also continuously changing the
competitor’s market scheme, as we will discuss in the next section.
Market Share Controlled by Walt Disney Company
Disney Total Revenue is approximately $36.1billion dollars (as for 2009, last data
obtained for the 6 major competitors). To get the market share I used the revenues from
the six major competitors in the media/entertainment industry, so this is an approximate
number.
Total Industry Revenue: $262.9 Billions
Disney Total Revenue: $36.1 Billion
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Disney Market Share: 13.7% of Total Revenue Industry (including only major
competitors share)
 In the themes park industry Disney constitutes 50% share of the Industry market
revenues.
 In the studio entertainment industry Walt Disney Studio market share is 16% in the
U.S.B.O ($4.1 B) and 12% in the Worldwide B.O.market ($7.9B)
Picture from Standards and Poor Net Advantage Industry Report
Major Full Mergers/Acquisitions during the last years
Disney primary mergers and acquisitions in the last 3 years are:
- Tapulous
On july, 2010 the company was adquired by Walt Disney Comapany. Tapulous is
an American Software and video game developer; its most profitable products are
Tap Tap series of music games.
- Playdom
On August 27, 2010, Disney Company acquired Playdom, Inc. (Playdom), which
develops online social games. This acquisition is meant to strengthen the
Company’s digital gaming portfolio and provide access to a new customer base.
For now, it is said that Playdom shareholders will receive total consideration of
approximately $563 million, but it might change according to other market shares
and investments.
- The Disney Store Japan
On March 31, 2010, the Company acquired all the shares of Retail Networks
Company Limited, called the The Disney Store Japan, for $17 million. At that
time, the cash balance was of $13 million.
- Marvel
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-
-
-
-
On December 31, 2009, Disney completed the acquisition for the outstanding
company Marvel Entertainment, Inc. (Marvel), a character-based entertainment
company, for at total $4.2 billion. The main purpose of this acquisition is to meet
with the Company’s strategic value of creation through the use of human
intellectual properties throughout the World media industry.
AETN / Lifetime
On September 15, 2009, the Company and the Hearst Corporation both contributed
their 50% interests in Lifetime Entertainment Services LLC (Lifetime) to A&E
Television Networks, LLC in exchange for an increased interest in AETN.
Jetix Europe
In December 2008, the Company acquired an additional 26% interest in Jetix
Europe N.V., a publicly traded pan-European kids’ entertainment company, for
approximately $354 million.
UTV
On May 9, 2008, the Company acquired a 24% interest in UTV Software
Communications Limited (UTV), a media company headquartered and publicly
traded in India, for approximately $197 million.
Disney Online Studios Canada
On August 1, 2007 the company became a subsidiary of Walt Disney Company; it
was formerly name as the New Horizon Interactive and later the Club Penguin
Entertainment. The company is a specialized graphics software company, which
specialization is producing and maintaining MMOGs.
New Challenges for the Company
The Walt Disney Company has multiple challenging threats that could lead to a negative
impact of the business in the future. The company major threats come from its national
and global competitors. The high competitions have sometimes imposed problems for the
company to sustain its entertainment leadership. A new challenge emerged with the
acquisition of Marvel; new acquisitions could affect the development of a company at its
beginning by having unprofitable sales. Disney’s pressure in terms of creativity and
innovation is other threat that must be surpassed to stay in this competitive market, and
which Disney has done well so far. With the economic recession that is faced in this
country now a days another common challenge might be employee retention. If you let
go your employees they might leave and work in a competitor within the industry, giving
out crucial information from the company.
To summarize some down siding challenges to the company might be (From sec.org 10K
report):
1. The increasing trend of vertical integration of large cable operator, today
Comcast-NBC merger, might present a negative threat to cable networks and
operators. Increased competitive pressures may reduce the company revenues
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2.
3.
4.
5.
6.
7.
8.
9.
and/or increase costs.
The Pirates of the Caribbean, one of Disney major hits, franchise has already been
exhausted in the market. The company has still not developed another hit like this
for the following years.
The DVR popularity is continuing growing and the introduction of remote servers
cable DVR, as Cablevision, is set to compress network’s advertising revenues.
Online businesses impose a risk of losing adverting revenues, making consumers
able to skip commercials.
Volatility of advertising revenues; depending on the event and shows with a
larger/few number of viewers. Also competition have rise in the past few years,
making advertising revenues more difficult to achieve.
