Industry Analysis

Entertainment Industry

Company - The Walt Disney Company

Group Members
Rutu Shah
Priyanka Iyer
 Industry Structure
Entertainment
Industry

Studio Other Leisure

Media Networks Resorts & Parks
Entertainment Activities

The Walt
Disney
Company

Studio
Entertainment
Media Networks Resorts & Parks Consumer
- Walt Disney Products
- ABC Television - Disneyland Park
Pictures
Group - Disney Cruise - Disney Consumer
- Walt Disney Products
- ESPN Line
Studios Motion
- Walt Disney Internet - Disneyland Pictures -Disney Publishing
Group Resorts Worldwide
- Walt Disney
Records
 Demand Drivers
Purchasing power of consumers
Consumer tastes and preferences
Timing of product introduction
Patent and copyright laws
Innovation and technology
 Porter`s Five Forces
Consumer Products Studio Media Networks Resorts & Parks
Entertainment
Bargaining Medium Low to Medium Medium to high Medium
Power of -Switching cost low -Long term contracts - Govt. provides - Switching cost not
Suppliers - Employees innovative with artists licenses too high

Bargaining Medium to High High High High

Power of -Wide range of products -Switching cost low -Switching cost low - Many other forms of
Buyers - Buyers can influence - Dependent on - Quality is important leisure activities
price public taste

Threat of New Low Low Low Low

Entrants -Distribution channel -Presence across -Presence across all -Capital intensive
- Strong brand entire value chain segments - Imagineering Unit
- Capital intensive - easy to enter any 1
segment
Threat of High Medium to high Low High
Substitutes -Large no. of franchisees -Video games, TV, - Presence in all - Other forms of
- substitute to a concept films, sports components of media leisure activities
-E.g. Mercedes, Arsenal - Quality matters

Rivalry among High Medium to high High Medium

Competitors -Strong brand - Marketing & -Sale of advertising -Disney characters
- Continuous innovation advertising expenses time main attraction which
high - Telecast rights are patented
- contracts with cable - Las Vegas is a
service providers competition
 Business Risk
Consumer Studio Media Resorts &
Products Entertainment Networks Parks
Change in copyright Film ventures may Advertisers shifting Seasonality of
laws not perform well to other mediums business

Timing is important Timing of releases Customer tastes Other forms of

to reap the benefits may change leisure activities

Global financial Public taste License renewal Global financial

crisis crisis

Competitive Piracy Technology Uncontrollable

pressure events
Government Policies & Regulations
Consumer Studio Media Networks Resorts &
Products Entertainment Parks
Merchandise Intellectual Licensing of State & local
licensing property rights television and radio govt. responsible
stations (upto 8 for inspection
years) programs
Long-term TV & radio station Some states rely
Programming ownership limits on insurance
Contracts companies or 3rd
party inspectors
4 major TV No mandatory
networks cannot be national safety
under common standards for
ownership amusement rides
Programming
content- penalty for
indecent
programming
Peer Comparison
Walt Disney Co.- Segments
  2008
REVENUES 37843
Media Networks 43%
Parks and Resorts 30%
Studio Entertainment 19%
Consumer Products 8%
   
  2008
OPERATING INCOME 8456
Media Networks 56%
Parks and Resorts 22%
Studio Entertainment 13%
Consumer Products 8%
• Operating Margins constitute 20-22% of the total revenues of the
company
• Media Network – Highest Affiliate fees in the industry due to the
popularity of ESPN programming provides a stable source of revenue
and growth in virtually any economic environment.
• Film and DVD syndication and merchandising - both more volatile than
Disney's other sources of revenue
• Theme Parks related to visitors (indirectly – strength of dollar)
Peer Comparison
–Industry Segments
Peer Comparison
  DIS CBS NWS TWX
Films √   √ √
Theme Parks √ √    
Cable Networks √   √ √
Broadcast Networks √ √ √ √
Television Stations √ √ √  
Radio √ √    
Internet √   √ √
Consumer Products √      

• Walt Disney has a presence in all segments

• Other major competitors – 4-5 segments
 
Peer Comparison
Peer Comparison (Year 2008)
  DIS CBS NWS TWX
Market Capitalisation 54.72Bn 9.22Bn - 37.94Bn
EPS 1.688 -18.41 - -11.534
         
Revenue growth 6.60% -0.87% 15.15% 1.08%
Operating Margin Growth Rate 8.12% -12.56% 21.03% 1.37%
Net Profit Margin Growth Rate -5.55% -1036.12% 57.24% -405.49%
         
Gross Margin 19.60% 19.29% 19.64% 20.29%
Net Profit Margin 11.70% -83.68% 16.33% -28.52%
Return on Capital Employed 17.89% 17.26% 15.38% 11.59%
Return on Equity 13.70% -135.78% 18.82% -31.69%
         
Asset T/o Ratio 165.15% 192.75% 188.84% 242.41%
Fixed Asset T/o Ratio 46.33% 21.56% 41.92% 39.23%
 Peer Comparison

Peer Comparison (Year 2008)

  DIS CBS NWS TWX
Quick Ratio 0.26 0.48 0.09 0.51
Current Ratio 1.01 1.19 1.08 1.56
Debt/ Equity 45.29% 81.38% 47.20% 94.55%
EBIDTA/Interest 1611.64% 492.32% 699.89% 423.64%

• Net Loss due to the high interest payments for CBS and TWX
(more leveraged than DIS and NWS)
• Liquidity is measured by the quick ratio
• Current ratio of all the firms are in the same range except TWX
which has a current ratio of 1.56.
 
Future Outlook
 Global entertainment industry will see a 6.4% CAGR
to hit $2 trillion in 2011
 Entertainment is a dynamic and diversified business
 Constant Innovation of products and technology
required
 Exploring other/new business segments
◦ Gaming
 Internet and Mobile
 Videogame and interactive entertainment industry (USA) revenue
to reach USD 57 billion in 2009 – High growth prospects
◦ Music
 Global Music Download is worth USD2.9billion
◦ Print Media- Magazines, etc.
 Print Media – Books (USA) - USD- 58.1 Billion