Disney Corporate Strategy(a).Pdf Essay

entrance The next big coup detat fight and it would be a beauty may involve Walt Disney Productions. By the time you get this issue, Disneys defense strategy may already be unfolding. But it im equalityt make grow no quick victory for Disney even if a white knight comes along, and even if the commandment attacker, Saul Steinberg, can be bought off. One by one, Hollywoods great studios have been draw by the smart out-of-town moneymen. Paramount by the late Charles Bluhdorn. Twentieth Century-Fox by Marvin Davis and Marc Rich. MGMUnited Artists by Kirk Kerkorian. capital of South Carolina by Coca-Cola. Now, it may be Disneys turn. But Disney will non go quietly. Forbes, June 4, 1984 Ron Miller, Disney Productions CEO reflected on the remarkable events of the past several months. Disney, the symbol of wholesome family entertainment, had become the target of a hostile take every everyplace attempt by a long-familiar raider, Saul Steinberg. Steinberg now owned 12% of the firm and was ominous to seize more. While Miller had orchestrated several defensive maneuvers, Steinberg had now announced a globe tender offer to purchase 49% of the equity at a price that was a 45% reward over where the origin had been prior to the raid. To fund this purchase, Steinberg was promising to sell the film subroutine library and certain(prenominal) real estate assets to outside investors. Steinberg also had a track record of accepting greenmail, having received $47 one thousand thousand just months prior from Quaker State Oil Company. Miller faced a unobjectionable dilemma as to how best to respond. Should he continue the defensive fight by paying greenmail or should he encourage the board to sell the guild? History of Disney With a $ five hundred loan, animator Walt Disney and his companion Roy founded Walt Disney Productions, an animation film studio, in 1923 in Anaheim California. One of Disneys archetypical popular vig netttes was Oswald the Lucky Rabbit. U nfortunately, Disney mazed the 1 Research Associate Peter Eberle prepared this case under the super day-dream ofProfessor Todd R. Zenger of the Olin educate of strain for exclusive use as an in-class discussion piece. The information in this case was obtained from published sources and in some instances raw data has been estimated. *This case is based upon Walt Disney Productions Greenmail published by Harvard Business instill Publishing, 1988.family 2002 Revised family 2009contract dispute with his distributor because Disney did not own the copyright. After this incident, Disney was very knowing about maintaining copyright control over his characters and content. Disneys breakthrough came in 1928 with the alert short, Steamboat Willie, the first-class honours degree animated film featuring sound. It also introduced the first of galore(postnominal) famous and timeless Disney cartoon characters, rice paddy Mouse. Disney also was the first to use color animation with the cart oon F abjecters and Trees in 1930. In another innovative and risky move, Disney created and expirationd the first feature-length animated film, Snow ovalbumin, in 1937. At the time, full-length animated films were not considered commercially viable. Nonetheless, Snow White was a critical and commercial mastery and was the first in a string of animated films over the next decades, including Pinocchio, Fantasia, Dumbo, Bambi, Peter Pan, Cinderella, and Sleeping Beauty. Disneys films were initially successful delinquent to the style and high fibre of animation, attention to detail, timeless and family-oriented story lines, and timeless characters such as Mickey Mouse, Goofy, and Donald Duck. Disney not only apply these characters throughout multiple films and cartoons, but also leveraged and change magnitude their reach through merchandising, beginning in 1929 with a licensed Mickey Mouse pencil tablet. Placing these characters on T-shirts, watches, toys and other items increase d both boodle and acknowledgement of the characters, and Disney, among consumers. pastime his success in animated films, Disney moved into non-animated films in the 1944 with the establishment of the Educational and Industrial learn Division. The first major success of this division was Seal Island, a nature film that won an Oscar in 1949. Also in 1949, Disney formed a music corporation to create, produce and maintain control over the music and songs featured in Disney avocations but often performed