Sunteți pe pagina 1din 3

External Factor Evaluation- The Walt Disney

Social & Economic forces:


Economic Outlook for the United States of America and Europe is bleak. Walt Disney achieves 91% of its revenue from these two regions and so the entire conglomerate is expected to rise by a meager 2-3% for the coming year or so. The Unemployment rates in the States will be anywhere around 10-15% officially, which leads to lower disposable income, Walt Disney being an Entertainment Company will be highly impacted by this factor. Even the recent appreciation of the US Dollar with respect to other currencies will also impact the foreign income generated by the foreign subsidiaries of Walt Disney. The current economic situation has brought many companies to cut back on advertising. As a result, Disneys advertising revenue has declined. The Walt Disney Co. is a highly diversified media company surpassing its closest competitors in the breadth of its operations. As it captures most of the entertainment spectrum, the company is better cushioned to weather a recession.

Competitive Forces:
Media Network: This division provides around 43% of the revenue for Walt Disney and around 55% of Operating Income for the group. This section also has the highest Operating Income Margin among other section. In this section, there is a Cable Network Section and a Broadcasting section. The cable network section has Disney and ESPN, while the subsidiaries in Broadcasting are majorly the ABC Broadcasting Group. According to an S&P Industry Survey 2009, it reports that Cable networks has been increasing at an impressive 6% Q-o-Q, but the revenues from the Broadcasting has been squeezed to 2%. So, around the world, major broadcasters have been joining with the content developers vertically. Recently Cablevision, a major Broadcaster has launched a DVR (Digital Video Recorder) which fast forwards the advertisements which is the only source of revenue for Broadcasters and a major revenue in Cable Networks, the other being subscription fees. Now Disneys ABC Broadcasting Group has not made any vertical integration as yet with any cable operators as of now and this may be shrinking its revenues We consider Disneys lack of a premium cable network in-house a potential downside going forward as basic cable channels are dependent on volatile advertising fees for their secondary source of revenues, while premium networks (HBO/ Cinemax, Showtime, Startz/ Encore, etc.) are based solely on subscription revenues. So, there is both an opportunity as well as a risk in this expanding Media Network Market. Parks and Resorts: Viacom is a new threat to Disney as it has started opening adult playgrounds offering virtual reality games, which is a new attraction in todays youth. Six Flags is an established competitor of Disney having 32 parks. But Disney does not have much competition in US with regards to Theme Parks.

Studio Entertainment: The studio entertainment section of Disney has been squeezed for a while now, having a revenue share of 22% of the whole group but an operating income of only 11% shows the intensity of competition in this arena. Warner Bros (Time Warners) and 20th Century Fox (News Corp) are the biggest challengers in this field. The movie attendance has been strong though as families substituted away from vacation, growing at a rate of 7% in US (Standard and Poor, Industry Survey), but Disney (Buena Vista) could not reap the benefits. In recent times only Pirates of the Caribbean has shown the hits, but other than that they got no other hits. We think that its acquisition of Marvel entertainment will lead it to achieve some heights in the coming days Marvel Super Hero Series have a good response among the American crowd. But piracy has been a major concern for the studio entertainment in recent times and has led to unrealized profits. Consumer Products: The leading competitors are Warner Bros, Fox, Sony, and Marvel. Now Marvel has been taken over by Disney. So, the competitors have shrunk in this segment. Another important aspect of this segment is Interactive Media Group which is related to game development and will reach full scale development in another 2 years, so a 7% CAGR is expected. Currently it contributes only 6% of revenues, while 11% of Operating Income for the entire group.

Globalization:
Media network: The US Media market has gone increasingly saturated with content and close competition, major media power are bound to seek new markets, especially the Asian Market. ESPN has made a 50:50 JV with Star to Broadcast in Asia. Parks and Resorts: Parks and Resorts contribute around 29% of Disneys Revenue. Due to economic conditions, the entire business has experienced a slowdown. Even though Disney weathered the crisis by giving high discounts, it seems in the coming days, it will find it difficult to maintain the bottom line growth if it does not expand its network outside US. Disney has a big balance sheet and so it can come up with new Disney Land Theme Parks in India, China and Brazil. All these 3 countries will have a steady growth of 7.5% (according to Datamonitor) growth in Entertainment Sector. Disney has already opened up a Disney Theme Park in Shanghai after a long wait of 10 years of regulatory disputes.

Technology:
Studio Entertainment: The major movie studios have been experiencing a continuing decline in DVD sales as customers shifted to digital downloads, broadband video and VOD offeredby cable and satellite providers. More affordable movie rentals, on the other hand, have been benefiting from the recession. Rentals have also been boosted by convenient services such as Redbox and Netflix, digital download platforms and videogame consoles use. Overall, rentals are increasingly cannibalizing movie sales preventing stronger growth. Within the rental market, DVDs have lost market share to Disneys Blu Ray Section. DVD market declined 2.4% while Blu Ray rose by 64% showing distinct popularity of technology. So, Disney should expand into Blu Ray offerings

Game Development is set to become a key growth area for Disney. Its acquisition of Minds Eye in 2005 (one of the leading interactive TV games developers) has been the right step in the right direction. Technology will also be a threat to the group because the advertisement revenue is shrinking due to the shift of advertisements from broadcasting media to the internet media. The growth of DVR popularity and the introduction of a network DVR on a remote server (by Cablevision) is set to further compress networks advertising revenues. With consumers being able to skip commercials, media companies will have to develop new advertising platforms or risk losing those dollars to online businesses. EFE MATRIX Opportunities Expansion of Cable Network Globalization Acquisitions Video Game Market Internet Broadcasting Medium Reuse of Past Portfolio Threats Struggling Economy Saturated Market Vertical Integrations of cable operators and Content Developers Increased Competition Piracy Total Weighted Score Weight .15 .10 .05 .04 .10 .04 Weight .10 .10 .15 .15 .02 1 Rating 4 2 2 2 2 4 Rating 3 3 2 3 3 -Weighted Score .60 .20 .10 .08 .20 .16 Weighted Score .30 .30 .30 .45 .06 2.75

Ratings given on a scale of 1-4 where 1= Poor, 2= Average, 3= Above Average and 4= Superior

S-ar putea să vă placă și