BUSINESS ANALYSIS

Business Analysis of Walt Disney Company

Business Analysis of Walt Disney Company

Introduction

The Walt Disney Company is the 2nd largest entertainment company in the world. Its movie production arms include Touchstone, Hollywood Pictures and Miramax. Overall, the performance of this company is linked to the release of box-office blockbuster movies, as well as DVD home entertainment sales. The company is operating in five main segments: parks, media networks and resorts, consumer products, studio entertainment and interactive media. The studio entertainment segment is included in the Global Movie Production and Distribution industry. This paper analyzes the Walt Disney Company's income statement, balance sheet, and cash flow statements in order to determine the financial health of the company. Furthermore, the paper compares The Walt Disney Company to two other companies in the same industry.

Discussion

Headquartered in Burbank, CA, the Walt Disney Company is one of the largest media conglomerates in the world. The company owns TV and radio stations; movie and music companies; theme parks and resorts; and other entertainment businesses and products around the world. With a history dating back over 80 years, Disney quickly expanded its movie animation and production business to include the Disneyland theme park in 1955. Increasing popularity of Walt Disney characters like Mickey Mouse and Donald Duck enabled the company to expand its licensing programs. In 2009, Disney acquired Marvel Entertainment, Inc. for $4 billion. The acquisition added some 5,000 comic book characters to the company's portfolio, including Iron Man, X-Men and Spider-Man. The Mickey Mouse character became the company's first licensed product in 1929 when he appeared on a writing pad that was produced by another firm. Other licensing opportunities soon followed as licensees began to manufacture a greater number of products depicting Disney characters. Today, Disney's consumer products segment generates approximately 7.0% of the company's revenue, or an estimated $2.87 billion in 2011. Disney's consumer products division is the largest licensors in the world and licenses Disney's name and characters to manufacturers, retailers, publishers and promotion companies around the world. The division is further divided into three segments: merchandise licensing, publishing and retail.

Disney earns royalties based on a predetermined percentage of the selling price of licensed product. Its brands are included in a wide range of merchandise including clothing, toys, games, books, foods, beverages, home products, computer games, electronics and many other items. Although Disney licenses its brands and trademarks to other firms, it still has some involvement in product development, styling, writing and illustration. It is also involved in quality control to ensure licensed items are manufactured to required standards. Disney sells its products directly through retail stores in North America and Europe, where it operates 231 and 109 stores, respectively. In Japan, Disney has a licensing agreement with Oriental Land Company, which operates its own Disney retail store. Disney Stores North America has previously been operated by the Children's Place under a long-term licensing arrangement; however, Disney acquired those assets for $64 million in April 2008. In 2009, revenue from the consumer products division was ...