by famousartists. Disney later moved into live-activeness features with prize Island in 1950. Disney continued to innovate in the live-action format by combining animation with live action in the film Mary Poppins. As Disneys film library had grown, Disney brought scattering in-house with the formation of Buena medical prognosis Distribution Co., in 1953. In films, Disney kept costs low by developing its own talent pool. For cartoon features, characters were infinitely reusable and never postulate a salary, art object for live-action features, Disney shied away from using good-known and expensive talent. Audiences were drawn because of the reputation Disney had established for providing quality, reliable, and predictable family entertainment. In the early 1950s, Disney was quick to recognize the ripening medium of television to provide newfangled outlets for Disney characters with The Wonderful foundation of Disney first airing in 1953 and The Mickey Mouse Club in 1955. Disneys television productions both the long-running shows and features were quite successful. During the same time, Walt Disney envisioned a home park that would bring the characters and stories of Disney to life featuring entertainment for all ages. Again, his idea was considered too risky and he was unable to raise substantial outside funding for the project. He purchased 225 landed estate outside of Anaheim and opened Disneyland in 1955. Disney scheme (A) 2 Olin Business prep areSeptember 2002 Revised September 2009Disneyland was hugely successful, grossing $10 cardinal in 1956. Cross-promotion of the park was achieved through featuring it on the Wonderful World of Disney. The only drawback of Disneyland was that private hotel, restaurant and sleuth owners who built adjacent to the park profited hugely from park attendance, but Disney was unable to plowshare in these receiptss. Additionally, due to the small size of the park there was little room for march on development both at bottom and outside of the park To address the drawbacks of Disneyland, Disney purchased 28,000 acres near Orlando Florida in 1964 and 1965. This would provide the site for Walt Disney World, which would include not only the theme park aspects of Disneyland, but also hotels and accommodations, shopping, camping, natural areas, and permanent residential and industrial areas. Also, with 28,000acres (as opposed to Disneylands 225) there was ample room for future expansion. As with Disneyland, Walt Disney World was extremely well planned and laid out with no expense spared to achieve the quality and attention to detail for which Disney was known. succeeding(a) the opening in 1972, the park was wildly popular and extremely profitable, attracting 11 zillion visitors and bringing in $139 one thousand million in grosss its first year. Walt Disney World would shortly become the number one travel term in the world. Disney formed the Walt Disney Travel Company to work with travel agents, tour organizers and airlines in order to razz travel to the Walt Disney World area. Walt Disney World provided the stage for another of Disneys visionary exploits, the Experimental Prototype confederacy of Tomorrow (EPCOT), the concept for which Disney laid out prior to his death in 1966. EPCOTs construction began in the 1970s and it opened in 1982. Following Walts death, Roy O. Disney assumed leadership and stressed on the theme parks completing Walt Disney World and EPC OT. The successes of the theme parks led to a joint proceed with the oriental person Land Company of Japan in 1976 to develop capital of Japan Disneyland, which opened in 1983. This project required no capital investment from Disney, who received a percentage-based licensing fee, as well as provided consulting services during operations. The venture was completely owned by the Japanese partner, but was planned and operated by Disney. In 1983, the Disney tv crowd entered the cable TV distribution with the Disney Channel. Also in 1983, they launched Touchstone Films, an independent film label, to allow Disney to produce and market films with more mature content and reach a more adult audience where movie attendance was strong. It was hoped that an independent label would not tarnish the Disney image. The first release was Splash, in 1984, which was the highest grossing Disney film since 1964. Walt Disney Productions Businesses As Disney grew over time, new subsidiaries and divisi ons were created as Disney engaged in new