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The Walt Disney Company

Company Profile

Publication Date: 13 May 2011

www.datamonitor.comAsia PacificAmericasEurope, Middle East & AfricaLevel 46245 5th Avenue119 Farringdon Road2 Park Street4th FloorLondonSydney, NSW 2000New York, NY 10016EC1R 3DAAustraliaUSAUnited Kingdom

t: +61 2 8705 6900t: +1 212 686 7400t: +44 20 7551 9000f: +61 2 8088 7405f: +1 212 686 2626f: +44 20 7551 9090e: [email protected]: [email protected]: [email protected]

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ABOUT DATAMONITOR

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The Walt Disney Company

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TABLE OF CONTENTS

Company Overview..............................................................................................4

Key Facts............................................................................................................... 4

SWOT Analysis.....................................................................................................5


The Walt Disney CompanyTABLE OF CONTENTS
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COMPANY OVERVIEW

The Walt Disney Company (Walt Disney or the company), together with its subsidiaries, is adiversified entertainment company. The company primarily operates in the North America, Europe,Asia Pacific and Latin America. It is headquartered in Burbank, California and employs about 149,000people.

The company recorded revenues of $38,063 million during the financial year ended September 2010(FY2010), an increase of 5.3% over 2009. The operating profit of the company was $6,596 millionin FY2010, an increase of 18.9% over 2009.The net profit was $3,963 million in FY2010, an increaseof 19.8% over 2009.

KEY FACTS

The Walt Disney CompanyHead Office500 South Buena Vista StreetBurbankCalifornia 91521USA

1 818 560 1000Phone

1 818 560 1930Faxhttp://www.disney.comWeb Address

38,063.0Revenue / turnover(USD Mn)

SeptemberFinancial Year End

149,000Employees

DISNew York StockExchange Ticker


The Walt Disney CompanyCompany Overview

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SWOT ANALYSIS

The Walt Disney Company (Walt Disney or the company), together with its subsidiaries, is adiversified entertainment company. The breadth and depth of Walt Disney's product and serviceportfolio provides it with considerable strength. The company's offerings can be broadly classifiedinto four segments: media networks, parks and resorts, studio entertainment, and consumer products.A broad and diversified revenue base insulates the company from economic cycles in one industryand diversifies the company's business risks. However, intense competition threatens to erode thecompany's market share in its different lines of business.

WeaknessesStrengths

Overdependence on the North Americanmarkets

Diversified product and service portfolioPortfolio of well know brandsSignificant customer penetration of thecable networks operationsStrong brand equity enjoyed by parks andresorts operations

ThreatsOpportunities

Intense competition keeps market shareunder check

Acquisitions to strengthen the position inthe entertainment industry

Proliferation of piracy in entertainmentindustry

Distribution agreement with DreamWorksStudios

Regulatory risksNew franchise releases are likely to growsales in the next fiscal

Strengths

Diversified product and service portfolio

The breadth and depth of Walt Disney's product and service portfolio provides it with considerablestrength. The company's offerings can be broadly classified into five segments: media networks,parks and resorts, studio entertainment, consumer products, and interactive media.

The media networks segment owns television, radio and cable properties in the US and othercountries.Through the parks and resorts segment, the company owns and operates the Walt DisneyWorld Resort and Disney Cruise Line in Florida, the Disneyland Resort in California and ESPN Zonefacilities in several states.The studio entertainment segment produces and acquires live-action andanimated motion pictures, animated direct-to-video programming, musical recordings and live stage


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plays.The consumer products segment partners with licensees, manufacturers, publishers andretailers to design, promote and sell products based on existing and new Disney characters andother intellectual property.The interactive media segment of the company creates and deliversDisney-branded entertainment and lifestyle content across interactive media platforms.

The company has balanced revenue mix in terms of revenue generated from these segments. InFY2010, the company generated 45.1% of the total revenue from the media network segment.Thiswas followed by parks and resorts (28.3%); studio entertainment (17.6%), consumer products (7%),and interactive media accounted for the remaining 2.0% of the overall revenues. A broad anddiversified revenue base insulates the company from economic cycles in one industry and diversifiesthe company's business risks.

