Disney defines its corporate governance as being committed to policies and practices that promote the thoughtful and independent representation of shareholder interests. Disney’s Chief Executive Officer as of 2005 is Robert A. Iger. Iger has been valuable to the company through his immediate impact beginning with but not limited to the 2006 acquisition of Pixar Animation Studios (Pixar).
Board of Directors
The Disney board of directors boasts a diverse body of ten members with the CEO, Robert A. Iger, sitting on the board and acting as the Chairman.
· Board of Directors
· Robert A. Iger – Chairman and CEO
· Susan Arnold, John S. Chen, Jack Dorsey, Fred H. Langhammer, Aylwin B. Lewis, Monica C. Lozano, Robert W. Matschullat, Sheryl Sandberg, Orin C. Smith
· Andy Bird, Alan Braverman, Ronald L. Iden, Kevin Mayer, Christine M. McCarthy, Zenia Mucha, Jayne Parker, Jay Rasulo, Brent Woodford
· Business Unit
· George Bodenheimer, Bob Chapek, Alan F. Horn, James Pitaro, John Skipper, Thomas O. Staggs, Anne Sweeney
External Environment: Opportunities and Threats
Disney is very strong within the United States and boasts a loyal fan base, therefore the logical opportunity for company growth is to expand and develop in foreign markets. The worlds fastest growing consumer market is China with an average growth rate of 10% over the last thirty years (International Monetary Fund). The Asia-Pacific region alone accounted for over half of the world’s paid television subscribers market share as of 2011 and is expected to continue its trend of growth. This would indicate that China and the Asia-Pacific region are the greatest external opportunity for Disney, as the company will be looking to enter and solidify itself within new foreign markets.
In today’s world, digital information and social media are dominant. In order for businesses and people to be relevant an online presence is mandatory, but in order for the online presence to be effective it needs to be powerful. Disney in the past has struggled to assert a strong online presence but if achieved the company will be able to expand the reach of its already established brand. Disney’s primary target audiences are children between the ages of four and fourteen. These audiences are considered primary due to the fact that these children are the most loyal to the brand and have the greatest amount of influence on parental decision-making. With 95% of teens in the United States actively online and comparable percentages in emerging markets worldwide, having an online presence is an easy opportunity for Disney to exploit.
Cable television is Disney’s main revenue generator. The threat exists in the possibility of a material drop in cable fees from Disney’s competitors, as it would place pressure on the company’s bottom line due to pricing changes. This specifically refers to sports programming as ESPN dominates this particular segment which forces all prospective newcomers to drop their fees drastically to get picked up by cable providers.
The rights to distribute marquee sports are expensive and the battles to obtain these rights are ruthless. Increased competition for these rights will likely drive programming fees higher in the future, which could threaten profits.
ESPN is a definite winner for Disney, however new competitors, regardless of how small must be considered threats. ESPN now competes for viewers with NBC Sports (Comcast) and Fox Sports (Twenty-First Century Fox). This competition has the potential to push programming costs higher.
The Walt Disney brand has existed for over ninety years and is renowned globally as a family entertainment provider. The company is the 13th most valuable brand in the world and boasts a consumer perception rank of 8th globally (Forbes). These lofty rankings are largely due to excellent strategic acquisitions. Disney acquired Pixar in 2006 followed by Marvel Entertainment in 2009 and Lucasfilm in 2012 all of which have proven to be prosperous in regards to revenue and profit growth.
ESPN, another Disney acquisition, is the worlds most valuable media property valued at $40 billion (Badenhausen, Forbes). ESPN is responsible for approximately 50% of Disney’s total profits making the sports media conglomerate a strongpoint for the company.
Disney has exceptional free cash flow, along with a financial strength rating of A++. This permits Disney to remain active in the stock buyback front.
High profile and big budget movie flops are risky for Disney’s potential growth. Examples not limited to John Carter, Mars Needs Moms, and The Lone Ranger cost Disney hundreds of millions of dollars of potential revenue. Film operations accounts for approximately 15% of Disney’s total revenue, therefore any large-scale film flops are a definite weakness to the company.
Disney’s broadcast segment leaves much to be desired due to the expensive cost of programming coupled with the company’s poor ratings within this segment and low advertising revenue. The rise of social media and alternative methods of watching television have furthermore revealed Disney’s broadcast segment, specifically ABC as a company weakness.
Disney has not properly addressed social media’s relationship with the company’s target audience. Disney’s interactive media initiatives have operated in the red for the past few years primarily due to poor video game sales. Interactive media will continue to be a company weakness until it turns profitable.
· Total revenue of $45,041 billion
· Total revenue increase in the fourth quarter by 8.54% year on year
· Gross profit of $9,450 billion
· Net margin of 15.47% – higher profitability than all competitors
Figure 3: Disney’s % of Total Revenue by Business Segment
Source: Commodity Systems Inc. 2014
External and Internal Environment Summary: SWOT
· Massive brand reputation worldwide. ESPN remains a Disney’s strong point due to their dominance of the sports media segment and all the advertising money that comes with it. Strategic acquisitions of advantageous companies continue to build the Disney brand and drive profits. Disney also boasts a financial strength rating of A++.
· Reoccurring film flops remain a weakness of Disney as well as poor television broadcasting. Furthermore the lack of understanding of interactive media remains a shackle on Disney’s potential growth.
· Disney has two clear opportunities for potential growth in front of them with the expansion into growing Asian and foreign markets, as well as the bolstering of the company’s online presence in order to effectively reach their target audience through a more relevant channel.
· Falling cable fees can spell trouble for Disney along with the increase of sports rights due to heightened competition and new competitors.