It is sometimes said that Walt Disney was repeatedly rejected by a number of mainstream animation companies because his stories lacked imagination. Some even say that these companies may have been on to something, because although Disney has a large and celebrated body of original characters to his credit, some of his most successful works were based on stories written by the Brothers Grimm and Hans Christian Andersen.
Regardless of whatever prism through which one views Disney’s legacy, he was an innovator who knew how to take risks and how to tell a great story. Powered by his remarkable vision, his eponymous company went from strength to strength. In the 1930s, the Walt Disney Company launched a powerful animation business backed by a revolutionary merchandising model and on the back of that success opened the world’s first theme park in 1955.
Since then the Walt Disney Company has gone on to become a global media and entertainment powerhouse that has kept the creation of high quality content as the pulsating heart of its business. Today, the company has a phenomenal market valuation of $187 billion – something no other company in the same product space has come close to, generates revenues over $50 billion from its many business streams and has an operating profit of nearly $15 billion. It has become a sterling example of success in its industry space, with its stock price growing five-fold in the last decade and profitability doubling in half that period.
The Walt Disney Company has a phenomenal market valuation of $187 billion – something no other company in the same product space has come close to, generates revenues over $50 billion from its many business streams and has an operating profit of nearly $15 billion.
Many credit this remarkable success story to the endurance of Disney’s vision to keep great storytelling and content at the centre of his company’s existence. Even today, the Walt Disney Company defines creating engaging stories through film as the core business unit in its structure – despite the fact that filmmaking accounts for only 14% of the overall operating profits. The company has built on the traction these films gain to increase revenue through theme parks, TV networks, merchandising sales, licensing, publishing and music. An industry analyst once famously commented that Disney’s secret has been to combine a great tale with cutting edge technology and creating the kind of toys that have led it to monopolise the childhood (and nostalgia for childhood) of global audiences. Even if the comment may have been made in jest, it comes close to the business model that the company has pursued aggressively since 2005, when Bob Iger became the CEO.
Today the company is known for its skill in having acquired successful franchises with a large following. The company bought out Jim Henson’s Muppets in 2004 for $75 million and then went on to acquire even bigger properties, such as Marvel (owners of the massive Marvel superhero multi-verse including Spiderman, Avengers, X-men, etc) for four billion dollars and Lucasf ilm (owners of Star Wars and Indiana Jones franchises) for 4.1 billion dollars.
According to industry analysts, these massive acquisitions have given Disney an endless supply of tropes and a dedicated fan base to whom it could sell an endless supply of stories, thereby ensuring limitless profitability.
However, while the success of these acquisitions seems like pure genius, Iger did not stop there. He looked at the company’s weaknesses and then made acquisitions aimed at strengthening Disney’s content generation technology and distribution capacities. In many ways that is where the true genius of Iger’s vision stands out.
In 1996, Disney acquired Capital Cities/ABC, one of the largest TV networks in the US (it still accounts for nearly half of its total profits). Iger incidentally came to Disney through this acquisition. Since then he lined up acquisitions that would induct the technology that would enhance the company’s storytelling capabilities. He bought out Pixar, a computer animation powerhouse from no less a perfectionist than Steve Jobs. Many in the industry consider the way Iger managed to negotiate that deal as the high point of his career. He convinced Jobs that under Disney, Pixar would maintain creative autonomy and that thanks to Disney’s deep pockets it would also be insulated from shareholder pressure to generate a profit on every film, thereby giving it massive levels of freedom to experiment with off-beat ideas.
In a similar vein, with the acquisition of Lucasfilm, Iger convinced George Lucas that Disney’s global merchandising muscle and retail partnerships would take Star Wars to a new level. This was a difficult promise to deliver on, given that Star Wars merchandise had one of the most successful runs in Hollywood history, earning $32 billion since 1977. Yet Iger made good on the promise, earning Lucasfilm over five billion dollars in merchandise sales in 2015 alone. The acquisition of Lucasfilm also brought with it Industrial Light & Magic (ILM), the leading special effects house in Hollywood owned by Lucas, thereby giving Disney further capacity to create more realism in animation and special effects in its film content and theme park attractions. Similar promises of creative freedom and bountiful cash to experiment with properties and creation of new sub-genres within established properties were instrumental in seeing through deals with Marvel and other content generators on Iger’s list.
Under Bob Iger’s stewardship the company has put content generation on a higher pedestal than content distribution, something none of its competitors, such as Universal or Warner Brothers, have managed to replicate in scale.
While retaining the creative essence of these franchises, the company then applied its business savvy to each one of them to generate even greater profits and secure its future. According to many industry observers these acquisitions represent a larger (and phenomenally brilliant) plan by Iger to insulate his company from future dependence on its TV networks, which are central to its current profitability. In their view, under Iger’s stewardship the company has put content generation on a higher pedestal than content distribution, something none of its competitors, such as Universal or Warner Brothers, have managed to replicate in scale. The Walt Disney Company, in their opinion, is banking on the fact that in future content generators rather than content distributors will be the ones to dictate where the content is placed and therefore guarantee where viewership ultimately goes.
However, many analysts warn that this model is not without faults. According to them, despite the company’s phenomenal success in exploiting its various franchises, there have also been some monumental failures (think Lone Ranger, John Carter and The Good Dinosaur). Others point to the fact that Iger may be overstretching; there are plans for a new Star Wars film every year until 2020, two new Indiana Jones films, a host of Avenger titles and massively linked attractions of these properties at the existing parks as well as new multiple properties in China and the Middle East. Another cause for caution is that many competitors are becoming good at their own franchise development.
None of this, however, seems to be stopping Iger and rumours abound that he has a list of properties he wants to acquire, including Lego, a privately-held Danish company that has its own theme park resorts as well as a few existing distribution deals with The Walt Disney Company. Another persistent rumour (albeit accompanied by vociferous denials) is the acquisition of video-gaming giant Nintendo. Both companies fit the bill in terms of the properties Iger would wish to acquire – both have a rich cast of characters, a huge global base of fans and above all, a near endless supply of great stories to tell.
Tariq Ziad Khan is a US-based marketer and a former member of Aurora’s editorial team.