On Disney
Everyone has a soft spot for Disney. Despite its rich history, Disney faces challenges, including a succession issue at the top, struggling business lines, and debates about its cultural stance.
I’ve been thinking a lot about Disney recently. A few reasons why:
I’ve got a 16-month-old who I’d like to take to Disney World at some point.
I’m concerned the characters and IP aren’t relevant to young children anymore.
I have a substantial (for me) position in Disney stock.
But personal reasons aside, Disney is at an interesting intersection as an organization at the moment: there is a succession issue at the very top of the company, financial performance issues mean the company is considering selling off its linear television assets, and there is much discussion around the direction of its creative and lightning rod status in the culture wars (are they too woke?).
All that said, I’ve got a soft spot for Disney - I grew up watching the cartoons and dreaming of going to the parks. I’ve been fortunate to have lived in Hong Kong and Tokyo, and have visited those parks. In fact, one of my favorite dates when courting my wife was at Hong Kong Disneyland… more reason for the soft spot.
But soft spots are a bad reason to make investments - and I’m well aware of that. Hence, this analyses.
A Brief History of Disney
The Walt Disney Company is one of the most successful and iconic entertainment companies in the world. It was founded in 1923 by brothers Walt and Roy Disney, and has since grown to become a global empire, with interests in film, television, music, publishing, and theme parks.
Disney's early years were marked by a series of successes and failures. In 1928, the company released Steamboat Willie, the first cartoon with synchronized sound. This groundbreaking film made Mickey Mouse a star, and Disney quickly became a leader in the animation industry.
In 1937, Disney released its first full-length animated feature film, Snow White and the Seven Dwarfs. The film was a critical and commercial success, and it cemented Disney's reputation as a producer of high-quality family entertainment.
Over the next few decades, Disney produced a string of classic animated films, including Pinocchio, Fantasia, Bambi, Cinderella, and Peter Pan. These films captured the hearts of audiences around the world, and they helped to make Disney one of the most beloved brands in the world.
In the 1950s, Disney began to expand into other areas of entertainment. The company launched its own television network, ABC, and it opened its first theme park, Disneyland, in 1955. Disneyland was a huge success, and it helped to make Disney a major player in the tourism industry.
In the following decades, Disney continued to grow and expand. The company released new animated films, such as The Jungle Book, The Lion King, and Toy Story. It also opened new theme parks around the world, including Walt Disney World Resort in Florida and Tokyo Disneyland.
In recent years, Disney has focused on expanding its digital presence. The company launched its streaming service, Disney+, in 2019, and it has quickly become one of the most popular streaming services in the world. Disney has also acquired several other media companies, including 20th Century Fox and Lucasfilm.
Today, the Walt Disney Company is one of the largest and most successful entertainment companies in the world. It has a global reach, and its products and services are enjoyed by people of all ages. Disney is known for its high-quality family entertainment, its iconic characters, and its magical experiences.
Here is a more detailed look at some of the key milestones in Disney's history:
1923: Walt and Roy Disney found Disney Brothers Cartoon Studio in Hollywood, California.
1928: Disney releases Steamboat Willie, the first cartoon with synchronized sound. Mickey Mouse makes his debut in this film.
1937: Disney releases Snow White and the Seven Dwarfs, the first full-length animated feature film.
1940: Disney releases Fantasia, a groundbreaking animated film that combines music and animation.
1950: Disney launches its own television network, ABC.
1955: Disney opens its first theme park, Disneyland, in Anaheim, California.
1966: Walt Disney dies at the age of 65.
1971: Walt Disney World Resort opens in Orlando, Florida.
1984: Disney releases The Little Mermaid, the first film in the Disney Renaissance era.
1995: Disney opens its first international theme park, Tokyo Disneyland.
2006: Disney acquires Pixar Animation Studios.
2012: Disney acquires Lucasfilm.
2019: Disney launches its streaming service, Disney+.
How Is Disney Doing?
Today, Disney stock trades at $81.25, a steep discount on the $197 the stock traded at during the stimulus-driven heights of the pandemic. The issue, however, is that the stock is trading below even its 2014 price with no real signs of leadership direction that would indicate it can recover anytime soon.