The overall competition within the cable network industry market and the
continuously increasing public expectations for better programming pose a threat
and a creativity challenge within companies, making programming costs to rise.
Changes in U.S., global, or regional economic conditions could have a negative
effect on the profitability of some of the company’s businesses. Also, changes in
exchange rates for foreign currencies may reduce international demand for
Disney’s products, making them more expensive.
Changes in public and consumer tastes and preferences for entertainment and
products could reduce the demand for the some entertainment productions and
Disney’s consumer products.
The success of Walt Disney businesses is highly dependent on the existence and
maintenance of intellectual property rights in the entertainment products and
services the company creates; if copyrights are disturbed, revenues would be
much less, and this also affect its producers of content.
Labor disputes are also likely to disrupt the company operations and adversely
affect the profitability of any of their businesses.
FINANCIAL CALCULATIONS AND EVALUATION
All the information below was taken from Standards and Poor Net Advantage Reports:
Revenues and Profits:
Revenues:
Revenues for 2010: 38,063 (Million $)
Revenues for 2009: 36,149 (Million $)
Revenues for 2008: 37,843 (Million $)
Revenues for 2007: 35, 510 (Million $)
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Revenue Growth from 2007 to 2008:
Revenue Growth from 2009 to 2010:
6.57%
5.29%
Revenue Growth from 2008 to 2009:
- 4.48% (Dropped)
 As seen from the previous information Disney Company’s revenues have been rising
through the years. Revenues for 2010 changed 5.29% from the previous year. Having
dropped from 2008 to 2009 by 4.48% (decrease in revenues that year). So, the total
change from 2008 to 2010 is for about 0.58% increase in revenues.
Incomes:
Net Income for 2010: 3,963 (Million $)
Net Income for 2009: 3,307 (Million $)
Net Income for 2008: 4,427 (Million $)
Net Income for 2007: 4 674 (Million $)
Income Growth from 2007 to 2008:
Income Growth from 2009 to 2010:
- 5.28% (dropped)
19.83%
Income Growth from 2008 to 2009:
- 25.29% (Dropped)
 As observed from the information above, net incomes in the company have changed
its trend during the last 3 years. First decreasing, and then, increasing again, but not
surpassing the ones from 2008 (as in revenues). The change from 2008 to 2009 was a
drop in income of 1,120 (million $) or a change decrease of 25.29 %. For 2009 to 2010
the change was an increase of 656 (million $) or 19.83% increase in income.
 From the previous information one can see that revenues dropped from 2008 to 2009,
but it recovers back during 2010; actually gaining 0.58% more than in 2008. In the other
hand the trend with net profits is clearly the same. It decreased during the 2009, where
revenues and income were less and it rises again during the 2010. However this time, the
greatest net profits are for 2008 (as seen in the table). This is because net incomes were
greatest than during 2010. A decrease of 21.79 % was observed from 2008 to 2009; and a
decrease of 11.02% from 2008 to 2010.
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Walt Disney Company Report
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Sep 27,
Oct 2, 2010
Oct 3, 2009
3,963
3,307
4,427
38,063
36,149
37,843
Walt Disney Co.
10.41
9.15
11.70
Industry, Consumer Services
–
4.34
2.87
2008
Selected Financial Data (USD $ in millions)
Net income attributable to The Walt Disney
Company (Disney)
Revenues
Net Profit Margin (%), Comparison to
Industry
The net profit margin indicates how much of every dollar of sales the company keeps in
earnings. Disney’s 2010 profit margin of 10.41% means that the company has a net
income of $0.14 for each dollar it sells.
 Based on the information presented above, the profitability of the industry can be
determined. As it is seen net profits have been decreasing since 2008, it recovered a little
bit from 2009 to 2010, but still not at the levels of 2008. However, revenues are now
higher than during 2008. But the profits are still lower due to lower net incomes and
lower earnings and cash flow through the industry. Due to these changes, we can say that
even the company is making now more revenues; their other expenses make profits to be
less for the company. If revenues will continue to grow at this margin, we could get to the
point were profits would be as high as they were before. The profitability of an industry
also accounts for operating income (depreciation and amortization) and EBIT (Less
income taxes and interests.) Presented on the Standards and Poor Industry Report,
Depreciation is now higher than it was in 2008 (from 1,582 to 1,713 (in millions$)) and
operating income is less than it was during 2008 (from 8,986 to 8.439). From this and
other information we can determine how the company has been performing and even
calculate expected performances for the next years. For example, according to the Henry
Fund Research, it is expected that for this year (2011) the total revenues would be of 39,
657 (millions $).
