The book The Disney Touch by Ron Grover published by Richard D Irwin, Homewood, Illnois, 1991 provides the material for this column. The characters of Disney of Mickey Mouse, Goofy, and Pluto and the early movies of Snow White, Cinderella and Pinocchio are known around the world and loved by many people. The stories are universal to people and Walt Disney did an excellent job in creating them. As a business person, Walt needed help, similar to many founders of companies he made most of the decisions by himself. There were many reasons why this developed including during the early years the company almost did not survive. It is not surprising when founders risk all of their assets and credit lines before the company experiences regional or international growth, the founders have a certain management style. As the company grew, Walt Disney envisioned theme parks although the one in Florida was larger because Disney did not like all the land uses around the California site. He was trying to have a particular image of the park and surrounding land uses. Eventually, Walt Disney passed away and his successors ran the company like Walt would have wanted. That type of management works for a couple of years, but will quickly go down, because very few new projects will come forth. In the case of Disney, shares traded on the stock exchange and it was not long before various people recognized Disney had great assets but were not using them.

Eventually new ownership and new executives were put in to add value to the brand. What does that mean? The first example is the theme parks that were located in Orlando, Florida and Anaheim, California, the cost of a day pass was $18 in 1984. Attendance had declined because little was done to add to the rides since it opened, although people still went to the parks. Previous management were almost afraid to raise prices because Walt had set them, the new management looked at the prices and saw for every dollar the price was raised an addition $30 million would come to Disney in profit – some of which could be used to upgrade the parks. Over the next three years the prices were raised $5. People came to the parks and with increasing investments in the park, there are very good reasons to return.

At the present time, it is hard not to find a Disney commercial, but in Walt’s day they did very little advertising. Most of the advertising was inviting travel writers to the park to be written about. However the new executive team found that for every $1 million spent on TV ads brought in 154,000 guests The average person buying the ticket would spend a similar amount on food and souvenirs, thus a $10 million campaign would yield upwards of $55 million in revenues. Disney is now a big advertiser.

In the early 1980’s most of the hotel rooms around the Orlando site did not belong to Disney, many other companies had built hotels. The new executive team looked at hotels and saw they can be very profitable, if the vacancy rates are low. The rooms inside the park had very low vacancy rates and under those terms profit margins of 60% for rooms and meals were the norm. It took Disney a number of years to built the hotels within the park, but it took new management to see how the assets could be used better.

Now days Disney had some wonderful movies – some under the Disney label, some under the Touchstone label, but in the old management the Board of Directors insisted on only very wholesome entertainment, the Board often watched all the movies. The movies the Board approved appealed to a very limited market and the Disney market share was 4%. It took the new management a number of years and always emphasising the story, not the stars, to bring the movie share upwards to 40% in a great year. In the movie business, people talk about tent poles, need some in case the next movie does not do as well. In the early 90’s the number was a movie grossing $ 100 million. As Disney turned itself around it went on to have many $100 million plus movies. The early ones included Pretty Woman, Three Men and a Baby, Ruthless People, Good Morning Vietnam.

Linking to dividend paying stocks, every company which pays dividends has great assets, they provide the profitability of the company, it is up to the shareholders to ask are they being used or getting the most value out of the assets and what could be? Some of the answers will come to the shareholders just from owning the stock and observing; some will be is the management the correct one? and other questions will be asking where is the competition and what are they doing?

There are more questions than answers, till the next time – to raising questions.