Michael Eisner & Disney Research Paper
Although they have either the number one or number two brand in over twenty countries, Disney s earning have been falling and analysts are placing a hold on the stock. Since April of 1998, Disney s earning per share have fallen twenty seven percent. Many analysts agree that the Disney brand has declined in popularity, their target markets have changed, and Eisner is trying to run the entire company from top down. Lately, there have been positive and negative changes taking place within Disney. They have shut down Toysmart.com, an Internet Retailer. Their global operations are not growing as expected. But, on the positive side, television ratings and income for Who Want to be a Millionaire are buying Disney time.
Toysmart.com, a once popular Internet retailer owned by Disney, closed its online doors. The company failed to raise additional capital and opted to shut everything down before filling Chapter 11 bankruptcy. Over the past two years, Disney has invested more than $45 million in the company. Toysmart.com offered a family friendly line of products featuring, plush Disney toys, puzzles, and games. They did not sell plastic weapons, due to the restrictions placed by Disney s majority ownership. Toysmart.com was among a large group of Internet toy stores that struggled through their first years of existence. Unlike merchants such as Wal-Mart Stores and Toys R Us Inc., Toysmart.com was forced to use heavy advertising schemes to create a national brand name. This advertising plan added to their operational costs and in end created a loss after net sales started to decline. Eisner believes that Disney s Internet holdings are in no danger and will survive. Disney Online along with Go.com is struggling with employee turnover and slower than expected growth.
Disney s plan to develop a global operations growth has failed to mature as expected. As of June 12th, 2000, Disney s global licensing revenue has fallen by $150 million. In Italy, Germany and Spain, the average dollar spent per capita is only $15. Their cable channel subscribers have grown from $7 million to $11 million in the respective countries. On the contrary, in Europe, Asia and Latin America, the subscribers only make up four percent of the market.
With sales down in Disney s global operations, Eisner is planning on reducing costs and strengthening the Disney brand. To reduce the costs of Disney s global operations, Eisner is restructuring the operations, which in turn will save the company between $75 million and $100 million. Last year, the company signed an agreement with Hong Kong to build a Disneyland. Eisner and Company will have a forty three percent stake in the venture.
Although earning are down, they do have ventures and operations going their way. The hit ABC show, Who Wants to be a Millionaire, has added $100 million of net income in the first quarter of 2000. This has boosted Disney s media networks and cable channel ratings. The studio entertainment, theme parks, and consumer products have produced $2.1 million dollars of operating income for Disney. Recently, Disney built a new theme park in California that will produce $1 billion per year of income. They also have a new animated movie coming out in 2001. Dinosaur could generate $200 million in box-office sales and $220 million in operating income over two years.
Disney is also looking to increase sales in home videos and Disney stores. Around 600 stores will be remodeled. Their family movies and animated movies will be sold in video stores and more movies will be available in DVD, with reduced prices.
If consumers are tired of waiting in lines for rides, Disney has developed a way to reduce waiting times for rides and attractions at all of the Disneyland theme parks. This will be implemented in the coming years and is expected to boost the attendance rate of the theme parks.
Even though Disney s earning per share have drastically dropped over the past two years, they still remain the largest and most profitable Media Company in the world. They also continue to have one of the top two most recognized brands in over twenty countries. Eisner and Disney are here to stay and will adapt to the changes brought on by their various markets.