Long term Debt and Current Liabilities from the last 3 Years:
Current Liabilities:
Liabilities for 2010: 11,000 (million $)
Liabilities for 2009: 8,934 (million $)
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Walt Disney Company Report
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Liabilities for 2008: 11, 591 (million $)
Long Term Debt:
2010: 10,130 (million $)
2009: 11, 495 (million $)
2008: 11, 351 (million $)
 So, liabilities for 2008 were the highest for the last 3 years in the company (this might
be why their total revenues were higher). Liabilities decrease from 2008 to 2009 by a
decrease of 2,657 (million $) or a decrease of 22.92%. The change from 2009 to 2010
was an increase of 2,066 (million $) or a growth of 23.13%. In the other hand, we have
the long term debt increasing from 2008 to 2009 by 144 (million $) or 1.26%. And from
2009 to 2010, a decrease of 1,365 (million $) or 11.87%. So, we can see that both, current
liabilities and long term debt are lower today (by 2010) than were before.
Long Term Debt to Capitalization Analysis:
Total Capital for 2010: 51,822 (million $)
Long term debt 2010: 10,130 (million $)
Total Capital for 2009: 48, 126 (million $)
Long term debt 2010: 11,495 (million $)
Total Capital for 2008: 47, 368 (million $)
Long term debt 2010: 11,351 (million $)
Adding the Liabilities for 2010: 11,000 (million $), Liabilities for 2009: 8,934 (million
$), and Liabilities for 2008: 11, 591 (million $); to the long term debt, the debt to
capitalization is calculated as follow:
% Debt to Capitalization 2010: 40.77 %
% Debt to Capitalization 2009: 42.45%
% Debt to Capitalization 2008: 48.43%
 Total Capital has been increasing in the last three years. However, the debt to
capitalization rate has been decreasing, due to decreases in the long-term debt. However,
what does all these mean? … A debt-to-capital ratio mean is a measurement of a
company financial leverage. Debt includes all short and long term obligations.
Sara Odette Battikh
Walt Disney Company Report
COMM 387 – Spring 2011
Companies are usually able to finance their operations through either debt or equity. The
debt-to-Capital ration give people an idea of how the company is financing its operations
and their strengths and weaknesses. The higher the debt-to-capital ratio, the more debt
the company has compared to its total equity; telling investors and customers how does
the company prefer to be financed. Usually, a company that has high debt-to-capital
ratios may show a weak financial strength. This is because the costs of these debts may
increase the company default risk. As seen, the debt to capitalization ratio has been
decreasing, and that is exactly what we want; because it indicates that the Company’s
debt is going down.
And, the Ratio of Total debt to capitalization would be:
%Long Term Debt to Capitalization 2010: 19.6 %
%Long Term Debt to Capitalization 2009: 23.9 %
%Long Term Debt to Capitalization 2008: 24.0 %
 As seen from these results, and comparing to the previous ones, we can see the same
trend if we sum up current liabilities; the debt to capitalization has been decreasing.
Cash Flow Margins, Returns on Investment, Returns on Equity, Current Ratio…
- Note that all margins are expressed in % and the % change in seen between each
margin calculation.
Cash Flow Margin…
Disney has produced $3,675 million Free Cash Flow (FCF) compared to $ 3, 646 million
in net income (as for 1st quarter of 2010). This means that Walt Disney Company turned
approximately 10% of its revenues into FCF.
To Calculate the Cash Flow Margin we will use the
equation: Cash Flow Margin = Cash Flow / Net
Revenue.
Cash Flow in 2010: 5,676 (million $)
Cash Flow in 2009: 4, 938 (million $)
Cash Flow in 2008: 6, 009 (million $)
Sara Odette Battikh
Walt Disney Company Report
COMM 387 – Spring 2011
So, with the revenues listed before, we can calculate the cash flow margin between these
years:
Cash Flow Margin 2010: 14.91 %
Cash Flow Margin 2009: 13.66 %
Cash Flow Margin 2008: 15.88 %
 The Cash flow margin indicates how the company needs to generate cash to pay its
expenses and purchase assets, and it is crucial for the company to have good cash flows.
