Marketing > Walt Disney Case Study

Walt Disney’s original core competency was cartoons, and animated films. They were the first ones to create the first animated, full-length film from the beloved story of Snow White and the Seven Dwarfs. The Walt Disney Company was established in 1923 by brothers Walt and Rodney Disney. They started a little animated film company, and produced their first silent cartoon in 1928 about a mouse named Mickey. (I had no idea Mickey was 77 years old.)

The company was an informal organization, where there were no titles; everybody was called by their first name. This is important because informality within a company encourages creativity. Besides turning well-known tales into animated films, Disney produced a number of live-action movies, and comedies as well. Until the 1980’s Disney was able to keep its position as the number one studio for family entertainment. The following decade saw Disney tumbling as never before. With the death of its founders, Disney had lost something important. It wasn’t creating movies with “enormous hearth” as before. In addition, as many in the industry suggested, one of the reasons of its bad luck is that Disney wasn’t changing with the times and that is why audiences lost their interests in its movies.

Eisner, after joining Disney in 1984, implemented many great strategies. First of all, he decided to revitalize the company’s commitment to animation, a sector which was long neglected. Skeptics thought that the time wasn’t right for this move, but they were wrong. Eisner decided to produce a number of small budget animations that brought moderate success, but nonetheless weren’t loosing money. The company hired writers, actors for lower than average wages, but provided production capabilities. This way they were able to save money on talent agencies, which would otherwise have taken most of their profits. All in one, Disney was cutting costs in order to save huge amounts of essential money. This so called “profit multiplier business model” lead to Disney’s success as a blockbuster giant by releasing movies that didn’t make it in the box office. Eisner also introduces the retail branch, which offered Disney merchandises in special stores. Another genius move was the creation of Buena Vista, the distribution unit to market abroad not only Disney, but Warner Brothers, and other competing studios’ movies as well.

All the above mentioned drastic measures eventually lead to the financial revitalization of the company, and also its status was restored among the public. Disney performed above the industry average in profit return, thanks to its mass investment in the latest animation technology. By the mid 1980’s they had 75 films in development. Their first animation success was Who Framed Roger Rabbit, which brought $300 million worldwide. The company’s stock price skyrocketed, net income rose drastically, their cash flow exceeded $1 billion. In 1988, Disney was ranked as the top studio, producing four of the top ten movies that year, and commanding 19% of all domestic box office sales. The studio not only managed to get out of its debts, but turned into a money making machine with the help of its management.

1. Lion King was not only a movie; it was a source of many, up until that time, unparallel variety of money source. Long before the release of the movie, trailers were running in the theaters, and designers were busy creating Lion King merchandise. At the annual Toy Fair held in New York City, wide array of products were shown to the wider public. Disney, very smartly decided to tie the opening of the movie to the release of the toys. Toys R Us carried more than 200 Lion King products from Mattel and other manufacturers.

2. Disney also had many licensees, such as Mattel, IBM, Coke, Burger King and McDonalds who paid a royalty of 10% on wholesale revenues for the right to use the Disney brand.

3. Disney decided to promote its own products in the more than 530 specialty stores across the country. Disney also created the Disney On-Line website, started to selling Lion King books, and soundtracks.

4. Just three weeks after the release of the film, the Walt Disney World presented “The Legend of the Lion King” show, combining puppetry, animation and special effects.

5. The Lion King video was released as a limited edition in March 1995 through Buena Vista Home Entertainment. According to Disney, this was the most anticipated video release in history, and indeed it became a best-seller.

The enormous success of the Lion King video can be attributed to Disney’s winning formula. Part of the formula was that Disney dealt directly with major mass retailers. They developed their own forecasting model that maintained daily contact with individual stores. This way they were able to distribute the right amount of product at the right places. Another component of the success was a well-timed promotional campaign by Disney’s home-video distribution company, and also the publicity that was generated around the re-release of the movie in theaters.

To answer this question, I did some online research, and I found the following website which I think represents Disney’s current state. This website is www.savedisney.com The site is dedicated to create a positive attitude toward the company, and its home page contains a message from Roy Disney. It seems to be clear that after the boom years of the 1990’s Disney is in a financial trouble once again. The company showed a little improvement since last year due mostly to improved theme park attendance and strong gains at ESPN and other cable networks. The company has some management troubles, especially since Eisner announced his resignation. One of Disney’s biggest competitors is Pixar, who is known by creating the animated film Finding Nemo. Another studio that threatens Disney is DreamWorks Animation, which produced the highly successful Shrek.¹ According to a New York Times article, Disney is preparing for a year end release of the story of Aslan, a talking lion with mystical powers. Disney’s marketing division is working hard before the December 9 release of The Chronicles of Narnia: The Lion, the Witch and the Wardrobe. It is expected to follow the footsteps of the Lion King that was a mile stone in Disney history. The picture will combine computer generated image with live action. According to Dennis Rice, Disney has millions of devoted fans spanning four generations, whom will be reached by this new film. They hope to add another large cast of child-friendly characters to their corporate stable. As a franchise, Narnia seems to have unparallel possibilities.² Just like the Lion King had. I wish them all the best.


References:
1 Isidore, Chris. Disney Shareholders: Who’s next CEO? February 20, 2005
<http://money.cnn.com/2005/02/11/news/fortune500/disney/?cnn=yes>

2 Kehr, David.. Disney’s Next Hero: The Lion King of Kings. February 20, 2005
<http://www.nytimes.co/2005/02/20/movies/20kehr.html>