The Walt Disney Company

The Walt Disney Company

A Business Environment Analysis

By Rebecca Newman, Kendra Nicastro, Todd Harris & Rick Brown

The Wide World of Disney:

Defining The Walt Disney Company’s Domain

The Walt Disney Company is an internationally recognized and renowned power player in the entertainment industry. Disney categorizes its operations into four key divisions: Studio Entertainment, Parks and Resorts, Consumer Products and Media Networks. Each division under The Walt Disney Company’s umbrella provides distinct products and services and caters to diverse market segments. All divisions, however, are united in their creative and imaginative efforts to “reach hundreds of millions of people worldwide and provide them with incredible entertainment experiences” (The Walt Disney Company Annual Report, 2005). By exploring each business unit’s domain and environment individually, we hope to develop a clear picture of the prevalent uncertainties in The Walt Disney Company’s overall business environment and discuss two possible solutions to adapt to that variable environment.

Frontierland:

An Analysis of The Walt Disney Company’s Business Environment

Studio Entertainment

The Studio Entertainment unit is the foundation on which The Walt Disney Company was built, and at its heart are world-renowned animated features and live-action motion pictures. The Studio Entertainment division is composed of three groups. The first group is the Buena Vista Motion Pictures Group which develops scripts and oversees film production and distribution for Walt Disney Pictures and Touchstone Pictures. The second group is Buena Vista Home Entertainment (BVHE) which markets and distributes video and DVD products from the Walt Disney Pictures, Touchstone Pictures, Hollywood Pictures, Miramax, Dimension, Saban and Spyglass labels. The third group is Miramax Films which is one of the world's leading independent film companies, having released some of the most critically acclaimed and commercially successful independent feature films of the past decade.

With respect to products and services, the current domain of the Studio Entertainment division includes cinemas, performance halls, home studios, home entertainment systems, online video, DVDs, theatres and any venue offering live or screen entertainment. The Studio Entertainment division also operates in the domain of video gaming entertainment. The Walt Disney Company views the integration of home entertainment systems and computer technology as the future domain of family-oriented home entertainment.

Disney Studio Entertainment provides the funding, equipment and resources to create entertainment experiences that fascinate audiences all over the world. Disney depends on creativity and imagination to bring enjoyment to the masses. While it provides more mature films for adults through Touchstone and Miramax Pictures, the Studio Entertainment division’s primary focus and profit maker is Walt Disney Pictures which produces and distributes animated children’s movies. During fiscal 2006 in the domestic markets, the Studio Entertainment division expects to distribute approximately 18 feature films under the Walt Disney Pictures and Touchstone Pictures banners and approximately 7 films under the Miramax banner. Anticipated releases include several live-action family films and full-length animated films targeted to North American teenagers, families and adults.

Since its inception, the Studio division’s focal point has always been family-oriented entertainment вЂ" mothers, fathers, and adults with young children. Story lines and characters in popular animated Disney films are enjoyed by children and adults alike, and most of the Studio Entertainment division’s accolades come from the Walt Disney Picture studio which produces children’s films. However, Disney has also profited from films such as The Aviator and The Pirates of the Caribbean series, both rated PG-13. The Walt Disney Company distributes produced and acquired films (including its film and television library) to the theatrical, home entertainment, pay-per-view, video-on-demand, pay television and free-to-air television markets. (The Walt Disney Company 10-K, 2005)

Financially, comparing the Studio Entertainment division to other Disney divisions, Studio performed the worst. It still generated a profit, but management was not pleased with the results. The decline of the Studio Entertainment division was primarily due to an overall decline in DVD unit sales. The success of Studio Entertainment operations depends heavily upon changing public taste and preferences. In addition, the operating results of the Studio Entertainment division fluctuate due to the timing and performance of releases in the theatrical, home entertainment and television markets. Release dates are determined by several factors, including competition and the timing of vacation and holiday periods.

A significant international factor is The Walt Disney Company’s ability to exploit and protect rights in its content, including its motion pictures, television programs and sound recordings. International competition is affected by the strength and effectiveness of intellectual property laws in the United States and abroad. Inadequate laws or enforcement mechanisms to protect intellectual property in a country can adversely affect the results of The Walt Disney Company’s operations, despite its strong efforts to protect its intellectual property rights throughout the world. In addition, some technological advances, such as peer-to-peer technology and the features of digital video recorders have made infringement easier and faster and enforcement more challenging. Therefore, The Walt Disney Company devotes significant resources to protecting its intellectual property against unauthorized use in the United States and foreign markets. The Studio Entertainment division is also subject to the risk of challenges by third parties claiming infringement of their proprietary rights. Regardless of their validity, such claims may result in substantial costs and diversion of resources, which could have an adverse effect on The Walt Disney Company. (The Walt Disney Company 10-K, 2005)

Another significant factor facing Disney’s Studio Entertainment division is changing