I asked James Philip Arbuckle, my co-author on Moonshot, to share his thoughts on Disney and here’s what he said:
“The media will continue to cause Disney problems as times change and technology changes peoples viewing habits,” James said. “Add in the fact the extremely high cost to build or expand attractions at the level you expect from Disney, this looks like a grim road in the short term. Those new attractions are capital intensive, so you can’t see how ticket prices don’t go up more. The American pocket book is already pressed, so it’s going to be a long road ahead it seems.”
James’ points make complete sense to me. He’s pragmatic in his perspective, too - looking at inflation, it’s impact on the consumer, and the media landscape. Thinking about his take, I ask myself:
Will the company change its stance on cultural issues such that the media will change its coverage of the company?
In a world where inflation is sticky, will people visit the parks?
Are the parks even relevant anymore?
Is Mickey Mouse A Relic?
The reality is that in the world of entertainment, few brands have achieved the timeless, multigenerational appeal that Disney has enjoyed for nearly a century. However, in the ever-evolving landscape of modern media, and to fight my own biases about the brand, I have to ask: are Disney's iconic characters and intellectual properties (IP) losing their relevance among today's young consumers?
Disney's cultural legacy is undeniable. For generations, beloved characters like Mickey Mouse, Cinderella, and Simba have been household names, captivating the hearts and minds of audiences worldwide.
In this environment, Disney's classics, while cherished by older generations, may not always resonate as strongly with the younger demographic.
These characters have served as the bedrock of Disney's empire, extending their reach from classic animated films to theme parks, merchandise, and even streaming platforms.
Yet, as we venture further into the 21st century, a new generation of consumers, raised on a different diet of content, may not share the same fervor for these familiar faces. Is today’s consumer more interested in TikTok influencers and Cocomelon?
The digital age has ushered in an era of unparalleled choice, where streaming services offer an extensive library of content catering to diverse tastes. Unlike previous generations, like myself, that grew up with Disney as one of the few entertainment options, today's youth have access to a vast array of characters and stories from various studios and cultures.
In this environment, Disney's classics, while cherished by older generations, may not always resonate as strongly with the younger demographic.
Moreover, Disney's recent push into the realm of live-action adaptations of its animated classics may have unintended consequences. While these adaptations have garnered attention and profits, they also risk diluting the uniqueness of the original animated characters.
Some argue that these live-action remakes, though visually stunning, can undermine the enduring appeal of the hand-drawn classics, potentially leading younger viewers to perceive them as outdated. These dynamics are made worse when controversial angles are undertaken by these remakes… see the recent heat caused by the live action version of Snow White.
In recent years, the company has faced criticism and praise alike for its efforts to adapt its content to a more inclusive and diverse world. While some applaud Disney's commitment to representation and inclusivity, others have accused the company of becoming too politically correct, stoking debates about its stance in the ongoing culture wars.
These are hard variables to factor into an investment decision.
Succession Issues
Another issue that affects the market’s perspective on Disney’s prospects is its leadership. Disney has been facing succession issues for a number of years. In 2020, Bob Chapek was named CEO, succeeding Bob Iger. However, Chapek was removed from the position in November 2022, with Iger returning as CEO.
There are a number of factors that have contributed to Disney's succession issues. One factor is the company's long-standing culture of secrecy and top-down decision-making. This culture has made it difficult for the company to develop and groom a bench of future leaders.
Disney's succession issues are, naturally, a concern for investors. The company needs to find a strong and capable CEO who can lead it through the challenges it is facing. However, it is unclear when Disney will be able to find a suitable successor.
In the meantime, Bob Iger is back as CEO, but he has only agreed to stay in the role for two years.
So I’m still not sure. I’m of the belief that Disney's legacy may need to evolve and its leadership situation needs to be resolved, but its status as a cultural icon remains a powerful force in the world of entertainment. I suppose we’ll have to wait and see how the company deals with all of this in the near term before making any big decisions around doing anything with the stock.
Maybe Apple swoops in and buys the company. After all, Steve Jobs and Bob Iger were dear friends prior to Jobs’ passing.
What a weird and wonderful world,