The Magical Story of Disney Stock
Walt Disney - 1935
When we think of Disney, we can’t help but think of magic and miracles. Indeed, the stock performance of Disney (DIS) over the past ten years has been nothing less than miraculous.
When Walt Disney established the Disney Brothers Cartoon Studio back in 1923, he probably did not expect the organization to become one of the world’s leading storytelling powerhouses. In October 2005, Bob Iger took the reins of Disney, becoming the sixth leader of the entertainment company’s history. A share of Disney was trading at $23 then, and today, that number is on the verge of quadrupling, trading at $91.
Traded on the New York Stock Exchange, Disney stock was not an obvious success story ten years ago. The company’s business model was based off of its presence on cable television. Iger realized, when he took over, that he would have two hurdles to overcome:
a) Acquire the right companies which would sustain and expand Disney’s revenues as it headed into a new century in the entertainment industry.
b) Convince investors that Disney was not just a cable company, but a content company which would be able to adapt to the digital age, and the inevitable changes which would come regarding how consumers consume media.
Disney stock over the past ten years.
Bringing Steve Jobs on board in 2006
In a recent interview with Chief Executive Magazine, Iger was asked about his decision, shortly after becoming CEO, to strike a deal with Steve Jobs, to put a Disney app on iTunes and the iPod. Iger responded that the move sent a loud message to investors that the Disney Company was not afraid of change. Taking risks and investing in technology meant that Iger was willing to embrace, and not shun, the technological revolutions occurring in the entertainment industries.
The app deal was only the beginning of the collaboration with Jobs. In January 2006, Iger negotiated a $7.4 billion deal with Jobs to acquire Pixar Animation Studios. Pixar had released the first Toy Story the previous November. The film cost $30 million to make, and has grossed over $360 million to date. But, it wasn’t just the amazing initial success of Toy Story which attracted Iger to Pixar.
The Pixar transaction had transformed Jobs into Disney's largest shareholder, a much-needed branding investment for Iger. Commenting on his strategy when he first took power in 2005, Iger said that he wanted to regain the admiration and respect of Disney’s employees. “If we ultimately were going to be admired and respected by our shareholders and by our customers,” says Iger, “it had to start at home… After our employees, our investors and our consumers were also important.”
By bringing Pixar and Steve Jobs into the loop, all the positive brand-feelings of Apple became associated with Disney’s brand as well. Jobs became a close advisor of Iger for years to come, counseling him on how to adapt Disney’s business model for the new millennium. According to Iger, his correspondence with Jobs became a weekly-routine.
Purchasing Hulu, Marvel, and Star Wars
In April 2009, Disney purchased a 27% share of Hulu. This was an important decision for Disney as it needed to understand the e-commerce business model which the entertainment industry was rapidly shifting towards. While basing its revenue on its cable television for decades earlier, Disney admired Hulu’s ability to attract subscribers to its online streaming video services.
Commenting on his decision to buy a stake of Hulu, Iger said: “We don’t view ourselves as a cable company. We view ourselves as a content company.”
Bob Iger of Walt Disney on Digital Business Models
In August 2009, Disney announced that it would also be acquiring Marvel Entertainment for $4.24 million. Iger’s decision to purchase Marvel was based on his love for the great stories and characters which the organization owned the rights to. As he continued to advance his plans on the channels through which Disney would operate in the decades to come, Iger realized that great content would be the perfect addition to Disney’s long-term plan. As a cherry-on-top, in 2012, Iger purchased Lucasfilm from George Lucas, thereby acquiring the rights to Star Wars.
A Theme Park in Macau
The Disney Company owns and operates 14 theme parks across the globe. Its most recent park, built in Macau, China, was the most expensive started-from-scratch project in Disney’s history. Theme parks are a great vehicle by which Disney spreads brand awareness to the general public. Theme park locations include: Hong Kong, Tokyo, Florida, California, and many more.
Having already mastered the art of finding the right channels, and the right content, Iger says his Macau theme park was a matter of planting seeds in the China market for generations to come. “[Macau is] the most populous city in the most populous country in the world,” says Iger, adding that, according to his financial analysts, China is quickly becoming the biggest movie market in the world. Whether it happens by the end of this decade, or the beginning of the next, Iger believes that the Chinese movie market will inevitably surpass the American one.
Of the top ten highest grossing films of all time, 3 of them were made by the Walt Disney Company (The Avengers, Frozen, and Iron Man 3). If Walt Disney would be resurrected from the grave, he would see a very different company than the one he established in 1923. Then again, as Bob Iger says: “if he saw Pixar, or Star Wars or Marvel—think of the storytelling and the characters and the places that these stories exist. [Take] ESPN, for that matter. I think he would be unbelievably proud.”