The Walt Disney Company (NYSE:DIS) is entering into its ninth decade of existence, yet shows no signs of a slowdown. Disney started out as a modest cartoon studio and has morphed over the years into an entertainment powerhouse. Disney’s operations focus on the following three industry segments: media networks, parks and resorts, and consumer products. Disney is a strong buy due to its impressive leadership and powerful brands.
A little history…
The Walt Disney Company (NYSE:DIS) inked its first deal with M.J. Winkler on October 16, 1923 to produce Alice Comedies which is considered the start of Disney, as reported on its website (The Walt Disney Company). Disney’s most iconic character, Mickey Mouse, debuted as a comic strip on January 13, 1930. I would argue one of the most important events, at least from an investor’s viewpoint, was April 2, 1940 when the company issued its first stock.
Why invest now as we approach new highs?
There are two characteristics that make The Walt Disney Company (NYSE:DIS) great: its strong leadership and its iconic brands. The top notch brands, by segment, are as follows:
The Entertainment portfolio
- ABC – acquired on July 31, 1995, after the company’s failed attempt to purchase NBC in 1994.
- The Walt Disney Company (NYSE:DIS) – Do I have to mention Mickey? Just saying this word will put a smile on anyone’s face.
- ESPN – synonymous with sports and one of the most successful sports networks.
- Lucasfilm – Star Wars and Indiana Jones.
- Marvel – comic books and films, with characters such as Spider-Man, X-Men, The Fantastic Four, Iron Man, and The Hulk.
- Pixar – has produced 14 feature films earning the studio 27 Academy Awards, seven Golden Globe Awards, and eleven Grammy Awards.
Parks and Resorts
This segment of The Walt The Walt Disney Company (NYSE:DIS) owns and operates the following:
- Walt Disney World (located in Florida), Disneyland (located in California), Disneyland Paris, and the Hong Kong Disneyland Resort
- Disney Vacation Clubs
- Disney Cruise Line
- Adventures by Disney
This segment generates the majority of its revenue from the following three sources:
- Licensing trade names and characters,
- The Disney Store and the Disneystore.com and
- Publishing children’s books, magazines, and comic books.
The competition (focusing on the entertainment portfolio)
The Walt Disney Company (NYSE:DIS) may be a powerhouse, but it is not free from competition. Amongst Disney’s entertainment portfolio, ABC may be the most significantly impacted by competition, facing fierce competitors such as CBS and NBC who often battle for its fan base.
In fact, in 2010, The Walt Disney Company (NYSE:DIS) considered a spin-off of the television network due to its lack of impact on the Disney brands as one analyst pointed out, “ABC doesn’t add a lot of value to Disney’s other divisions” (Reuters Article). Disney was in talks with a couple private equity firms, but the deals never materialized. As it stands today, ABC will remain with Disney for the foreseeable future. In order to keep its fan base and to win over critics ABC will need to produce more shows of high quality, such as its highly viewed television series Modern Family.
Marvel Comics’ biggest competitor is DC Comics which is owned by Time Warner Cable Inc (NYSE:TWX) through Warner Bros. DC Comics is most known for Batman and Superman. Time Warner operates under four divisions: HBO, Turner Broadcasting Systems, Warner Bros, and Time.
HBO produces some of the best original series content including Game of Thrones and The Newsroom. The viewers agreed in 2012 as reported on HBO’s website, “HBO was the #1 domestic premium pay television service in primetime and total day ratings in 2012.” It is time for The Walt Disney Company (NYSE:DIS) to start learning from HBO as Time Warner Cable Inc (NYSE:TWC) has a leg up when comes to original content.
Pixar is the premiere animation company with feature films such as Toy Story, Cars, and Finding Nemo, just to name a few. However, this success does not come without challenges and its fair share of competition. DreamWorks Animation Skg Inc (NASDAQ:DWA) has been quite successful in its own right. DreamWorks is best known for Sherk, Kung Fu Panda, and Madagascar. The Sherk franchise is truly the pride and joy of the company with three of the films landing among the top 50 grossing films of all time. This a great accomplishment that all studios strive for, but few have been able to achieve. Pixar could take some notes from the green guy on creating some real green for the studio.
It is clear The Walt Disney Company (NYSE:DIS) dominates the competition in many areas, but there is still room for improvement. ABC should take some notes from HBO and improve its original content lineup. It is time for Disney to be humble and learn from the best in this area.