activities. The corporate office grew to manage the several(a) subsidiaries and divisions. By the late 70s, Disney had four primary business lines Entertainment & Recreation, Motion Pictures, Consumer products, and Real Estate. Disney scheme (A) 3 Olin Business SchoolSeptember 2002 Revised September 2009The Motion Pictures group over sawing machine animation and production of films, managed rerelease of existing film properties, television production, and the cable television channel. This divisions contribution to revenues and net income to the general association had steadily decreased over time, falling off significantly by the mid-70s (with the groups rattling losing money in 1983). Production of animated films fell off with the slack cosmos interpreted up by live action films including sequel series such as Herbie, The Love Bug. Walt had been averse to sequels and pursuit popular sentiment. Live-action films released during the 7 0s had been perennial money losers contributing heavily to the drag in divisional earnings. It was hoped that the newly established Touchstone Films studio would s poster to to a wider range of audiences and increase both revenue and profitability. In 1983, Disneys long standing presence on prime time television stop with the cancellation of The Wonderful World of Disney. The group relied on re-release of the classic animated features to bolster revenue, often tying distribution of new films to the re-releases. This also had the effect of constantly introducing younger generations to the Disney classics. While the rank of Disneys film library was significant, the group found difficulty in determining the best vehicle to realize the maximum value. It was mat up the television and home video releases would cannibalize or otherwise lessen the existing, profitable, theatre re-release channel. It was estimated the value of Disneys film library was worth $275 million ( demo 6). While having a successful launch, the Disney cable pay-channel would take a number of eld before becoming profitable. The Entertainment & Recreation division managed the theme parks, hotels, managing the licensing arrangement with Tokyo Disneyland, and worry of the land contact Disney World. While the theme park and resort business was the most youthful new business, or diversification move by Disney, it had grown to dominance in the corporation. In legal injury of revenue and net income, it accounted for close to 79% of total revenue and 90% of total corporate profits (Exhibit 1). While operating income jumped significantly in 1983, the prior years provided very modest growth. Moreover, attendance at Disneyland had been flat for five years. Consumer Products managed the merchandising of Disney characters and intellectual properties that included character merchandising (the leadrevenue generator), make and books, music and records, and educational media. The division had been consi stently profitable, but there was concern because of increased competition from newer cartoon characters with more television exposure. Operating income had been rather flat over the prior four years. Leadership at Walt Disney Productions From the founding of the company until his death, Walt Disney created or approved every major strategic move and development. He provided the vision and decisive leadership that made Walt Disney Productions successful. He realized his belief that one Disney outline (A) 4 Olin Business SchoolSeptember 2002 Revised September 2009could create a timeless entertainment experience that would appeal to the entire family, children and adults a like. Additionally, he maintained complete control over the customers entertainment experience in order to ensure that the Disney philosophy and experience was complete. Walt Disney constantly innovated and took significant risks on new ideas and concepts, most of which met with significant success. His confidence a nd acumen in identifying and vigorously pursuing good ideas led to many firsts in entertainment. Walt Disney also placed great importance on passing the Disney culture and values on to all employees, including executives, with all new employees attending a training program where the companys value and strategy were explained. Great value was placed on communicating openly, teamwork, creativity, and cooperation. Walt inspired a congenial, informal gentle wind throughout the organization. This culture was very deep among employees, many of whom spent their entire