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Products: The Walt Disney Company (DIS)

U.S. Theme Parks and Hotels(U.S. Theme Parks and Hotels)
International Parks/Hotels(International Parks/Hotels)
ESPN Channels(ESPN Channels)
Disney Studios(Disney Studios)
Consumer Products and Interactive Media(Consumer Products and Interactive Media)
ABC Broadcasting(ABC Broadcasting)
Disney Channel and Others(Disney Channel and Others)

U.S. Theme Parks and Hotels

What is being offered?

This division includes The Walt Disney World Resort in Florida, Disneyland Resort in California, Disney Resort & Spa in Hawaii, the Disney Vacation Club and Disney's Cruise Line. Disney operates theme parks & hotels that attract millions of tourists every year. The theme parks provide fun and adventure for adults, kids and families with several themed rides and activities.

Who are its clients?

U.S. and international visitors

Who are its competitors?

Universal Studios

What do buyers care about?

  1. Ticket prices
  2. Breadth and depth of fun activities
  3. Overall safety for kids and families
  4. Appealing themes

Strengths

  1. Disney is world leader in theme parks and boasts of several appealing themed rides and other activities that attract millions of visitors each year.
  2. Disney's characters have a deep connection with kids as well as adults, which the company leverages to attract them to its parks and resorts.

Number of Guests at U.S. Theme Parks

Number of Guests at Disney's U.S. Theme Parks is the total number of people visiting all of Disney's theme parks in the U.S. combined in a given year.

Overall, Number of Guests at Disney's U.S. Theme Parks has increased from 67 million in 2007 to 83 million in 2015. However, this figure declined in 2010 as consumers looked for cheaper entertainment options during an economic slowdown.

Per Capita Guest Spend at U.S. Theme Parks

Per capita guest spending at a park comprises of spending on ticket, food, and beverages and merchandise. Tickets comprise approximately 60% of the per capita spending, while food and beverage comprises 20% and merchandise accounts for the remaining 20%.

Per Capita Guest Spend at U.S. Theme Parks declined during the recession in 2008 and 2009. However, it has picked up since then amounting to $140 in 2016.

Chart: Number of Guests at U.S. Theme Parks

Chart: Per Capita Guest Spend at U.S. Theme Parks

International Parks/Hotels

What is being offered?

This division includes Disney's international parks & resorts in Paris, Hong Kong, Shanghai and Japan. Disney has 82% stake in Disneyland Paris, 48% stake in Hong Kong Resort, and 70% stake in Shanghai Resort. In Japan, it licenses the operations of its resort in Tokyo to a different company.

Who are its clients?

International visitors

Who are its competitors?

Universal Studios

What do buyers care about?

  1. Ticket prices
  2. Breadth and depth of fun activities
  3. Overall safety for kids and families
  4. Appealing themes

Strengths

  1. Disney is world leader in theme parks and boasts of several appealing themed rides and other activities that attract millions of visitors each year.
  2. Disney's characters have a deep connection with kids as well as adults, which the company leverages to attract them to its parks and resorts.

International Available Room Nights

International Available Room Nights refers to number of room nights available across Disney's hotels internationally combined. In other words, this represents the number of rooms across all Disney hotels internationally multiplied by number of nights per year that the rooms are available for booking.

International Available Room Nights have remained fairly stable over the past few years. Disney is developing a theme park resort in Shanghai and that will increase the available room nights going forward.

 

Chart: International Available Room Nights

ESPN Channels

What is being offered?

ESPN is the worldwide leader in sports programming and offers live as well as taped event telecasts, sports talk shows and other original programming. Its signature telecast is SportsCenter and it also has rights to be host of major sporting events such as NFL, NBA, and the FIFA World Cup. ESPN and its sister channels include ESPN, ESPN2, ESPNEWS, ESPNU, ESPN Classic and ESPN Deportes. Despite the presence of several sister channels, ESPN remains by far the biggest revenue generator.

Who are its clients?

All the pay TV households in the U.S. are its clients. Almost all the major pay-TV service providers carry ESPN which has close to 95% penetration among pay TV households in the U.S. The target audience is primarily men in the age range of 18-54.

Who are its competitors?

ESPN's main competitors are Fox Sports, NBS Sports, and CBS Sports.

What do buyers care about?

  1. Subscriber fee
    • These should not be too high compared to competitors with similar programming.
  2. New programming
    • Customers want to avoid repetition and re-runs.
  3. Should be carried by most cable carriers
  4. Advertising spot rates should not be too high to prevent advertisers from buying.

ESPN's strengths

  1. ESPN covers over 80% of all U.S. pay TV households.
  2. ESPN's programming covers all major sporting events such as FIFA, NBA, and the PGA tour.
  3. ESPN attracts the top TV advertisers such as Ford, Pepsi, AT&T etc.

ESPN's weakness

ESPN's subscription fee is substantially higher than next most expensive channel. Nevertheless, ESPN is able to sustain viewership owing this to its monopoly over many major sporting events.

