The Walt Disney Company

Company Profile

Publication Date: 23 Sep 2010

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The Walt Disney Company

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TABLE OF CONTENTS

TABLE OF CONTENTS

Company Overview..............................................................................................4
Key Facts...............................................................................................................4
SWOT Analysis.....................................................................................................5

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The Walt Disney Company
Company Overview

COMPANY OVERVIEW

The Walt Disney Company (Walt Disney or “the company”), together with its subsidiaries, is a
diversified entertainment company. The company primarily operates in North America, Europe, Asia
Pacific and Latin America. It is headquartered in Burbank, California and employs about 144,000
people.

The company recorded revenues of $36,149 million during the financial year ended September 2009
(FY2009), a decrease of 4.5% as compared to FY2008. The operating profit of the company was
$5,547 million in FY2009, a decrease of 24.5% as compared to FY2008. The net profit was $3,307
million in FY2009, a decrease of 25.3% as compared to FY2008.

KEY FACTS

Head Office The Walt Disney Company

500 South Buena Vista Street
Burbank
California 91521
USA
Phone 1 818 560 1000
Fax 1 818 560 1930
Web Address http://www.disney.com
Revenue / turnover 36,149.0
(USD Mn)
Financial Year End September
Employees 144,000
New York Stock DIS
Exchange Ticker

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The Walt Disney Company
SWOT Analysis

SWOT ANALYSIS

Walt Disney, together with its subsidiaries, is a diversified entertainment company. The breadth and
depth of Walt Disney's product and service portfolio provides it with considerable strength. The
company's offerings can be broadly classified into four segments: media networks, parks and resorts,
studio entertainment, and consumer products. A broad and diversified revenue base insulates the
company from economic cycles in one industry and diversifies the company's business risks. However,
intense competition threatens to erode the company's market share in its different lines of business.

Strengths Weaknesses

Diversified product and service portfolio Weak performance of studio entertainment

Portfolio of well known brands segment
Significant customer penetration of the Overdependence on the North American
cable networks operations markets
Strong brand equity enjoyed by parks and
resorts operations

Opportunities Threats

Acquisitions to strengthen the position in Intense competition keeps market share

the entertainment industry under check
Distribution agreement with DreamWorks Proliferation of piracy in entertainment
Studios industry
Regulatory risks

Strengths

Diversified product and service portfolio

The breadth and depth of Walt Disney's product and service portfolio provides it with considerable
strength. The company's offerings can be broadly classified into five segments: media networks,
parks and resorts, studio entertainment, consumer products, and interactive media.

The media networks segment owns television, radio and cable properties in the US and other
countries. Through the parks and resorts segment, the company owns and operates the Walt Disney
World Resort and Disney Cruise Line in Florida, the Disneyland Resort in California and ESPN Zone
facilities in several states. The studio entertainment segment produces and acquires live-action and
animated motion pictures, animated direct-to-video programming, musical recordings and live stage
plays. The consumer products segment partners with licensees, manufacturers, publishers and
retailers to design, promote and sell products based on existing and new Disney characters and

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SWOT Analysis

other intellectual property. The interactive media segment of the company creates and delivers
Disney-branded entertainment and lifestyle content across interactive media platforms

The company has balanced revenue mix in terms of revenue generated from these segments. In
FY2009, the company generated 44.8% of the total revenue from the media network segment. This
was followed by parks and resorts (29.5%); studio entertainment (17.0%), consumer products (6.7%),
and interactive media accounted for the remaining 2.0% of the overall revenues. A broad and
diversified revenue base insulates the company from economic cycles in one industry and diversifies
the company's business risks.

Portfolio of well known brands

The company has a portfolio of globally recognized brands. For instance, the company owns one
of the most powerful brands, Disney, in the entertainment business. Disney brand was ranked 9th
in the Top 100 Global Brands ranking of the BusinessWeek magazine and Interbrand, with the brand
value of $28,731 million, in 2010. Apart from a strong corporate brand, the company has several
other brands such as ESPN within its portfolio. ESPN, for instance, is one of the largest and popular
sports channels in the world. Touchstone, and Pixar are other brands of Walt Disney, which have
strong brand equity. Strong brand image helps the company gain consumer acceptance of new
products easily. The company also has the option to leverage its strong brand image to enter new
businesses.

Significant customer penetration of the cable networks operations

The company has strong cable networks. The company's cable networks and international broadcast
operations are principally involved in the distribution of television programming, the licensing of
programming to domestic and international markets, and investing in foreign television broadcasting,
production, and distribution entities. The cable networks produce its own programs or acquire
programming rights from other producers and rights holders for network programming. Some of the
company's most significantly penetrated cable properties as of FY2008 include ESPN with 99 million
subscribers; ESPN Classic with 64 million subscribers; ESPNEWS with 70 million subscribers; Disney
Channel with 98 million subscribers; Toon Disney with 74 million subscribers; and ABC Family with
98 million subscribers.

The company also has made investments in international broadcast and cable properties. ESPN
operates six television sports networks, including ESPN, ESPN2, ESPN Classic, ESPNEWS, ESPN
Deportes (a Spanish language network) and ESPNU (a network devoted to college sports). ESPN
also operates four high-definition television simulcast services, including ESPN HD, ESPN2 HD,
ESPNEWS HD and ESPNU HD.