careers with Disney. Disney University was founded to be the keeper and purveyor of the Disney culture. Walt, who died on December 14, 1966, was succeeded by his brother, Roy O. Disney. Upon Roys death in 1971, Card Walker, who had been with the company since 1938, assumed the leadership position. Following the completion of EPCOT center, Card resigned and was succeeded by Ron Miller. Being Walt Disneys son-in-law, it had be en expected that Ron Miller would eventually be appointive to CEO. Prior to his appointment to CEO in 1983, he had led the Disney film studio since 1976. Ron Miller, a football star at USC, had met Walts daughter Diane while in college and married shortly thereafter.Following a brief stint in the Military he played for the Los Angeles Rams football team. Concerned over his existence knocked unconscious in two games, Walt urged him to quit football and work for the company. In general, people were promoted from within the company ranks, usually based on seniority. Through 1984, Disney was managed by its founders, family and insiders who had grown up within the organization. Although possessing many years of experience within Disney, the post-Walt management lacked Walts vision and leadership. At the core of Disney were Walts ideas and grand accomplishments to which it seemed that no one but Walt could build upon. And, attempts to capture and pass down his leadership style were unsu ccessful. Additionally, much(prenominal) of the focus following Walts death was on fulfilling his final wishes and serving as caretakers to the kingdom. Upon taking control, Ron Miller saw the need to create new legacies for Disney, particularly in the films group. Some positives resulted, including the creation of the Touchstone label and release of successful films like Tron and Splash. Nonetheless, these additive actions lacked the impact that many of Walts grand ideas had had on the company and the industry.Disney scheme (A)5Olin Business SchoolSeptember 2002 Revised September 2009In 1983, the Disney family collectively held around 13.7% of Disney with Roy E. Disney macrocosm the largest of the family shareholders with around 3% ownership and a seat on the Board of Directors. Managers and long-time employees held 2-7% of the company. With the super majority select rule in place, requiring in excess of 80% shareholder approval to affect a management change, and unified Disney and management shareholder group, the current management felt that it could operate without concern of shareholder and market pressures. Financial Performance and Condition From the early 1960s until a peak in 1973, Disneys credit line price had steadily outperformedthe S&P 500. In the following years the stock price had declined approximately and then stagnated through the late 70s and early 80s (Exhibit 4). While the share price had peaked at $84 per share in early 1983 after the initial success of EPCOT, it fell into the $40-range following news of losses in the film division. Additionally, EPS performance had declined significantly from a peak of $4.16 per share in 1980 to $2.70 per share in 1983, the lowest EPS in the past 6 years. Throughout its history, Disney had generally operated completely free of debt, only occasionally taking on debt for completion of large projects, such as with the final construction phases of EPCOT in 1981, 1982 and 1983 (Exhibit 1). Prior to 198 1, Disney was relatively debt free since 1977. Even when Disney took on debt, leverage was low (with a coverage ratio of 11.6 in 1983). Due to the tremendous amount of free cash melt down thrown off from the theme parks, Disney had been able to internally fund growth without needing to access the capital markets regularly. The debt taken on to complete EPCOT, as prior experience dictated, would be paid down rather quick once revenue from EPCOT was realized. However, there was growing dissatisfaction and impatience among the investing community in regards to managements lack of urgency regarding Disneys lackadaisical stock performance. Although near-term earnings forecasts predicted improvements, there were no signs of improvement in stock value. psychoanalysts and the media had begun to increase pressure on management by publishing the break-up value of Disneys business lines. These values ranged from $60 to as much as $110 per share, well above the current work value (Exhibit 3) . Moreover, the end of year 1983 book value per share (total assets/shares