If you were ever a child, you’re familiar with Disney.
Although I don’t believe it to be essential, before I dive into any stock, I like to become
familiar with the history.
How did the company I’m studying become what it is today?
I do this because I’m entrepreneurial and I love learning from business history, but
more than that, it provides me with important context about the decisions the company is
making today, and it can help me understand the implications those decisions can have
on the stock’s price.
So, that’s what I’m going to do today for you - by the end of this, you’re going
to know everything important there is to know about the making of The Walt Disney Company.
Hi, my name is Stephen Spicer, and it’s my goal to help you invest smarter.
If you’re here because you’re interested in some business history, I might do some
more of these, depending on how this goes.
So, subscribe if you’d like.
But if you’re here to learn from a practicing professional how to invest smarter, well you
should definitely (if you haven’t already) hit that subscribe button.
Before we get into the history of Disney, I put together a short quiz (just for fun)
to see how much you know about it - the link is toward the top of the description and in
the pinned comment.
I recommend you pause this video right now, go take the quiz, and then come back and let
us know in the comments how you did.
...but you should do that now if you can, cause if you wait and watch this whole thing
first, well, you’ll know all the answers.
Now, a proper introduction to the birth of the Disney Company starts with an introduction
to Walt Disney.
Born in Chicago in 1901, he developed an early interest in drawing.
By the age of 18, he was working as a commercial illustrator.
At 20, he co-owned his own animation company called Laugh-O-Gram Studio.
The cartoon shorts he made there were popular but didn’t bring in enough income to keep
his business solvent.
His firm went into bankruptcy in 1923 when Disney was just 22-years-old.
He moved to Hollywood to be with his brother Roy and tried to sell “Alice’s Wonderland,”
the last animation he had made before Laugh-O-Gram went under.
Later that same year, Margaret J Winkler of M.J. Winkler Productions agreed to pay the
Disney brothers $1,500 per reel.
Following that news, the brothers formed the Disney Brothers Cartoon Studio - the business
that would ultimately evolve into the company we know today.
Later, through Winkler Pictures, Disney created his first original character - and no, it
wasn’t Mickey Mouse.
He created 26 shorts of Oswald the Lucky Rabbit.
Unfortunately, in February 1928, due to a legal loophole, when Charles Mintz, Winkler’s
husband, took over the distribution company, Disney lost the contract and…
Oswald.
And that’s not all he lost.
Mintz, after failing to take over Disney Studio as a whole, hired away 4 of Disney’s 5 primary
animators.
The one who stayed behind was his long-time friend Ub Iwerks.
Walt tried not to be discouraged.
In 1928, inspired by a mouse that he had pulled from his trash can and then kept on his desk
during his time at Laugh-O-Gram… he created his next character, originally named, Mortimer
Mouse.
Ub, that one animator that stayed with Disney, refined his initial design to give us the
iconic Mouse that the world fell in love with.
And his wife, Lillian, told Walt that Mortimer sounded too pompous, she suggested Mickey
instead.
After creating and failing with a couple Mickey Mouse shorts, his third attempt, Steamboat
Willie, was an immediate smash hit!
1929 was a big year for the future of the Disney Corporation.
They continued to create cartoons starring Mickey and other original characters.
They partnered with Colombia Pictures to create the Silly Symphonies series.
The Mickey Mouse Club was created.
The Mickey Mouse comic strip was put into its first newspaper.
And the company was reorganized as a corporation with the name Walt Disney Productions.
Although, they did end up creating an edited version after accusations of cruelty animals...
This success allowed him to push the animation boundaries even further.
In 1937, after 3 years in production, Disney released its first feature-length animated
film, Snow White & the Seven Dwarfs.
Within 2 years, it became the highest-grossing film of its time.
Using the profits from Snow White, Disney financed the construction of its 51-acre headquarters
in Burbank, California, where they are still headquartered to this day.
That paved the way for Walt Disney Productions’ initial public offering on April 2nd, 1940.
The company continued producing animated shorts and features like Pinocchio, Fantasia, Dumbo,
and Bambi.
But then, after the start of World War II, the company had to shift its focus - the government
commissioned Disney to create pro-war propaganda films, like Der Fuehrer's Face (originally
titled Donald Duck in Nutzi Land…) and Education for Death - just for fun, here’s a clip
from that gem...
...I mean c’mon - I don’t know why that’s not a modern-day classic!
If you enjoyed that, take a moment to hit like on this video.
Thanks!
I really appreciate that!
Needless to say, during and a little after the War, business was slow.
But after the release of Cinderella in 1950, Disney started to once again see massive success.
So much so that in 1953 it formed its own distribution arm, Buena Vista Distribution.
In 1955, Disney’s dream of creating a magical place where parents and children can have
fun at the same time finally came to fruition with the opening of Disneyland.
As Disney expanded the size and international popularity of the park, it still managed to
churn out hit after hit after hit… after hit!
