walt disney annual report analysis
TRANSCRIPT
Walt Disney
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Introduction For more than eight decades, the name Walt Disney has been preeminent in
the field of family entertainment. From humble beginnings as a cartoon studio in
the 1920s to today's global corporation, The Walt Disney Company continues to
proudly provide quality entertainment for every member of the family, across America and around the world.
Walt Disney
Walt Disney is one of the largest media and entertainment corporations in the
world. Founded on October 16, 1923, by brothers Walt and Roy Disney as an
animation studio, it has become one of the biggest Hollywood studios, and
owner and licensor of eleven theme parks and several television networks,
including ABC and ESPN. Disney's corporate headquarters and primary
production facilit ies are located at The Walt Disney Studios in Burbank,
California. The company is a component of the Dow Jones Industrial Average.
John E. Pepper, Jr. ( )
Robert Iger ( ) & ( )
Anne Sweeney (
)
ABC, ABC Family, ABC Kids, Walt Disney Distribut ion, Walt Disney Motion Pictures
Group, Disney Channel, ESPN, Jet ix, Walt Disney Studios, Walt Disney Parks and
Resorts, Walt Disney Television Animation, Walt Disney Records, Walt Disney
Pictures, Touchstone Pictures, Miramax Films, ABC Studios, Playhouse Disney,
Disney Consumer Products, Pixar Animation Studios, SOAPnet, Disney Interactive
Studios, Muppets Holding Company, Disney Store, Toon Disney, New Horizon
Interactive, and Hollywood Records
Walt Disney
The Walt Disney Studios is the foundation on which Disney was built, and at its heart
are world-renowned animated features and live-action motion pictures. With the
creation of Mickey Mouse and Snow White and the Seven Dwarfs, the world's first full-
length animated feature, the Disney name quickly became synonymous with quality
entertainment for the whole family
Disney's Parks and Resorts is not just home to
Disney's beloved characters but the place "Where
Dreams Come True." The segment traces its roots to
1952, when Walt Disney formed what is today known
as Walt Disney Imagineering to build Disneyland Park in Anaheim, California.
Since then, Parks and Resorts has grown to encompass the world-
class
Disney Cruise Line, eight Disney Vacation Club resorts (with more than 100,000
members), Adventures by Disney (immersive Disney-guided travel around the world),
and five resort locations (encompassing 11 theme parks, including some owned or co-owned by independent entities) on three continents:
Disney merchandising began in 1929 when
Walt Disney was approached by a businessman
interested in placing Mickey Mouse on the cover of a
children's writing tablet. Disney Consumer Products
and affiliates (DCP) extend the Disney brand to
merchandise ranging from apparel, toys, home décor
and books and magazines to interactive games,
foods and beverages, stationery, electronics and fine
art. This is accomplished through DCP's various lines of
business which include: Disney Toys, Disney Apparel,
Accessories & Footwear, Disney Food, Health & Beauty, Disney Home and Disney Stationery.
Disney Publishing Worldwide (DPW) is the world's largest publisher of children’s books
and magazines, reaching more than 100 million readers each month in 75 countries.
Disney's imprints include Disney Libri, Hyperion Books for Children, Jump at the Sun, Disney Press, and Disney Editions.
Media Networks comprise a vast array of
broadcast, cable, radio, publishing and Internet
businesses. Key areas include: Disney-ABC Television
Group, ESPN Inc., Walt Disney Internet Group, ABC
owned television stations, and a supporting
headquarters group. Marketing, research, sales and
communications functions also exist within the
segment.
Competitors
The recent AOL/Time Warner merger is one of the most significant mergers in the
history of corporate America. For years, Time Warner was a media giant,
producing films, television networks, professional sports, and digital media. They also held the brand name, Warner Brothers. America Online is current ly the #1
internet service and owns Netscape and Compuserve. Together, AOL Time Warner, Inc. will challenge the industry dominance of The Walt Disney
Company.
AOL Time Warner, Inc. is Disney's chief competitor. This company not only
challenges Disney's television interests, but also looks to be competitor in
merchandising. The Warner Brother label will be the name brand name in this merchandising effort . The merger put the final nail in the coffin of The Go
Network and has had a significant effect upon Disney Internet interests.
Viacom is the world's third largest media company. They operate well known
affiliates such as CBS Enterprises, Paramount Television, Blockbuster Video, and
Infinity Broadcast ing. Viacom also produces TV shows and mot ion pictures through popular cable outlets. The most popular of these channels are Black
Entertainment Television, Showtime, MTV Networks.