Portfolio of well know brands

The company has a portfolio of globally recognized brands. For instance, the company owns oneof the most powerful brands, Disney, in the entertainment business. Disney brand has beenconsistently ranked high in several brand surveys. Apart from a strong corporate brand, the companyhas several other brands such as ESPN within its portfolio. ESPN, for instance, is one of the largestand popular sports channels in the world. Miramax, Touchstone, and Pixar are other brands of WaltDisney, which have strong brand equity. Strong brand image helps the company gain consumeracceptance of new products easily. The company also has the option to leverage its strong brandimage to enter new businesses.

Significant customer penetration of the cable networks operations

The company has strong cable networks operations.The company's cable networks and internationalbroadcast operations are principally involved in the distribution of television programming, thelicensing of programming to domestic and international markets, and investing in foreign televisionbroadcasting, production, and distribution entities.The cable networks produce its own programsor acquire programming rights from other producers and rights holders for network programming.Some of the company's most significantly penetrated cable properties as of FY2010 include ESPNwith 100 million subscribers; ESPNU with 74 million subscribers; ESPNEWS with 74 millionsubscribers; Disney Channel with 100 million subscribers; Disney XD with 78 million subscribers;and ABC Family with 99 million subscribers.

The company also has made investments in international broadcast and cable properties. ESPNoperates six television sports networks, including ESPN, ESPN2, ESPN Classic, ESPNEWS, ESPNDeportes (a Spanish language network) and ESPNU (a network devoted to college sports). ESPNalso operates four high-definition television simulcast services, including ESPN HD, ESPN2 HD,ESPNEWS HD and ESPNU HD.

The strong market penetration in the cable networks lends greater stability to the company'soperations.The company leverages this platform to cross-sell its other businesses, leading to betterrevenue growth prospects.



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Strong brand equity enjoyed by parks and resorts operations

Walt Disney has a strong presence in the parks and resorts business. About 28.3% of its revenueamounting to $10,761 million comes from parks and resorts segment. The company's parks andresorts segment consist of the Walt Disney World Resort, the Disneyland Resort, the Disney VacationClub, the Disney Cruise Line, Adventures by Disney, and ESPN Zone.

The Walt Disney World Resort is located in Florida, on approximately 25,000 acres of company'sowned land.The resort includes theme parks (the Magic Kingdom, Epcot, Disneys Hollywood Studiosand Disneys Animal Kingdom), hotels, vacation club properties, retail, dining and entertainmentcomplex, sports complex, water parks and other recreational facilities.

The Disneyland Resort owns 461 acres and has the rights under long-term lease for use of an

additional 49 acres of land in Anaheim, California. It includes two theme parks (Disneyland andDisneys California Adventure), three hotels and Downtown Disney, a retail, dining and entertainmentdistrict.

Further, the Disney Vacation Club (DVC) offers ownership interests in 11 resort facilities located atthe Walt Disney World Resort; Vero Beach, Florida; Hilton Head Island, South Carolina; and Oahu,Hawaii.

The company's Disney Cruise Line has two 85,000-ton ships, the Disney Magic and the DisneyWonder. The Adventures by Disney offers a series of all inclusive guided vacation tour packages atpredominantly non-Disney sites around the world. Also, the company operates eight ESPN Zonerestaurants.

Furthermore, the company also owns 47% ownership interest in Hong Kong Disneyland Resort.Thecompany also licenses the operations of the Tokyo Disney Resort in Japan. An extensive parks andresorts operation enables the company to not only reach more customers but also reinforce its brandequity among its target group.

Weaknesses

Overdependence on the North American markets

Walt Disney has its operations all across the world spanning North America, Europe, Asia Pacificand Latin America. But, the company derives a majority of its revenues from North American markets,which does not truly reflect its global presence. The company derived 74.3% of its revenues fromthe US and Canada in FY2010.The company has a little presence in emerging markets like AsiaPacific, Latin America and other, which accounted for only 8.5% of the company's total revenue.Concentrating on maturing markets like the US and Canada, which are already witnessing economicslowdown, and not expanding in emerging markets limits the company's overall revenue growth andalso weaken its market position in the international market.



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Opportunities

Acquisitions to strengthen the position in the entertainment industry

Walt Disney has acquired several companies in the recent past to expand its position in the kidsand families media markets. In the year 2009, the company acquired Wideload Games, aChicago-based producer and developer of original interactive entertainment; Marvel Entertainment,renowned character franchise company; and Playdom, one of the leading companies in thefast-growing business of online social gaming.

