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"The Walt Disney Company, together with its subsidiaries, is a diversified worldwide entertainment company with operations in five business segments: Media Networks; Studio Entertainment, which produces live-action and animated motion pictures, television animation programs, musical recordings and live stage plays.; Parks & Resorts; Consumer Products, which licenses the Company's characters and other intellectual property for use in connection with merchandise and publications and publishes books and magazines; and the Internet Group (formerly known as GO.com)." -Yahoo Market Guide
The media networks are the most visible of Disney's five business segments. In 1995, Disney acquired the ABC Television network for $19 billion. Currently, ABC is the most popular broadcast channel on television, earning higher ratings than chief competitors CBS, NBC, and Fox. This triumph was attained largely because of the success of the smash hit game show, Who Wants To Be A Millionaire. ABC News and their companion web site are among the worlds most trusted sources of information. Disney also owns other television powerhouses such as ESPN, The Disney Channel and A&E. ESPN is the world's most popular sports channel, while The Disney Channel and A&E are leaders in family entertainment. These television interests provide Disney with constant visibility and help Disney's various marketing campaigns around the world.
The Walt Disney Company's first business ventures were in animated films. Today, animated films continue to be a focus of the company. Hits such as The Little Mermaid, The Lion King, and Toy Story have been extremely lucrative and make Disney's presence as an industry leader known. Disney has expanded to full-length feature films and has gained notoriety with the success of Con Air, and G.I. Jane. Disney has furthered its film interests with the acquisition of Miramax Films. According to Forbes.com: "Miramax has evolved from simply distributing movies to producing them - and what pictures. Shakespeare in Love, a Miramax production, was nominated for 13 Oscars." Earlier Miramax hits: Pulp Fiction, The English Patient, and Good Will Hunting. Those post-Disney movies managed a rare twofer: They won critical acclaim while earning piles of money." Disney has earned a formidable presence in the movie industry. Their pictures continue to fill the theaters and earn record profits. In addition to the success of these films in the theatre, Disney continues to expand its interest in the home box office. All of their movies are available for home viewing in either DVD or VHS. Several of these movies, especially the animated films, are considered to be collectables and can be found in the home video libraries of consumers around the world.
Investors are certainly aware of the overwhelming success of the Walt Disney Company. However, the company's weaknesses have been well publicized and continue to worry potential investors. Disney's most significant weakness is the overwhelming failure of the GO network, which has recently been shut down. Go was created to give web surfers another choice in search engines and e-commerce. The individual sites of GO, such as ABC.com, ESPN.com, and Disney Online have been critically acclaimed and viewed by millions. However, the GO network portal never seriously challenged chief competitors, such as Yahoo and Lycos, and was never recognized as a quality search engine. Media Metrix reports that "Despite a megabucks marketing campaign and constant visibility on America's highest rated TV network, it (the GO network) remains the fifth most-visited web site, lagging badly behind America Online, Yahoo, Microsoft, and Lycos."
Another company weakness in that Disney's success and the majority of their revenues come from business ventures in the United States. CEO Michael Eisner acknowledged that, "The company still generates 80% of its $23.4 billion revenues in the U.S., which has only 5% of the world's population." This statistic is very important to Disney when one considers that other large consumer outfits, such as Coca-Cola and Gillette, earn the majority of their revenues from overseas. Investors have long wondered why Disney's success has not extended past the borders of the United States. The instability of management in the decision making process may be the answer. Mark Lacter of Forbes magazine has been quoted as saying, "The Company has long tried to micromanage foreign operations out of Burbank, instead of letting local managers operate autonomously." This approach has resulted in conflicts between central management and local managers who both have different ideas about the future direction of the company.
There are two words that have always appropriately defined The Walt Disney Company, innovation and adaptation. They must continue to develop new technologies in order to ensure that customers will continue to visit their theme parks and once again pack the movie theatres. Disney must adapt to the new cable and Internet environment that will be established upon the completion of the AOL-Time Warner merger. In conclusion, Disney must rely upon the strengths of its theme parks and television interests in order to more aggressively market and improve upon the shortcomings they have found overseas and on the Internet.
Disney has been confronted with several problems in the new millennium. The failure of the GO network along with the merger of America Online and Time Warner seem to be the most significant. A decline in movie returns is also troublesome. Despite these problems, the purchasing of Disney stock is still a safe bet. Investors who want a diversified portfolio would be wise to acquire Disney Stock and hold onto it until Disney makes its next big corporate announcements. At that time, the potential exists for a dramatic increase in the price of their stock and a huge reward for their shareholders. Until that time an investor will be happy with the lack of risk that are possessed by The Walt Disney Company.
