Case Study:
THE CORPORATE STRATEGY of creating billion-dollar franchises is Disney’s main focus. CEO Iger leads a group of about 20 executives whose sole responsibility is to hunt for new billion-dollar franchises. This group of senior leaders decides top-down which projects are a go and which are not. They also allocate resources to particular projects. Disney even organized its employees in the consumer products group around franchises such as Frozen, Toy Story, Star Wars, and other cash cows. While things seem to be sunny right now in Southern California, there are clouds on the horizon. First, relying on a few big franchises is quite risky. What if the pipeline dries up? Many of Disney’s greatest franchises such as Star Wars joined the family through an acquisition. (The newly released Star Wars sequel The Force Awakens is predicted to gross over $1 billion on the big screens, making it the third-bestselling movie ever after Avatar and Titanic.) An acquisition-led growth strategy, however, may not be sustainable because of the limited number of media companies such as Pixar, Marvel, or Lucasfilm that Disney can acquire. Second, some critics assert that focusing too much on billion-dollar franchises reduces originality and leaves consumers bored more quickly. Disney’s recipe of success also becomes too predictable. Third, and perhaps most important, roughly half of Disney profits come from its TV networks ESPN, ABC, and others. The media industry, however, is being disrupted: People spend much less time and money watching movies on the large screen and spend more time consuming content online via YouTube, Netflix, Hulu, and other streaming services. While ESPN is certainly very successful, the cost of rights to show the big sporting events live has escalated dramatically in recent years. In addition, more and more subscribers have cut their cable cord and get their media online. As a response, cable providers are more likely to unbundle their service offerings, which may create challenges for ESPN, an expensive part of the cable bundle (some estimate $8) with a narrow focus that doesn’t appeal to everyone.
Q1. Do you think focusing on billion-dollar franchises is a good corporate strategy for Disney? What are pros and cons of this strategy?
Q2. Given the build-borrow-or-buy framework, do you think Disney should pursue alternatives to acquisitions? Why or why not?
Q3. Why do you think Disney was so successful with the Pixar and Marvel acquisitions, while other media interactions such as Sony’s acquisition of Columbia Pictures or News Corp.’s acquisition of MySpace were much less successful?
Q4. Given Disney’s focus on creating and milking billion-dollar franchises, some industry observers now view Disney more as a global consumer products company like Nike rather than a media company. Do you agree with this perspective? Why or why not? What strategic implications would it have if Disney is truly a global consumer products company rather than a media company?
Your answer must be typed, double-spaced, Times New Roman font (size 12), one-inch margins on all sides, APA format and also include references.