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Disney Diversification and

M&As Case Study

Deepak Somaya
Bob Chapek,
CEO of the Walt Disney Company

© 2020 elisfkc2 / CC BY-SA 2.0 / Wikimedia: Bob Chapek


Walt Disney Pictures / Buena Vista Pictures / The Lion King poster
Ed Catmull, Steve Jobs, and John Lasseter
Animated Movie Economics
Animated characters and stories are amazingly lucrative
You can own the characters fully (no Jack Sparrows)
Long tail … home video, pay-per-view, video on demand, TV,
merchandise, video games, electronic use of characters
Sequels often outsell originals (and easy to market)
Disney was particularly well-positioned to orchestrate this
enterprise across multiple channels and over time
Owned most of the needed complementary assets
Explicit design of Disney corporate strategy!!
Disney Corporate Strategy: 1950s

Walt Disney Production


Disney Corporate Strategy: 1960s

Walt Disney Production


Disney Parks

Sleeping Beauty Castle in 2019 after Refurbishment


Spaceship Earth at Epcot in Walt Disney World Florida

Disney Resort in Orlando Florida


Walt Disney World Resort Entrance
Walt Disney Feature Animation
• 1st Movie: Snow White and the 7 Dwarfs (1934)
• Struggled after Disney’s death but recovers under Michael
Eisner and Katzenberg in 1980s
• The Lion King (1994) is the high point
• Katzenberg leaves in 1994 (key “creative force”)
• Starts DreamWorks (w/ Spielberg & Geffen)
• Studio gets large (2200 employees in 1999), and animator
salaries kept rising
• Cost cutting in 2000s, failed computer generated (CG)
animation attempts and greater reliance on Pixar movies
(over 60% of operating income, 1998-2004)
The Disney Renaissance 1989-99
1989: The Little Mermaid
1991: Beauty and the Beast
1992: Aladdin
1994: The Lion King
1995: Pocahontas; Toy Story
1996: The Hunchback of Notre Dame
1997: Hercules
1998: Mulan; A Bug’s Life
1999: Tarzan; Toy Story 2

Walt Disney Pictures / Buena Vista Pictures / The Lion King poster
The Disney Slump 2000-2007
2000: Fantasia 2000; Dinosaur
2001: Atlantis: The Lost Empire; Monsters Inc.
2002: Lilo & Stitch; Treasure Planet
2003: Brother Bear; Finding Nemo
2004: Home on the Range
2005: Chicken Little, The Incredibles
2006: Cars
2007: Meet the Robinsons; Ratatouille
Pixar
Ed Catmull (U of Utah), John Lasseter (Disney) end up in Lucasfilm
Bought by Steve Jobs for $10 Mn in 1986
Jobs wanted to sell graphics computers, but ends up keeping animation
studio instead
Developed proprietary technologies and licensed to others
E.g. RenderMan™ - Disney, Lucasfilm, Sony, DreamWorks
Also made revenue through CGI for ADs Ed Catmull, Steve Jobs, and John Lasseter

Sought to make first animated feature


Eventually becomes Toy Story (1995)
20 Academy Awards by 2005
Disney’s Other Acquisitions
Marvel (2009) Lucasfilm Ltd. (2012)
• Library of 5,000 characters • Lucasfilms
• Some characters licensed to other studios, • Industrial Light & Magic
parks
• 6 other divisions
• Sony: Spider-Man
• Fox: X-Men, F4 • Located in N. CA
• Universal (Florida) park • Net revenue $1.5B/yr
• Struggled with access to capital for
blockbusters Disney paid $4.05B
• Kathleen Kennedy, president and Star
Disney paid $4.24B Wars brand manager
• Iron Man 2, Thor, Captain America, • New trilogy
Avengers highly successful=more sequels
• Star Wars area at Disney California
• Theme park planned in UAE without
Disney; May be used in Paris park Adventure park; compare to Avatar
area at Animal Kingdom in WDW,
Merger with 20th Century Fox (2019) Florida
Film releases since the merger
Disney Pixar
• Cars (2006) $462M
• Bolt (2008) $310M • Ratatouille (2007) $624M
• The Princess • WALL*E (2008) $534M
and the Frog (2009) $267M • Up (2009) $731M
• Tangled (2010) $592M • Toy Story 3 (2010) $1,063M
• Winnie the Pooh (2011) $50M • Cars 2 (2011) $562M
• Wreck-it Ralph (2012) $471M • Brave (2012) $540M
• Frozen (2013) $1,276M • Monsters Univ. (2013) $744M
• Big Hero 6 (2014) $658M • Good Dinosaur (2015) $332M
• Zootopia (2016) $1,024M • Inside Out (2015) $858M
• Moana (2016) $643M • Finding Dory (2016) $1,029M
• Cars 3 (2017) $384M
• Coco (2017) $745M
Case Assignment

Write a memo to Bob Chapek, Disney’s CEO,


explaining the case for why Disney should be
acquiring smaller movie studios like Pixar, Marvel
and Lucas Film. What are the risks of this strategy
and how can those risks be reduced?
Disney Stock Price (v. S&P500)

Lucasfilm
Merger

Marvel
Pixar Merger
Merger
References (Images)
• Bdesham. (2007). Spaceship Earth at Epcot in Walt Disney World. [Photograph]. Retrieved from
https://commons.wikimedia.org/wiki/File:Spaceship_Earth_2.jpg

• Benna, S. (1957). Walt Disney’s Corporate Strategy in 1957. [Diagram]. Retrieved from https://www.businessinsider.com/1957-drawing-walt-disney-
brilliant-strategy-2015-7

• CrispyCream27. (2019). Galaxy’s Edge at Disneyland. [Photograph]. Retrieved from https://commons.wikimedia.org/wiki/File:Galaxyedgedl.jpg

• CripsyCream27. (2019). Sleeping Beauty Castle in 2019 after Refurbishment. [Photograph]. Retrieved from
https://commons.wikimedia.org/wiki/File:Sleeping_Beauty_Castle_2019.jpg

• Hallett, J. (2010). Bob Iger – World of Color Premiere - Disney California Adventure Park. [Photograph]. Retrieved from
https://www.flickr.com/photos/hyku/4700820564

• Heusser, J. (2010). John Lasseter and Ed Catmull. [Photograph]. Retrieved from https://www.flickr.com/photos/neonmarg/4397916420

• Jrobertiko. (2010). Walt Disney World Resort Entrance. [Photograph]. Retrieved from
https://commons.wikimedia.org/wiki/File:Walt_Disney_World_Resort_entrance.jpg

• Matthunterross. (1967). Organizational Synergy Diagram. [Diagram]. Retrieved from https://hiveminer.com/Tags/disney%2Cinfographic

• Orr, C. (2017). How Pixar Lost Its Way. [Photograph]. Retrieved from https://www.theatlantic.com/magazine/archive/2017/06/how-pixar-lost-its-
way/524484/

• Pixar. (1999). Pixar Executives Ed Catmull, Steve Jobs, and John Lasseter. [Photograph]. Retrieved from https://tinyurl.com/y5wnnabd

• Walt Disney. (1994). The Lion King. [Poster]. Retrieved from https://en.wikipedia.org/wiki/File:The_Lion_King_poster.jpg

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