If a company increases its cash flow it means that it is more able to convert sales into
cash, which is a good indicator of its performance. So, in the case of Walt Disney
Company the cash flow margin was reduced from 2008 to 2009 and then it rise again for
2010. However, it still does not get to the levels of 2008. Which, might show that the
company still needs to overturn to generate more cash. The cash flow per share shows
exactly the same pattern. It was at $3.09 during 2008, decreased to $2.63 in 2009, and
increased to $2.91 in 2010.
Returns on Investment
Returns on equity
Oct 2, 2010
Selected Financial Data (USD $ in millions)
Net income attributable to The Walt Disney
3,963
Company (Disney)
Total Disney Shareholder’s equity
37,519
ROE (%)
Walt Disney Co.
10.56
Oct3,
2009
Sep 27,2008
3,307
4,427
33,734
32,323
9.80
13.70
The Returns on equity (ROE) is a profitability ratio calculated as net income divided by
shareholders equity. In the case of Walt Disney company, as seen from the picture above
the returns on equity deteriorated from 2008 to 2009, but then they slightly improved
from 2009 to 2010. We would like ROE to be higher through the years, because it is an
indicator of improvements in the economy.
Sara Odette Battikh
Walt Disney Company Report
COMM 387 – Spring 2011
Returns on Assets…
Selected Financial Data (USD $ in millions)
Oct 2, 2010
Oct 3, Sep 27,
2009
2008
Net income attributable to The Walt Disney Company
3,963
(Disney)
3,307
4,427
Total assets
69,206
63,117
62,497
ROA (%),
Walt Disney Co.
5.73
5.24
7.08
Returns on Assets refer to the profitability ratio calculated as net income divided by total
assets. Walt Disney Company returns in assets also deteriorated from 2008 to 2009, and
again slightly improved from 2009 to 2010. We also want ROA to be higher trough the
years, because it means the company is getting more income per investment.
ROE numbers would be higher than ROA, because the denominator side of the
equation (Shareholders equity) would be lower than the one of ROA (which includes
all assets). The more liabilities the company has, the bigger the ROE would be
compared to the ROA.
Current Ratio… Liquidity or Risk Assessment
From the information above, taking the information for current liabilities and now using
the current assets. We can calculate the current ratio of the Company.
Oct 2, 2010
Oct
2009
Current Assets
12,225
11,889
11,666
Current Liabilities
11,000
1.1
8,934
1.3
11,591
1.0
Selected Financial Data (USD $ in millions)
Current Ratio
3, Sep 27,
2008
This ratio is used to give an idea of the company’s ability to pay back its short term
liabilities with its short term assets. The higher the ratio, the more capable the company is
of paying its obligations. So, from the chart you see that Disney was more capable during
the 2009, having increase from 2008 and again decrease in 2010. Higher current ratios
are better, because you would like to have more money available (assets) than the money
Sara Odette Battikh
Walt Disney Company Report
COMM 387 – Spring 2011
you need (liabilities). Normally, companies want current ratio to be at 1.5 or higher,
which is not happening with Disney Company. However, as liabilities go down these
numbers could change.
Operating Profit Margin…
Selected
Financial
(USD $ in millions)
Operating income
Revenues
Operating Profit Margin (%)
Walt Disney Co.
Oct 2, 2010
Oct 3, 2009
Sep 27, 2008
6,456
38,063
5,205
36,149
7,404
37,843
16.96
14.40
19.57
Data
From the previous table you can see the profits margin calculations, which is a
profitability ratio calculated as operating income divided by revenue. Walt Disney
Company’ s Profit Margin also deteriorated from 2008 to 2009 and slightly improved
from 2009 to 2010.
In Summary from all the information above the next table, which includes return on sales
and returns on Investment is presented:
Return on Sales (%)
Operating profit margin
Net profit margin
Return on Investment (%)
Return on equity (ROE)
Return on assets (ROA)
Oct 2, 2010
Oct 3, 2009
Sep 27, 2008
16.96
10.41
14.40
9.15
19.57
11.70
10.56
5.73
9.80
5.24
13.70
7.08
Solvency or Capital Structure…
Leverage Ratio:
It is calculated by the formula: total debt/ total assets
(million $)
Total Debt
Total Assets
Oct 2, 2010
21,130
69,206
Oct 3, 2009
20,429
63,117
Sep 27, 2008
22,942
62,497
Sara Odette Battikh
Walt Disney Company Report
COMM 387 – Spring 2011
Leverage Ratio
30.53 %
32.37%
36.71%
 As seen from the graph above the leverage ratio has been lowering in the last three
years, which is a good indicator for the company. It is a positive sign, because it means
that the company debt is going down in overall. This ratio, implies that relative to the
industry the Walt Disney Company takes a less aggressive method to finance its growth
with its debt, reducing its risk as a company.