CBS promises new programming and a stong late night lineup that may
challenge the success of ABC and their hit telev ision show, "Who Wants To Be A Millionaire". CBS offers a huge threat to the future of The Walt Disney Company
and The ABC television network. In order to maintain its posit ion as the world's #1 media conglomerate, Disney must continue to improve upon the quality of its
television programming.
The Fox Entertainment Group is a serious competitor to the strength of Disney's
television networks. Popular Fox shows, such as Ally McBeal, and sport ing
interests, such as the broadcast ing rights to the National Football league have challenged Disney's television dominance.
Paramount Pictures Corporation is an United States motion picture production and
distribution company, based in Hollywood, California. Founded in 1912, it is the oldest
running movie studio in Hollywood, beating Universal Studios by a month.I t has the
largest studio market share. It has produced most of the popular Hollywood Titles.
Titanic produced by Paramount is currently the Biggest grosser in both the domestic
and International market.
The following chart shows 2007 domest ic studio market share by gross revenue. Total gross revenue in that year was ~$9.7B for the industry as a whole.
Rank Company Market
Share
1 Paramount 15.50%
2 Warner Bros 14.70%
3 Buena Vista 14.00%
4 Sony/Columbia 12.90%
5 Universal 11.40%
6 20th Century
Fox
10.50%
7 New Line 5.00%
8 Lion Gate 3.80%
9 MGM/UA 3.80%
10 Fox Searchlight 1.40%
11 Miramax 1.30%
12 Rogue Pictures 0.80%
16%
15%
15%
DISNEY14%
12%
11%
5%4%
4%
2% 1%1%
1 Paramount 2 Warner Bros 3 Buena Vista
4 Sony/Columbia 5 Universal 6 20th Century Fox
7 New Line 8 Lion Gate 9 MGM/UA
10 Fox Searchlight 11 Miramax 12 Rogue Pictures
Method used for forecasting
This method is a ‘classical method’ of business forecast ing . It is essentially
concerned with the study of movement of variables through t ime . The use of
this method requires a long and reliable t ime-series data . Trend projection
method is used under the assumption that the factors responsible for past t rends
in the variable to be projected will continue to play their part in fut ure in the
same manner and to the same extent as they did in the past in determining the
variable.
There are 3 techniques of t rend projection based on t ime-series data:
In this method, a trend line is fitted to the t ime-series sales data either visually
or by regression analysis. The linear regression model will take the form of
St = So + bt
Where:
St= value of t ime series to be forecasted for period t
S0= est imated value of t ime series in the base period
b= absolute amount of growth per period
t= t ime period for which series is to be forecasted
So = [(∑S)( ∑(t2))-( ∑t)*( ∑s*t)]/d
b=[n∑s*t-(∑t)( ∑s)]/d
where d=n∑(t2)-( ∑t)2
One characterist ic of this method is that each observation has the same weight.
Shortcomings of t rend projection:
One of the most successful forecast ing methods is the exponential smoothing
(ES) techniques. Exponential smoothing overcomes many objections of simple
moving averages. ES is an averaging technique that uses unequal weights; however, the weights applied to past observations decline in an exponential
manner.
Exponential smoothing is a technique of t ime series forecast ing that gives
greater weight to more recent observations. The first step is to choose a
smoothing constant w where 0<w<1. If there are n observations in a t ime series,
the forecast for the next period i.e. (t+1) is calculated as a weighted average of
the observed value of the series at period t and the forecasted value for that
same period. Thus, the value of the forecast of the t ime series in period t+1 is
Ft+1 = wAt + (1-w)Ft
where:
A small w provides a detectable and visible smoothing. While a large w
provides a fast response to the recent changes in the t ime series but provides a
smaller amount of smoothing.
For selecting the value of w, we will calculate RMSE(root mean square error)
RMSE=√(∑(A –F)2/n)
The value of w is accepted for which RMSE is minimum.