outstanding) was around $68 per share while the year-end stock price was $52-5/8. Hostile Takeover Attempts, Defense and Greenmail On March 9, 1984 the price of Walt Disney Productions stock was $52-1/4 and had been stable over the past 6 months. On March 9, Roy E. Disney resigned from the Board of Directors after being re-elected to the Board in February. Shortly thereafter, trading volume of Disney stock increased several times over the average daily volume, pushing the price upward (Exhibit 5). By March 23, Disney stock closed at $66-7/8. In Disney Strategy (A) 6 Olin Business SchoolSeptember 2002 Revised September 2009preparation of an bare takeover attempt, Ron Miller and his management team increased Disneys credit line from $400 million to $1.3 billion. At the end of March, Saul Steinbergs Reliance Financial Services Corporation announced that it had purchased 6.3% of Disneys stock and intended to buy more. By April 13, Steinberg had increased his share of Disney to 9.3%, costing around $176.9 million. Roy E. Disney had also increased his share of Disney to 4% from 2.7%. In late April, Steinberg declared his intent to increase his share to as much as 25% and executed a million share block purchase on whitethorn 1st for $65.50 per share. After assembling a takeover defense team, Disney announced a deal to study Arvida Corporation on May 17th. Arvida was a southeastern US real estate development company that was controlled by the Bass brothers of Texas who had purchased 70% of Arvida for $20 million five months prior. The Bass brothers would receive $200 million in Disney stock. The deal was denounced separately by both Steinberg and Roy E. Disney as destroying shareholder value. Steinberg threatened to block the achievement by buying control of Disney and selling the assets. In spite of Roy E. Disneys opposition and Steinbergs threat, the encyclopaedism was closed, issuing 3.3 million shares, or 8.8% of Disney, to the Bass Brothers. Steinbergs 4.2 million shares now controlled only 10% of the company down from 12%. The move also diluted Roy E. Disneys ownership stake. In a further move to dilute Steinbergs ownership stake, Disney announced a deal on June 6th 1984 to acquire Gibson Greeting Cards for $310 million in stock from an LBO partnership. Gibson Greeting cards had licensed numerous popular cartoon characters (Bugs Bunny, Garfield the Cat, etc.) for its cards but did not have any licensing agreements for Disney characters. The acquisition of Gibson, which had been purchased from RCA in 1982 for $80 million (most of which was debt), would add $41 million to Disneys debt and dilute Disneys equity by an additional $310 million in stock. Two days later in an attempt to block the deal, Saul Steinberg made a tender offer of $67.50 per share cash for 37.1% of Disney Stock with a promise to boost the offer to $72.50 in cash and securities for cancellation of the Gibson acquisition. By that time, Steinberg had spent $265.6 million for his 10% ownership stake in Disney. Steinberg obtained additional funding to support this tender offer by granting Kirk Kerkorian, the controlling shareholder in MGM/UA, an option to purchase all of Disneys motion picture and cable TV assets and to theFisher Brothers, the right to develop Disney land surrounding the theme parks for hotels. The Present Dilemma Nothing in Ron Millers experience had prepared him for these circumstances. He had assembled a defensive team to fight the hostile takeover, but perhaps allowing Disneys profligacy was a better option. Should he buy off Steinberg with greenmail? If so, at what price and how could this be justified to shareholders? Disney Strategy (A) 7 Olin Business SchoolSeptember 2002 Revised September 2009Exhibit 1WALT DISNEY confederation pecuniary INFORMATIONsource Disney Annual Reports, Disney Corporate Fact Books, Mergent, Global Access Note Some song are estimates and slight structural modifications have been made to produce standardized statements consolidated STATEMENT OF INCOME (in millions of dollars) division fireed September 30th grosss shoot Entertainment beginning position & Resorts Consumer Products number Segment Revenue cost & Expenses Filmed Entertainment matter Parks & Resorts heart Segment Costs Operating Income Filmed Entertainment discipline Parks & Resorts Consumer Products sum Segment Operating Income Total Operating Income Corporate Activities common & Administrative Expenses Net Interest (Income) Expense Acquisition