Walt Disney Company
AFTER WALT: THE SIXTIES THROUGHTHE DISNEY DECADE
By the 1960s, the company had developed a diversified foundation, with the Disney brand firmly established in a wide range of film products (live action and animation), as well as television, theme parks, and merchandise. The Disney firm also benefited from a policy of re-releasing its popular (already amortized) feature films every few years, reaping additional profits with minimal additional expenditures. For instance, Snow White and the Seven Dwarfs was re-released in 1952, 1958, and 1967, amassing an additional $50 million.
With some success, Roy Disney, Donn Tatum (previously, vice president of administration), and Cardon E. Walker (formerly in marketing) served as the management team until 1971. Film releases included The Jungle Book (1967), Winnie the Pooh and the Blustery Day (1968)—the beginnings of a franchise that would become especially lucrative during the 1990s—and The Love Bug (1968). Roy Disney saw Walt Disney World in Orlando, Florida, open in October 1971, but he died a few months later.
After Roy's death, Tatum moved into the chairman position and Walker became president. By this time, however, the company had become even more oriented to recreation and real estate than entertainment, exemplified by the theme park expansion (Tokyo Disneyland opened on 15 April 1983) and an ambitious plan to develop a mountain resort in Mineral King, California (which eventually failed).
Meanwhile, the film division was turning out mainly box-office duds, which fell far short of previous Disney successes. Part of the reason may have been the attempt to cling to the past, attempting to reproduce the classic Disney films and avoiding the changes that were being adopted by the rest of the industry. For instance, the management turned down proposals for Raiders of the Lost Ark and ET, The Extra-Terrestrial —both films that became huge box office hits. By the early 1980s, Disney's share of the box office was less than 4 percent.
Moreover, the company seemed to be moving into new media outlets at a leisurely pace. By the early 1980s, much of the film industry had started to adjust to the introduction of cable and home video as new opportunities for distribution of theatrical motion pictures, plus opportunities for new investments. The Disney company made a few moves in this direction, with the launching of the Disney Channel in April 1983, and an adult-oriented film label, Touchstone, inaugurated in 1984 with the release of Splash . However, by the mid-1980s, most analysts agreed that the company's management was basically "sitting on its assets," trying to "do what Walt would have done" and not doing a very good job of it.
Finally in 1984, Disney's uninspired management was challenged by a group of outside high-profile investors and eventually lost control of the company. A group of corporate raiders who recognized the value of the enterprise started accumulating huge blocks of Disney stock and jockeying for position to take over the company. In the end, the billionaire Bass brothers of Ft. Worth, Texas, invested nearly $500 million in Disney, preventing a hostile takeover and the possible dismantling of the company. Bass Brothers Enterprises ended up with nearly 25 percent of the Disney stock, enough to control the company and to appoint their own managers.
The new management team (which dubbed itself "Team Disney") was led by Michael Eisner (b. 1942), former head of Paramount, as chief executive officer. Team Disney also included former Warner Brothers's vice chairman, Frank Wells, who served as Disney's president and chief operating officer until his death in 1994. Jeffrey Katzenberg (b. 1950) (also from Paramount) became head of the Film Division.
Immediately after the team was put into place, it proceeded to break a strike at Disneyland and fire 400 Disney employees. Other cost-cutting measures and strategies were introduced, as discussed below. But the real evidence of Team Disney's achievements for Disney's owners is in the value of the company's stock and its balance sheets. From 1983 to 1987, annual revenues more than doubled, profits nearly quintupled, and the value of Disney stock increased from $2 billion to $10 billion; by 1994, it was worth $28 billion. By 1999, company revenues totaled nearly $23 billion, assets were over $41 billion, and net income was $1.85 billion.
When the new ownership and management team took over in 1984, the Disney empire extended its reach more widely than ever. While drawing on valuable assets and previous policies, Team Disney also introduced new strategies that must be understood in the context of the entertainment business of the 1990s. As with the other major Hollywood companies, Disney's expansion did not depend solely on motion pictures, but on a wide array of business activities in which the new management team aggressively exploited the Disney brand name, as well as diversifying outside of the traditional Disney label. Team Disney rejuvenated the sagging corporation through a variety of new policies, including reviving the classic Disney (by repackaging existing products and creating new animated features), modernizing some Disney characters, implementing rabid cost cutting (especially on feature films), introducing dramatic price increases at the theme parks, and employing new technological developments (such as computer animation).
However, Team Disney also emphasized at least four other related strategies that the Disney Company had already developed: corporate partnerships, limited exposure in new investments, diversified expansion, and further development of its corporate synergy. Disney not only added a wide range of corporate activities, but the company linked these different business endeavors under the Disney brand (and, more recently, the ABC and ESPN brands). The management's stated goal was to identify the most profitable holdings and develop
Despite earning $1.1 billion in profits and more than $10 billion in revenues, as well as becoming the first film company to gross over $1 billion annually in domestic box office, a shadow fell over the Magic Kingdom in 1994. Wells died in a helicopter accident, Eisner had heart surgery, EuroDisney (which had opened in 1992) was suffering huge losses, and a proposal for a new historic theme park was getting hammered by nearly everyone. It looked like the company was running out of magic. Then in July 1995, the company stunned Wall Street and the media with the dramatic $19 billion take-over of Capital Cities/ABC. The move greatly enhanced the company's position in television, sports programming, and international marketing, in addition to adding publishing and multimedia components to its operations. Thus, Disney became—at least for a short while—the world's largest media company, with $16.5 billion in annual revenues.