In 1965, “Disney World” was announced after the company purchased thousands of acres
in Florida.
Sadly, on December 15th, 1966, Walt Disney died.
His brother, Roy, took over as Chairman, CEO, and President of the company.
One of the first things Roy did was to rename Disney World, to Walt Disney World, in honor
of his brother’s vision.
Despite Walt’s passing, the company continued to release several well-received and well-known
films.
In October 1971, Walt Disney World opened to the public.
And on December 20th, 1971, Roy Disney died of a stroke.
As you might expect, the company then struggled for a bit under new leadership.
The company released several films over the following decade with mixed results.
In 1983, the Disney Channel made its debut as a subscription-level channel on cable networks
nationwide.
In 1984, then CEO and Walt’s son-in-law, Ron Miller, created Touchtone Films, to help
Disney release more major motion pictures.
But really, through most of the 70s and into the 80s, it was Walt Disney World that received
most of the attention.
Inspired by Walt’s vision of a futuristic model city, the next Florida-based theme park,
the EPCOT Center, opened in 1982.
Then, Tokyo Disneyland opened the following year, in April 1983.
But while their theme parks were thriving, Disney’s production arm was unable to keep
up with other studios.
In fact, in the early 1980s, the parks were generating 70% of the company’s revenue.
And although management successfully fended off a hostile takeover bid from Saul Steinberg’s
Reliance Group Holdings in 1984, shareholders wanted change.
Accordingly, the board brought in Michael Eisner from Paramount to serve as CEO.
Over the following years, Eisner used Touchtone to crank out hit after hit after hit ...after
hit.
He also pushed the company into television syndication with The Golden Girls and Home
Improvement.
And then began the period known today as the Disney Renaissance, where the company returned
to its roots and created a series of wildly successful films, including Who Framed Roger
Rabbit, The Little Mermaid, Beaty and the Beast, Aladdin, and The Lion King.
At the same time, they produced several television series (many that I remember from my childhood)
that did very well.
In 1991, Disney became a Dow Jones Industrial component company.
And In ‘95, Disney purchased the ABC network and its assets, which included A&E and ESPN
Networks.
But the following decade did not prove quite as successful as Eisner’s first.
The company created the Mighty Ducks NHL team, which they later sold.
They purchased a majority stake in the Anaheim Angels, which they later sold.
During this time, they did start to venture into the internet space with their Go Network,
and they did launch their cruise line.
But after the September 11th attacks, years of box office flops, multiple lawsuits, a
failed attempt to buy Universal Studios, the fending off an unsolicited $54B bid from Comcast
to buy Disney, complaints (specifically from Roy E Disney, Roy Disney’s son) about Eisner’s
micromanagement and his transforming of The Walt Disney Company into a “rapacious, soul-less”
company, and with the stock hovering around 52-week lows…
Eisner finally ceded the board chairmanship.
And on March 13th, 2005, it was announced that he would be replaced by Robert Iger as
CEO.
It’s been under Iger’s management that we’ve seen some pretty significant deals
that have shaped the Disney we know today.
Notably, their 2006 $7.4B acquisition of Pixar, their 2009 $4.2B acquisition of Marvel Entertainment,
and their 2012 $4.1B acquisition of Lucasfilm.
In 2017, Disney announced that they’ll be starting their own streaming service, Disney+,
by the end of 2019.
They also announced their intention to merge with 21st Century Fox in a deal worth $52.4B.
Everything was proceeding as planned until in mid-2018 Comcast announced their bid for
Fox of $65B. Disney quickly responded with a $71.3B counter.
But this Comcast rivalry, which has reared its ugly head a few times over the last couple
decades is a relevant headwind to Disney’s future success - and will come up again in
a future video.
Aside from rounding out Disney’s ownership of the Marvel Cinematic Universe with the
X-Men, Fantastic Four, and others, this Fox merger brings with it even more franchise
titles with cult followings, like the Simpsons, Family Guy, and the X-Files, to name a few.
And that brings us to today, 2019, where, in this year alone, we await the completion
of that aforementioned merger, where Marvel fans eagerly anticipate a blockbuster finale
a decade in the making, where Stars Wars fans cautiously await the completion of the first
Star Wars themed park, and where Disney+ will debut with its sights set on the streaming
king Netflix… needless to say, it should be an exciting year!
Disney’s is obviously a very robust history.
If you feel I’ve left out something important, please, share with us in the comments.
As for any commentary as to my opinions on and how I’d personally “play” Disney
stock… well, that’s coming up next.
So, don’t forget to subscribe.
And if you’d like for me to just email you my full analysis of Disney (or whatever stock
I’ve most recently covered) go to SpicerCapital.com/stock - let me know there and I’ll just go ahead
and send everything right over!
Whatever you do, just keep doing everything you can to try to invest smarter.
I hope I can help.
Take care!