Related Costs Design Projects Abandoned Total Corporate Expenses (Income) 7.3 56.9 5.1 21.3 4.6 -2.3 4.3 -16.7 2.4 -8.2 35.6 14.1 30.9 -14.8 26.2 -33.1 21.3 -42.1 17.8 -28.4 -$33.4 197.0 56.9 220.4 $220.4 $19.6 132.6 47.8 200.0 $200.0 $34.6 129.4 50.6 214.7 $214.7 $48.7 127.5 55.0 231.3 $231.3 $40.2 120.6 44.8 205.7 $205.7 $198.9 834.0 1,086.7 $182.5 593.0 830.2 $162.2 562.4 790.0 $112.3 5 15.9 682.9 $111.8 387.8 535.4 $165.5 1,031.0 110.7 1,307.4 $202.1 725.6 102.5 1,030.3 $196.8 691.8 116.0 1,005.0 $161.0 643.4 109.7 914.5 $152.0 508.4 80.6 741.0 1983 1982 1981 1980 1979Income Before Income Taxes (EBIT) Unusual Charges Income Taxes Net Income Earnings (Loss) Per Share Avg. Number of Common Shares Outstanding163.5 70.3 $93.2 $2.70 34.5178.8 78.7 $100.1 $3.01 33.2217.0 95.5 $121.5 $3.72 32.6248.0 112.8 $135.2 $4.16 32.5213.9 100.1 $113.8 $3.51 32.4Disney Strategy (A)8Olin Business SchoolSeptember 2002 Revised September 2009WALT DISNEY COMPANY FINANCIAL INFORMATIONCONSOLIDATED BALANCE SHEET (in millions of dollars) September 30th Assets hard cash & Cash Equivalents Investments Accounts Receivable sell Inventories Inventories Income Taxes Refundable Film & Television Costs Prepaid Expenses Theme Parks, Resorts and other(a) Property, at cost Attractions, Buildings and Equipment Accumulated Depreciation 2,251.3 -504.4 1,746.9 Projects in set ahead land 108.1 16.7 1,87 1.8 new(prenominal) Assets Total Assets Liabilities & Stockholders legality Accounts Payable Income Taxes Payable Borrowings Unearned Royalty & former(a) Advances Other Deferred Income Taxes Other Long Term Liabilities, Unearned Royalties & Advances Stockholders Equity Common Stock (1) Common Stock meshing Group Paid-in Capital Retained Earnings Less Treasury Stock & Compensation Fund Shares Total Stockholders Equity Total Liabilities & Stockholders Equity 1,401.0 $2,381.2 1,274.8 $2,102.8 1,167.1 $1,610.0 1,075.0 $1,347.4 961.0 $1,196.4 738.6 1,400.5 686.5 1,274.8 626.2 1,167.1 537.1 1,074.4 425.2 961.1 661.9 588.3 540.9 537.7 535.9 321.8 110.0 181.0 94.7 89.0 61.9 96.8 98.0 $187.6 50.6 346.0 109.6 $210.8 26.6 315.0 $148.5 33.1 110.0 $109.0 36.2 30.4 $74.6 45.2 18.6 93.7 $2,381.2 1,916.6 -419.9 1,496.7 160.1 16.4 1,673.2 103.0 $2,102.8 968.2 -384.5 583.7 469.2 16.4 1,069.4 21.3 $1,610.0 935.2 -352.1583.1 163.1 16.4 762.5 19.4 $1,347.4 882.1 -310.8 571.4 60.7 16.3 648.4 19.2 $1,1 96.4 $18.1 0.0 102.9 77.9 77.9 70.0 126.9 19.8 66.7 41.0 108.0 18.2 59.8 0.0 120.6 15.4 120.3 11.4 85.8 8.9 54.6 41.9 $13.7 0.0 79.0 $5.9 248.4 69.3 $9.7 318.5 50.7 $8.8 346.1 37.1 1983 1982 1981 1980 1979(1) For the years 1983 and prior Disney Stock no par value, 75,000 shares Auth., 33,729 billion shares issued & 34,509 outstanding Disney Strategy (A) 9 Olin Business SchoolSeptember 2002 Revised September 2009WALT DISNEY COMPANY FINANCIAL INFORMATIONCONSOLIDATED STATEMENT OF CASH FLOWS (in millions of dollars) Year Ended September 30 Cash Provided by Operations Net Income Income from continuing operations before taxes and cumulative effect of accounting changes Income taxes (paid) refunded, net Charges to Income Not Requiring Cash Outlays Depreciation Amortization of Film & Television Costs Other Changes in Receivables Merchandise Inventories Prepaid Expenses and Other Assets Deferred Income Taxes Total Cash Provided by Operations Investing Activities Film & Television Costs Theme Parks, Resorts, and Other Property Other Total Cash Used by Investing Activities support Activities Borrowings Reduction of Borrowings Repurchases of Common Stock Dividends Other Total Cash (Used) Provided by Financing Cash Provided by Discontinued Operations Increase (Decrease) in Cash Cash Balance, Beginning of Year Cash Balance, End of Year 4.4 13.7 $18.1 -240.6 254.3 $13.6 -74.0 328.3 $254.3 -26.6 354.9 $328.3 80.6 274.3 $354.9 41.1 102.8 $151.7 39.7 48.2 $277.1 32.4 32.1 $142.4 23.3 11.6 $11.7 15.5 8.5 $10.0 137.5 -99.9 205.0 110.0 0.0 n/a 83.8 333.7 26.0 -$443.5 52.3 614.4 85.9 -$752.8 55.4 333.4 5.9 -$394.7 68.4 149.7 1.6 -$219.7 -$91.5 44.4 56.6 -25.9 -11.2 13.3 -2.6 $337.4 1.1 -6.9 15.2 4.6 $274.8 $210.8 $204.7 $182.8 -18.6 -5.1 24.1 -13.6 -12.8 23.8 90.2 65.6 15.5 41.9 64.9 9.9 38.9 52.2 9.4 43.1 33.9 6.5 40.4 5.3 2.4 $163.4 29.0 $178.8 -34.6 $216.9 -106.1 $247.9 -121.8 $ 113.8 1983 1982 1981 1980 1979Disney Strategy (A)10Olin Business SchoolSeptember 2002 Revised Septem ber 2009WALT DISNEY COMPANY FINANCIAL INFORMATIONKEY FINANCIAL RATIOS ROE (NI/total shareholders equity) (ROE was 22% in 