The Walt Disney Company: the Art of Brand Building Keeps Disney Center Stage Essay Example

CEO Michael Eisner from Paramount and a new president, Frank Wells, from Warner Bros.

ushered in a new era in the history of Disney. Work the Brand Michael Eisner has been involved in the entertainment industry from the start of his career (ironically, beginning at ABC Television in the 1960s).He exhibits a knack for moving organizations from last place to first through a combination of hard work and timely decisions. For example, when he arrived at Paramount Pictures in 1976, it was dead last among the six major motion picture studios. During his reign as the company’s President, Paramount moved into first place with blockbusters such as Raiders of the Lost Ark, Trading Places, Beverly Hills Cop, and Airplane, along with other megahits.

By applying lessons he learned in television at ABC to keep costs down, the average cost of a Paramount picture during his tenure was $8. million, while the industry average was $12 million. Eisner viewed Disney as a greatly underutilized franchise identified by millions throughout the world. In addition to reenergizing film production, Eisner wanted to extend the brand recognition of Disney products through a number of new avenues. Examples of his efforts over the years include the Disney Channel (cable), Tokyo Disneyland (Disney receives a management fee only), video distribution, Disney Stores, Broadway shows (Beauty and the Beast), and additional licensing arrangements for the Disney characters. However, in the early 1990s problems began emerging for Disney.

An attempt to build a theme park in Virginia based on a Civil War theme was defeated by local political pressure. EuroDisney, the firm’s theme park in France resulted in over $500 million in losses for Disney due

to miscalculations on attendance and concessions. In 1994, Eisner underwent emergency open-heart bypass surgery and Frank Wells, long working in the shadows of his boss but increasingly viewed as integral for the success of Disney, died in a helicopter crash. Eisner’s choice to succeed Wells, Michael Ovitz from Creative Artists Agency, did not work out and Ovitz soon left.

Stories of Eisner’s dictatorial management style brought succession worries to shareholders. Capital Cities/ABC Once again, Eisner ushered in a new era at Disney by announcing the $19 billion takeover of Capital Cities/ABC on July 31, 1995. The deal came in the same week as Westinghouse Electric Corporation’s $5. 4 billion offer for CBS Inc. Disney represented one of several consolidations of the media conglomerates that increasingly control the distribution of entertainment programming in the United States. Disney ranked as the third largest media conglomerate behind AOL Time Warner and Viacom.

Eisner appreciated the importance of both programming content and the distribution assets needed to deliver it. As a result of many of Eisner’s decisions, The Walt Disney Company has been transformed from a sleepy film production studio into a major entertainment giant, with its revenues of over $2 billion in 1987 increasing to $22 billion in 1997. Its stock price has multiplied over 15 times, creating enormous wealth for both stockholders and executives of Disney. One of the biggest questions arising from the ABC deal is whether Disney paid too dearly for declining network assets.Viewership among all the major networks was declining.

According to Michael Jordan, the CEO of CBS, “the pure network television business is basically a low-margin to breakeven business. ” The networks were squeezed by having

to pay extravagantly for programming and were attracting an audience of older viewers who were scorned by advertisers. However, another way to look at networks is as the lifeblood of the global, vertically integrated entertainment giants that own them and as loss leaders that act to promote their parent’s company’s more lucrative operations.In this scenario, ABC acts as Disney’s megaphone to tell the masses about Disney movies, theme parks, Disney-made shows, and toys.

Another financial advantage occurs when the network owns and syndicates a hit show, something that could not be done before the networks were deregulated in the mid-1990s. By owning more of their own shows, the networks avoid the increasing licensing fees from the production companies. A potential risk is that a network will miss out on a hit by favoring its own shows. Disney has blocked out certain parts of the week for its own shows.Fox and Disney appear best situated to exploit their platforms, with Fox injecting new life into an old brand, and Disney providing diverse production assets to feed its network.

This strategy works as long as networks remain big. During the 1990s, however, network viewership declined; the various networks have cushioned this problem by investing more in their cable holdings. Hard Times and Brand Investment Not everything Disney touches turns to gold. For example, in early 2001, the company was forced to downscale its go. com Internet site as it continued to lose hundreds of millions of dollars.  Moreover, from fiscal 1998 through fiscal 2000, net income declined by half, from $1.

85 billion to $920 million, while operating revenue grew from $22. 98 billion to $25. 4 billion. In fiscal

2001 the company had net loss of $158 million on operating revenue of $25. 2 billion.

Nonetheless, Disney remained committed to integrating its various operations into the greater Disney picture and to developing its brands. As Michael Eisner said in the late 1990s: “It sounds funny, but I am thinking about the millennium change. I’ve got to protect the Disney brand well into the future. As of fiscal 2002, The Walt Disney Company’s businesses included Media Networks, Studio Entertainment, Walt Disney Parks and Resorts, and Consumer Products.

Among the various Media Network holdings are:

• (a) broadcasting networks such as ABC Television Network, Disney owned and operated television stations and radio stations, and Touchstone Television and Buena Vista productions; and
• (b) cable networks such as the ESPN-branded businesses, the Disney Channel, Toon Disney, SOAPnet, and a variety of online commerce, broadband, and wireless subscription services.

Disney’s Studio Entertainment segment produces and/or acquires animated and live-action films, musical recordings, live stage plays, and animated television products. Walt Disney Parks and Resorts includes the company’s theme park and resort operations (e. g. , Walt Disney World, Disneyland, and the Disney Cruise Line) and ESPN Zone sports-themed restaurant, among others. Walt Disney Parks and Resorts also receives licensing royalties and/or management fees from the Paris and Tokyo Disneyland resorts.

The Consumer Products segment produces books and magazines, operates Disney retail stores, and licenses Disney’s characters and other intellectual property to manufacturers, retailers, publishers, and promoters. The Walt Disney Company has been very careful in maintaining brand identity and family values. However, the company recognizes that not everything is a Disney cartoon. For example, when the company goes outside its tradition they produce their

films under the Pixar or Buena Vista labels.

Such movies are still family oriented in a broadly defined manner but are not the typical Disney film.In his letter to shareholders in Disney’s 2002 annual report, Michael Eisner wrote: “The past years have been disappointing in terms of earnings and stock price, but they have also been an exciting period of investment in our key brands ? investment that I am confident will pay off well in the years ahead. ” The company’s competitive advantage is rooted in “maintaining strong and differentiated brands, most notably the Disney and ESPN brands. ” These brands are powerful from a business perspective because they are unique, thereby differentiating the products, and they are relevant to consumers. This competitive advantage has helped return The Walt Disney Company to financial success. In fiscal 2002, The Walt Disney Company’s net income was $1.