ESPN Viewers

ESPN Viewers represents average number of viewers watching ESPN each day (in thousands).

ESPN Viewers has increased consistently over the past few years as ESPN maintained its high demand and even the economic slowdown did not led to viewership decline. ESPN was the most watched sports cable network in 2016. The network still commands a high premium owing to its demand and control over biggest sports telecasts. But given the rise of digital video platforms and increased cord-cutting, viewership could decline.

ESPN Fee per Subscriber

ESPN Fee per Subscriber represents the monthly fee paid by pay-TV companies such as Comcast, Time Warner Cable, DirecTV etc. to ESPN in order to provide the channel to their subscribers.

ESPN's Fee per Subscriber, despite being one of the highest across all channels, has grown very significantly over last few years due to high demand for its programming content. The figure has grown from $4.4 in 2010 to $6.5 in 2015.

ESPN Penetration of U.S. Pay-TV Households

ESPN Penetration of U.S. Pay-TV Households represents the number of pay-TV households in the U.S. which subscriber to ESPN.

Although ESPN still commands over 80% penetration in the U.S., it has come down in the recent years. We expect the decline to continue in the coming years amid rise of digital video platforms and increased cord-cutting.

Chart: ESPN Viewers

Chart: ESPN Fee per Subscriber ($ per month)

Chart: ESPN Penetration of U.S. Pay-TV Households

ESPN Effective Ad Pricing

ESPN Effective Ad Pricing is the price that advertisers pay per 1,000 impressions (e.g. views) of the advertisement to ESPN, net of fee distributed to advertising agencies. In essence revenues generated from this fee are solely attributed to ESPN.

ESPN Effective Ad Pricing has seen exceptionally strong growth over the past few years for the last few years due to its popularity with its target audience. We expect the growth to continue as ESPN's target audience is most attractive in terms of demographics and household income. Due to ESPN's attractive demographic, it attracts the biggest advertisers in the market.

Chart: ESPN Effective Ad Pricing ($ per 1,000)

Disney Studios

What is being offered?

This division consists of Disney's produced and acquired films that it markets through various channels such as theatrical market, home entertainment market and television market.

Theatrical market includes box office channel which is the first sales venue for the new movies produced. Home entertainment market includes sales of movies via DVDs/Blu-Rays as well as electronic versions. Television market involves pay-per-view and pay-TV channels.

Disney produces and acquires films and distributes them under several brands including Walt Disney Pictures, Pixar, Lucasfilm and Marvel.

Who are its clients?

Movie enthusiasts

Who are its competitors?

Other movie studios including Paramount, Fox, Warner Bros. etc.

What do buyers care about?

  1. Movies with an appealing theme to the larger audience.
  2. Presence across all the major theaters.
  3. Merchandise sales at theaters help promoting movies.
  4. Awards for the movies always attract more moviegoers.

Strengths

Predicting the future of businesses in the film industry is difficult, given their dependence on success of independent films. However, Disney leads most studios in its animation films as a result of its Pixar acquisition and the fact that they build a whole world around their film characters in their parks. Over the last few years Disney has managed to significantly grow its market share in the global box-office market, led by the success of its Marvel movies and Star Wars in 2015.

Global Box Office Market

Global Box Office Market refers to total sales of movies at theaters across the world.

Global Box Office Market has increased consistently for the past few years amounting to $37.1 billion in 2015.

Disney Global Box Office Market Share

Disney Global Box Office Market Share is its share in the worldwide box office market, which is the sum of the revenues of box office productions from other production houses along with Disney.

Disney Global Box Office Market Share has increased from 8% in 2011 to 13.5% in 2015 led by the success of Marvel movies, along with Frozen and recently Star Wars. In fact, the studio witnessed 3.7% jump in market share in 2015, led by Star Wars success. The movie sales are unpredictable and depend heavily upon success of individual films.

Disney Share of Box Office Sales

The revenue generated from the ticket sales of a film showing at a theater are typically split between the production house and the theatre. Most movies gross the maximum percentage of their total revenues in the first 3 - 4 weeks. The split might start off with a 90/10 split in favor of the production house; and continues to taper off as time progresses.

Chart: Global Box Office Market

Chart: Disney Global Box Office Market Share

Chart: Disney Share of Box Office Sales

Consumer Products and Interactive Media

What is being offered?

The consumer products segment essentially sells merchandise based on its characters, which includes products such as toys, apparel, stationary, consumer electronics, food, books, magazines and more.

The interactive media segment is involved in developing and distribution of games as well as content for branded online services.

Who are its clients?

Primarily kids, but adults are its clients as well.

Who are its competitors?

Other animation characters not owned by Disney as well as other gaming companies that target kids.

What do buyers care about?

  1. Price of the merchandise.
  2. Latest characters hitting the stores.
  3. Easy accessibility
    • They have stores across a lot of locations and countries.
  4. Appealing themes for games and ease of play.

Disney's strengths

Disney is far ahead of its competitors when it comes to marketing its characters. Even though there are other theme parks which sell their merchandise, Disney is a run-away winner due to its popularity and effective marketing.