Wideload Games is well known for its Bungie Software label, the Marathon and Myth computer gameseries, and the extremely popular game franchise Halo.Wideload Games is slated to develop original

video games for Disney. Another acquired company, Marvel, owns some of the strong global brandand world-renowned characters including Iron Man, Spider-Man, X-Men, Captain America, FantasticFour, Hulk and other 5,000 characters. The acquisition has brought these popular characters underthe Disney brand. Besides, the acquisition of Playdom strengthens the companys position in thefast-growing online social gaming.

The company can capitalize on the synergies from each of these acquired companies to furtherenhance its business operations and revenues.

Distribution agreement with DreamWorks Studios

The Walt Disney Studios, a motion picture arm of Walt Disney, entered into a long-term distributionagreement with DreamWorks Studios, in 2009. Under the terms of this agreement, Walt Disney willdistribute 30 DreamWorks films over five years. Disney will also handle DVD sales and distributionon Starz, the premium cable channel with which Disney has a long-term deal. The first DreamWorksmotion picture is expected to be released under the Walt Disney's Touchstone Pictures banner in2010. Furthermore, DreamWorks, for instance, will pay Disney a fee of 10% of the revenues. Theabove agreement enables the company to further enhance its quality of motion picture offerings andexpand its customer base.

New franchise releases are likely to grow sales in the next fiscal

Walt Disney has several franchise releases lined up during 2011. Pirates of the Caribbean: On

Stranger Tides, the fourth film in Pirates franchise; Cars 2 from Cars franchise; Marvel's Thor;Marvels Captain America; and The Avengers are to be released during 2011. Most of these franchiseshave huge fan following and is expected to draw audiences in large scale. Earlier, during 2010, thecompanys Toy Story franchise released Toy Story 3, which became the highest grossing animatedmovies and subsequently won several prestigious awards. Alice in Wonderland was anothersuccessful movie of 2010. The success of these franchises contributed to the 5.3% revenue growthduring FY2010. Similar success of 2011 releases would further add to the companys revenue growth.



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Threats

Intense competition keeps market share under check

There is strong competition in many of Disney's key industries. Its broadcasting services competefor viewers with other television networks, cable television, satellite television, videocassettes, DVDs,and internet. This high level of competition is particularly important with respect to advertisingrevenues, where it also competes with other media such as newspapers, magazines, radio andbillboards. Disney's broadcasting division competes with organizations such as CBS and Fox, withstrong market presence and technical expertise to challenge it in every aspect of business. Theparks and resorts segment competes with other parks and resorts operators like Xanterra Parks &Resorts and smaller local US based amusement parks for visitors.Thus, intense competition threatens

to erode the company's market share in its different lines of business.

Proliferation of piracy in entertainment industry

The proliferation of piracy in the entertainment industry is a significant and rapidly growingphenomenon. New technologies such as the convergence of computing, communication, andentertainment devices, the falling prices of devices incorporating such technologies, and increasedbroadband internet speed and penetration have made the unauthorized digital copying and distributionof films, television productions and other creative works easier and faster and enforcement ofintellectual property rights more challenging. This facilitates the creation, transmission and sharingof high quality unauthorized copies of Disney's content.The proliferation of unauthorized copies andpiracy of these products has an adverse effect on the company's businesses and profitability asthese products reduce the revenue that the company could potentially receive from legitimate saleand distribution of its products and services. Increasing piracy will have an adverse effect on thecompany's businesses and profitability.

Regulatory risks

The company's television and radio broadcasting are highly regulated, and each of its otherbusinesses is subject to a variety of US and overseas regulations.These regulations include theUS Federal Communications Commission (FCC) regulation of its television and radio networks andowned stations, including licensing of stations, ownership limits, prohibitions on 'indecent' programmingand restrictions on commercial time in children's programming.These regulations are also in the

form of federal, state and foreign privacy and data protection laws and regulations and regulationof the safety of consumer products and theme park operations. Changes in any of these regulatoryareas may require the company to spend additional amounts to comply with the regulations, whichin turn could affect its profitability.



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