Analysis Of Data
PERIOD REVENUES
1 27061
2 30752
3 31347
4 33747
5 35510
0
5000
10000
15000
20000
25000
30000
35000
40000
1 2 3 4 5
REVENUES IN MILLIONS
YEAR PERIOD REVENUES S*t
2003 1 27061 27061 2004 2 30752 61504
2005 3 31347 94041
2006 4 33747 134988 2007 5 35510 177550
15 158417 495144 55
d= 50 s0= 25715.5
b= 1989.3
2003 2004 2005 2006 2007 2008 st= 27704.8 29694.1 31683.4 33672.7 35662 37651.3
A-F -643.8 1057.9 -336.4 74.3 -152 (A-F)^2
1675420
rmse 578.8645
PERIOD PROFITS
1 1267
2 2345
3 2533
4 3374
5 4687
YEAR
PERIOD
PROFITS P*T
2003
1 1267 1267
2004
2 2345 4690
2005
3 2533 7599
2006
4 3374 13496
2007
5 4687 23435
15 14206 50487
55 d= 260
p0= 92.403846
0
500
1000
1500
2000
2500
3000
3500
4000
4500
5000
1 2 3 4 5
PROFITS
(In millions)
15 b= 151.32692
31
pt 243.7307692
395.0576923
546.3846
697.7115
849.0385
1000.365
2101.269231
2137.942308
2827.615
3989.288
13356.96
(A-F)^2
2.11E+08
rmse
6500.837
YEAR
PERIOD
REVENUES
FORECASTING WITH W=0.5
A-F FORECASTING WITH W=0.6
A-F FORECASTING WITH W=0.7
A-F w=0.8
A-F w=0.9
A-F
2003
1 27061
31683.4
-4622.4
31683.4 -4622.4
31683.4 -4622.4
31683.4
-4622.4
31683.4
-4622.4
2004
2 30752
29372.2
1379.8
28909.96
1842.04
28447.72
2304.28
27985.48
2766.52
27523.24
3228.76
20 3 3134 30062. 1284 30200.0 1146 30338.0 1008 304 870. 306 732.
05 7 1 .9 8 .92 6 .94 76.04
96 14.02
98
2006
4 33747
30704.55
3042.45
30833.04
2913.96
30961.53
2785.47
31090.02
2656.98
31218.51
2528.49
2007
5 35510
32225.775
3284.225
32530.02
2979.98
32834.265
2675.735
33138.51
2371.49
33442.76
2067.245
2008
33867.8875
34196.31
34524.7325
34853.16
35181.58
SUM 158417
SIGMA (A-F)^2
44964034
43446562
42612649
42462294
42995496
rmse 2998.801
2947.764
2919.337
2914.182
2932.422
AVERAGE
31683.4
YEAR
PERIOD
PROFITS
FORECASTING
WITH W=0.5
A-F FORECASTING WITH
W=0.6
A-F FORECASTING WITH
W=0.7
A-F w=0.8 A-F w=0.9 A-F
2003
1 1267
2841.2 -1574.
2
2841.2 -1574.
2
2841.2 -1574.
2
2841.2
-1574.
2
2841.2
-1574.2
2004
2 2345
2054.1 290.9 1896.68 448.32
1739.26 605.74
1581.84
763.16
1424.42
920.58
2005
3 2533
2199.55 333.45
2228.64 304.36
2257.73 275.27
2286.82
246.18
2315.91
217.09
20 4 337 2366.27 1007. 2399.62 974.3 2432.96 941.0 2466. 907.6 2499. 874.345
06 4 5 725 8 5 35 31 9 655
20
07
5 468
7
2870.13
75
1816.
863
2970.91 1716.
09
3071.68
25
1615.
318
3172.
455
1514.
545
3273.
228
1413.7725
3778.56
875
3960.25
5
4141.94
125
4323.
628
4505.
314
SUM 14206
SIGMA (A-F)^2
6990416
6666113
6415598
6238871
6135933.105
rmse 1182.406
1154.653
1132.749
1117.038
1107.784555
AVER
AGE
284
1.2
PERIOD REVENUES PROJECTED
1 27061 27704.8
2 30752 29694.1
3 31347 31683.4
4 33747 33672.7
5 35510 35662
0
5000
10000
15000
20000
25000
30000
35000
40000
1 2 3 4 5
REVENUES
ACTUAL
REVENUES
PROJECTED
0
5000
10000
15000
20000
25000
30000
35000
40000
1 2 3 4 5
REVENUE
ACTUAL
REVENUE
PROJECTED
YEAR PERIOD PROFITS PROJECTED
2003 1 1267 2841.2
2004 2 2345 1424.42
2005 3 2533 2315.91
2006 4 3374 2499.655
2007 5 4687 3273.228
0
500
1000
1500
2000
2500
3000
3500
4000
4500
5000
1 2 3 4 5
PROFITS
PROJECTED
Conclusion
A
The Walt Disney