Consumer Products Revenues

Consumer Products Revenues refers to revenues earned by Disney from sales of merchandise based on its characters including products such as toys, games, apparel, footwear, books, magazines etc.

Consumer Products Revenues has risen consistently since 2007, except for the small dip in recession-hit 2009. This figure amounted to $4.6 billion in 2015. Going forward we expect the growth to continue as Disney remains very popular among kids and much ahead of its competitors. As of now, there seems to be no factor that could slow down growth in this business notably. The near term growth will come from the newly opened Shanghai store, sales of Playmation toy series and Star Wars merchandise.

Chart: Consumer Products Revenues

ABC Broadcasting

What is being offered?

This division includes Disney's ABC Television Network and TV production business.

ABC Television Network is Disney's own broadcasting network with 238 local affiliate stations, which reach about 99% of U.S. TV households. It broadcasts programs during all parts of the day and the majority of its revenue comes from selling advertising slots on its networks. It also generates revenues through retransmission fee.

TV production business produces content under the banner of ABC Studios and ABC Media Productions. It then distributes and sells this content globally.

Who are its clients?

All U.S. TV households as well as International households are potential clients.

Who are its competitors?

Other broadcasting networks such as NBC, CBS, and Fox, as well as cable channels.

What do buyers care about?

  1. New programming
    • Avoiding repetition and re-runs

Strengths

  1. Quality content.
  2. Acquisition of Club Penguin has increased exposure to kids on the internet.

ABC Network Effective Ad Pricing

ABC Network Effective Ad Pricing is the price that advertisers pay per 1,000 impressions (e.g. views) of the advertisement to ABC Networks, net of fee distributed to advertising agencies. In essence revenues generated from this fee are solely attributed to ABC.

ABC Network Effective Ad Pricing has been hovering around $6 levels over the past few years.

ABC Network Weekly Average Viewers

ABC Network Weekly Average Viewers represents average number of viewers watching ABC each day (in thousands).

There has been a decline in ABC Network Weekly Average Viewers over the past few years as cable networks have risen in popularity and this has impacted viewership of broadcasting networks. This figure stood at an estimated 3 million in 2016. Going forward we expect this to decline towards 2.7 million.

Chart: ABC Network Effective Ad Pricing ($ per 1,000)

Chart: ABC Network Weekly Average Viewers

Disney Channel and Others

What is being offered?

This division includes Disney's other cable channels such as Disney Channel, Disney XD, Disney Junior and ABC Family.

The Disney Channel carries programming aimed at kids and is the only non-commercial channel (advertisement free) on television with penetration similar to that of ESPN.

ABC Family's programming is a mix of drama, original movies, acquired series, and blockbuster theatricals such as The Harry Potter Series.

Disney Junior is focused on learning-based shows while Disney XD targets 6-14 age group and offers them live-action as well as animated programming.

Who are its clients?

U.S. pay-TV households. While Disney Channel, Disney XD and Disney Junior cater to kids, ABC Family caters to grown up individuals.

Who are its competitors?

Competitors include kids-focused channels such as Nickelodeon and Cartoon Network as well as other cable channels such as TNT and FX.

What do buyers care about?

  1. Subscriber fee
    • These should not be too high compared to competitors with similar programming.
  2. New programming
    • Customers want to avoid repetition and re-runs.
  3. Should be carried by most cable carriers
  4. Advertising spot rates should not be too high to prevent advertisers from buying.

Strengths

  1. Disney Channel is advertisement-free, and it appeals to families as they can be assured that their kids will not be exposed to any offensive advertisements.
  2. ABC Family has a good demographic profile with the median age of adults at 34.

Weakness

  1. Disney Channel is more expensive than its strong competitors such as Nickelodeon.
  2. ABC Family has suffered slightly due to re-run of programming in the past. However, the channel is resolving that issue by adding new programming.

U.S. TV Households

U.S. TV households represents the number of U.S. households which have at least one television.

TV penetration in U.S. households is very high, with around 98% of all U.S. households owning TV sets. We do not expect the penetration level to change much. This translates to an annual increase of around 1% in U.S. TV households, in line with U.S. population growth.

Disney Channel Penetration of US TV Households

Disney Channel Penetration of US TV Households represents the proportion of the U.S. pay-TV households which subscriber to the channel.

Disney Channel penetration among the U.S. pay-TV households has declined in the recent years to 85% in 2015.

Disney Channel Fee per Subscriber

Disney Channel Fee per Subscriber represents the monthly fee paid by cable and satellite providers such as Comcast, Time Warner Cable, DirecTV and others to the cable channel in order to provide it to their subscribers.

Disney commands a high fee per subscriber owing to its popularity among kids. This figure has increased steadily from about $0.90 in 2010 to close to $1.30 in 2015, according to our estimates.

Chart: U.S. TV Households

Chart: Disney Penetration of US TV Households

Chart: Disney Fee per Subscriber ($ per month)