65, 16% in 55, and 7% in 45) ROA (NI/total assets) Operating Margin (operating rev. sga/total rev) Debt to Equity (total debt/total shareholders equity) Total Debt to Assets (Current & L/T Borrowings/Total Assets) Divisional Operating Margins (div. op. inc./div. rev.) Filmed Entertainment Theme Parks & Resorts Consumer Products Divisional Contributions to Total Revenue (div. rev./total rev) Filmed Entertainment Theme Parks & Resorts Consumer Products 12.7% 78.9% 8.5% 19.6% 70.4% 9.9% 19.6% 68.8% 11.5% 17.6% 70.4% 12.0% 20.5% 68.6% 10.9% -20.2% 19.1% 51.4% 9.7% 18.3% 46.6% 17.6% 18.7% 43.6% 30.2% 19.8% 50.1% 26.4% 23.7% 55.6% 3.9% 14.1% 24.7% 14.5% 4.8% 16.4% 24.7% 15.0% 7.5% 18.8% 9.4% 6.8% 10.0% 23.0% 2.8% 2.3% 9.5% 25.4% 1.9% 1.6% 1983 6.7% 1982 7.9% 1981 10.4% 1980 12.6% 1979 11.8% 1975 10% 1970 10%Divisional Contribution to Operating Income (Div. Op. Inc./Tot al Segment Op. Inc.) Filmed Entertainment Theme Parks & Resorts Consumer Products -15.2% 89.4% 25.8% 9.8% 66.3% 23.9% 16.1% 60.3% 23.6% 21.1% 55.1% 23.8% 19.5% 58.6% 21.8%Disney Strategy (A)11Olin Business SchoolSeptember 2002 Revised September 2009Exhibit 2WALT DISNEY PRODUCTIONS, JUNE 1984 Other Financial Date (in thousands)Entertainment and Recreation Walt Disney World Admission and rides Merchandise gross revenue Food sales Lodging Disneyland Admissions and rides Participant fees, Walt Disney Travel Co. Tokyo Disneyland royalties and other Total revenues Theme Park Attendance Walt Disney World Disneyland Total Motion Pictures Theatrical Domestic Foreign Television Worldwide Home-Video & NonTheatrical Worldwide Total revenues Consumer Products and Other1983 $278,320 172,324 178,791 98,105 102,619 45,6691982 $153,504 121,410 121,329 81,427 98,273 44,4811981 $139,326 121,465 114,951 70,110 92,065 44,9201980 $130,144 116,187 106,404 61,731 87,066 41,7031979 $121,276 101,856 95,203 5 4,043 75,758 35,86583,044 $1,031,202 22,712 9,980 32,69228,502 $725,610 12,560 10,421 22,98129,282 $691,811 13,221 11,343 24,56428,005 $643,380 13,783 11,522 25,30526,843 $571,079 13,792 10,760 24,552$38,635 43,825 27,992 55,006 $165,458 $45,429 20,006 30,666 10,269 4,327$55,408 64,525 44,420 37,749 $202,102 $35,912 20,821 26,884 15,468 3,453$54,624 76,279 43,672 22,231 $196,806 $30,555 24,658 27,358 21,148 12,704$63,350 78,314 19,736 10,565 $171,965 $29,631 22,284 23,432 21,908 1,905$49,594 57,228 27,903 9,273 $144,058 $24,787 18,985 16,129 19,967 1,768Character merchandising Publications Records and music publishing Educational media OtherDisney Strategy (A)12Olin Business SchoolSeptember 2002 Revised September 2009Exhibit 3Comparable Valuations For Disneys Businesses 1984source Analysts comments in June 4, 1984, Forbes time article, Who Will Win the Keys to Disneys Magic Kingdom?Shares Disney Outstanding = 34.5 million Disney annual royalty revenue from Tokyo Disney Land = $20 m illionBusiness LineTransaction/Source Taft Broadcasting Theme Parks purchaseDateValuation Multiple/WorthComments Disney may deserve an additional premium due to the brand name Some still see this as one of the most fallow assets in Disney Tremendous library and recent signs of turnaround may erase poor performanceTheme Parks19842 times RevenuesConsumer Products Forbes/Analyst Comments19843-3.5 times Rev.Film, Studio & Cable Forbes/Analyst Comments Hotels Land Forbes/Analyst Comments Forbes/Analyst Comments1984 1984 19842-2.5 times Rev. $ 300 million $ 300 millionDisney Strategy (A)13Olin Business SchoolSeptember 2002 Revised September 2009Exhibit 4 Disney Share Price Performance Compared to the S&P 500 January 1970 August 1984Disney Strategy (A)14Olin Business SchoolSeptember 2002 Revised September 2009Exhibit 5 Walt Disney Share Price and Trading Volume During the Hostile Takeover January 1984 August 1984Disney Strategy (A)15Olin Business SchoolSeptember 2002 Revised September 2 009Exhibit 5 ContinuedDisney Strategy (A)16Olin Business SchoolSeptember 2002 Revised September 2009Exhibit 6 WALT DISNEY PRODUCTIONS, JUNE 1984 Estimated Probable Minimum subroutine library Values as of 1983 Value ($ millions) 500 275 950 Approximate No. of Titles 1,800 features 25 animated, 125 live action, 500 shorts 4,600 features (2,200 MGM), 1,310 shorts, 1,080 cartoons 700 features 1,400 features 3,000 features, 12,500 TV episodes 1,600 featuresColumbia Pictures Disney MGM/UA EntertainmentParamount Twentieth Century Fox Universal Warner Bros. Total275 350 700 450 3,450Disney Strategy (A)17Olin Business School