The Walt Disney Company has been one of The Most Iconic Corporate Turnarounds in Business History. Robert Iger has been Strategically Leading The Company since 2005, but The Challenge lies in reducing dependence on a Specific Business Segment. Is Disney up to it?
Nevertheless, Walt Disney Company is a much steadier ship today. In 2003, revenue stood at $26.48 billion and it grew to $38.06 billion in 2010, implying a CAGR of 5.31%. It isn’t the 20% growth rate that Eisner targeted yet, but the company is showing a reasonably healthy financial position despite the global financial meltdown. The man behind this success is Robert Iger, President and CEO. When he took over the office in 2005, Disney was a bottomless spiral of bureaucratic traps. Employees were afraid of decision making, which was largely centralised. His first priority was to undo the damage, which Disney had endured mostly on part of Eisner’s egoistic pursuits. He started off by patching up with Steve Jobs’ Pixar Animation, a relationship which Eisner had destroyed. According to Michael Corty, CFA Stock Analyst, Morningstar “Iger knew the importance of animation to its studio entertainment business, so he quickly patched up with Steve Jobs”. On January 24, 2006, Disney acquired Pixar for $7.4 billion in stocks. Although the move made Jobs the largest shareholder in Disney, it has proved to be one of the best acquisition that has bolstered Disney’s animation division. In 2010, the studio released Toy Story 3. Produced at a budget of $200 million, the movie grossed $1.06 billion; becoming the highest grossing movie of 2010 worldwide and the 5th highest grossing film of all time. The acquisition of Marvel entertainment couldn’t have come at a better time. Despite being in the movie business for ages, Disney always felt restricted with respect to its target audience. With more than 5000 characters under its label, Marvel has given Disney access to an array of inventory, which presents enormous franchising opportunities (properties can be exploited across segments). Disney is making considerable investments in the Parks and Resorts business. It has already started construction of the Shanghai Disney Resort. Conceptualised on a budget of $4.4 billion, the media giant holds a 43% stake in the venture. Although this is a late cycle business, the company will realise formidable earnings riding on the back of economic recovery and the 260 million viewers of its TV shows in the mainland.
One of the areas where Disney needs to work extensively is the interactive media segment. The business has been incurring operating losses for the past three years. Till last year, the Interactive Media Group had an employee base of 700. After the announcement of the results for 2010 wherein the division posted losses of $234 million, around 30% of the workforce was laid off.
Disney is on the right track so far and Iger seems to be playing all his cards right. The risk however lies in the fact that revenues are centralised. A segmental analysis of Disney’s business reveals that the Media Networks business generates 45% of all revenues. The remainder, which includes Parks & Resorts, Studio Entertainment and Consumer Products contribute 28.27%, 17% and 6.83% respectively. The media network business forms the backbone, and ESPN contributes 75% of cable network sales. But the growth of live streaming providers like Netflix can threaten that in the future.
Disney needs to extensively work on reducing its dependence on one business. Currently, the business is doing well, but then, the problem with good times is that they may ignore potential problems on the way. Moreover, with the kind of opportunities that he now has, Iger needs to push for higher growth in revenues and a return to the legendary days of lore.
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Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri
and Arindam Chaudhuri (Renowned Management Guru and Economist).
For More IIPM Info, Visit below mentioned IIPM articles.
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IIPM: Indian Institute of Planning and Management
One of the areas where Disney needs to work extensively is the interactive media segment. The business has been incurring operating losses for the past three years. Till last year, the Interactive Media Group had an employee base of 700. After the announcement of the results for 2010 wherein the division posted losses of $234 million, around 30% of the workforce was laid off.
Disney is on the right track so far and Iger seems to be playing all his cards right. The risk however lies in the fact that revenues are centralised. A segmental analysis of Disney’s business reveals that the Media Networks business generates 45% of all revenues. The remainder, which includes Parks & Resorts, Studio Entertainment and Consumer Products contribute 28.27%, 17% and 6.83% respectively. The media network business forms the backbone, and ESPN contributes 75% of cable network sales. But the growth of live streaming providers like Netflix can threaten that in the future.
Disney needs to extensively work on reducing its dependence on one business. Currently, the business is doing well, but then, the problem with good times is that they may ignore potential problems on the way. Moreover, with the kind of opportunities that he now has, Iger needs to push for higher growth in revenues and a return to the legendary days of lore.
Read more...
Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri
and Arindam Chaudhuri (Renowned Management Guru and Economist).
For More IIPM Info, Visit below mentioned IIPM articles.
IIPM Best B School India
Management Guru Arindam Chaudhuri
Rajita Chaudhuri-The New Age WomanIIPM's Management Consulting Arm-Planman Consulting
IIPM Prof. Arindam Chaudhuri on Internet Hooliganism
Arindam Chaudhuri: We need Hazare's leadership
Professor Arindam Chaudhuri - A Man For The Society....
IIPM: Indian Institute of Planning and Management