Debt to Equity Ratio:
(million $)
Total Debt
Total Equity
Debt to Equity Ratio
Oct 2, 2010
21,130
37,519
56.32 %
Oct 3, 2009
20,429
33,734
60.56%
Sep 27, 2008
22,942
32,323
70.98%
 As seen from the graph above the debt to equity ratio has been lowering in the last
three years, which is a good indicator for the company business and capital structure. It is
a positive sign for the company in overall.
Conclusion and Analysis
After collecting all my data and making a careful and depth analysis from an outside
perspective to the company, I can say that The Walt Disney Company is a global leader
in the industry of entertainment; it is a company that is continuously growing. The
company always demonstrates its highly centralized and organized managerial decisions.
Sara Odette Battikh
Walt Disney Company Report
COMM 387 – Spring 2011
The studio production department is crucial for the company to act as a leader for its
products and other advertisings services; at the end all its businesses are codependent into
this starting point; the company’s developments that come from its studio production
department, were all characters are born and ideas are developed.
The Walt Disney Company has a rich selection to produce its own products and
attractions, making the company a highly competitive industry to expand into new
markets and products lines. Their domestic and international market share demonstrates
its great expansion and its location between the top players in its industry.
Between the Positive remarks on investment are:
-
-
-
The Walt Disney Company is a diversified media company surpassing its
competitors in most of its operations. It captures most of the entertainment
spectrum around its industry.
The Cable and Media Network Business line accounts for about 27% of the
company total revenues and 48.5% of the total operating income from cable
networks. If long-term contracts are possible, it would make the company’s cash
flow much more stable that from other of the company’s business segments.
Thanks to the recent launch and growth of the company’s game development, new
growth avenues are expected.
Reviewing the overall balance sheet, I can say that it is generally strong, having a
solid cash balance.
Successful new franchises may be developed with the acquisition of Marvel; which
bring along new characters and ideas.
Even though, fluctuations in net revenues and incomes, these are very small. So
that not great changes were present during the last three years. Revenues have
increased, but net incomes have decreased in the past few years. But as I said, it is
nothing really huge to worry about. These fluctuations might be due to the
increases in assets and liabilities in the 2010. The new mergers and acquisitions
that were present trough those years influence the increases and decreases in
liabilities and assets. To merge or acquire a new company, expenses are involved
and loans might be taken to pay for them.
Disney Company is also characterized for having a strong management team,
which have had the ability to develop entertainment franchises for the domestic
and international distribution.
The company is being undertaken different approaches into growth initiatives; as
its increasing presence on the Internet, and its international expansion of cable
networks and theme parks.
The Company also features ESPN network, which have the dominant position in
sports. And will continue to be for the prospect years; it is a key revenue driver in
the Disney’ cable segment and for the Company in general.
Sara Odette Battikh
Walt Disney Company Report
COMM 387 – Spring 2011
Besides these positive remarks on investment, there are also the negative arguments for
the company; generally expressed as the company main challenges, which were discussed
previously in this report and that are basically focus on competition and vertical
integration from other companies and providers.
Overall, the Walt Disney Company seems to be doing well in the past years; and even
economic recessions, the company market share is still high: there are some fluctuations
in its total revenue and income, but the company is still in a good spot and market
dominance. In the next few years, according to my research, I see the company entering
to even new markets nationally and internationally and exploring new business segments.
I see the company revenues growing for this year too, and this can even influence the
growth in total income (which has been low mainly due to the acquisition of new firms in
the previous years.). Also, we need to realize that the United States is almost recover
from the last economic recession, pushing up our economy and thus influencing Walt
Disney revenues to go up.
Walt Disney Company goal has been and will always be “To make people happy” and
“to be creative” Since 1923 to the present the company has been producing films and
contents for different age people. The company’s ability to invoke a feeling of “eternal
youth” is clearly present in all of its content; so generally I can say the company has been
doing an excellent job fulfilling both of their goals!
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Sara Odette Battikh
Walt Disney Company Report
COMM 387 – Spring 2011
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Walt Disney Company Report
COMM 387 – Spring 2011
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COMM 387 – Spring 2011
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