The strong market penetration in the cable networks lends greater stability to the company's
operations. The company leverages this platform to cross-sell its other businesses, leading to better
revenue growth prospects.

Strong brand equity enjoyed by parks and resorts operations

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The Walt Disney Company
SWOT Analysis

Walt Disney has a strong presence in the parks and resorts business. About 29.5% of its revenue
amounting to $10,667.0 million comes from parks and resorts segment. The company's parks and
resorts segment consist of the Walt Disney World Resort, the Disneyland Resort, the Disney Vacation
Club, the Disney Cruise Line, Adventures by Disney, and ESPN Zone.

The Walt Disney World Resort is located in Florida, on approximately 25,000 acres of company's
owned land.The resort includes theme parks (the Magic Kingdom, Epcot, Disney’s Hollywood Studios
and Disney’s Animal Kingdom), hotels, vacation club properties, retail, dining and entertainment
complex, sports complex, water parks and other recreational facilities.

The Disneyland Resort owns 461 acres and has the rights under long-term lease for use of an
additional 49 acres of land in Anaheim, California. It includes two theme parks (Disneyland and
Disney’s California Adventure), three hotels and Downtown Disney, a retail, dining and entertainment
district.

Further, the Disney Vacation Club (DVC) offers ownership interests in ten resort facilities located at
the Walt Disney World Resort; Vero Beach, Florida; and Hilton Head Island, South Carolina.

The company's Disney Cruise Line has two 85,000-ton ships, the Disney Magic and the Disney
Wonder. The Adventures by Disney offers a series of all inclusive guided vacation tour packages at
predominantly non-Disney sites around the world. Also, the company operates eight ESPN Zone
restaurants.

Furthermore, the company manages and has effective ownership interests of 51% and 43%,
respectively, in Disneyland Resort Paris and Hong Kong Disneyland Resort. The company also
licenses the operations of the Tokyo Disney Resort in Japan. An elaborate parks and resorts operation
enables the company to not only reach more customers but also reinforce its brand equity among
its target group.

Weaknesses

Weak performance of studio entertainment segment

The studio entertainment segment has witnessed a declining revenue growth in the last three years
(FY2007-09). The segment recorded revenues of $6,136.0 million in FY2009, a decrease of 16.5%
over FY2008. The segment's revenues have declined at a compounded annual rate of interest of
10% during FY2007-09. The percentage contribution of the segment to the total revenue has also
declined from 21.1% in FY2007 to 17.0% in FY2009. Furthermore, the segment has been contributing
the least operating profit, apart from the interactive media segment. Over the years the segments’
contribution to the company’s operating profit has declined from 15.2% in 2007 to 2.6% in 2009.
The declining revenues from the segment indicate the fact that the company might be losing its edge
to other competitors. While, the declining operating profit contribution indicate the cost management
problem at the company. Since the segment still constitute a major part of the company’s global

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SWOT Analysis

operations, aggravating weak performance could have negative implications for the company’s
overall operations.

Overdependence on the North American markets

Walt Disney has its operations all across the world spanning North America, Europe, Asia Pacific
and Latin America. However, the company derives a majority of its revenues from the North American
market, which does not truly reflect its global presence. The company derived 76.1% of its revenues
from the US and Canada in FY2009. The company has a little presence in emerging markets like
Asia Pacific, Latin America and other, which accounted for only 7.3% of the company's total revenue.
Concentrating on matured markets like the US and Canada, which are already witnessing economic
slowdown, and not expanding in emerging markets would limit the company's overall revenue growth
and also weaken its market position in the international market.

Opportunities

Acquisitions to strengthen the position in the entertainment industry

Walt Disney has acquired several companies in the recent past to expand its position in the kids
and families media markets. In the FY2009, the company acquired Wideload Games, a Chicago-based
producer and developer of original interactive entertainment; Marvel Entertainment, renowned
character franchise company; and Playdom, one of the leading companies in the fast-growing
business of online social gaming.

Wideload Games, which was acquired by the company in 2009, is well known for its Bungie Software
label, the Marathon and Myth computer game series, and the extremely popular game franchise
Halo. Wideload Games is slated to develop original video games for Disney. Another acquired
company, Marvel, owns some of the strong global brand and world-renowned characters including
Iron Man, Spider-Man, X-Men, Captain America, Fantastic Four, Hulk and other 5,000 characters.
The acquisition has brought these popular characters under the Disney brand umbrella. Besides,
the acquisition of Playdom strengthens the company’s position in the fast-growing online social
gaming.

The company can capitalize on the synergies from each of these acquired companies to further
enhance its business operations and revenues.

Distribution agreement with DreamWorks Studios

The Walt Disney Studios, a motion picture arm of Walt Disney, entered into a long-term distribution
agreement with DreamWorks Studios, in 2009. Under the terms of this agreement, Walt Disney will
distribute 30 DreamWorks films over five years. Disney will also handle DVD sales and distribution
on Starz, the premium cable channel with which Disney has a long-term deal. The first DreamWorks
motion picture is expected to be released under the Walt Disney's Touchstone Pictures banner in

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SWOT Analysis

2010. Furthermore, DreamWorks, for instance, will pay Disney a fee of 10% of the revenues. The
above agreement enables the company to further enhance its quality of motion picture offerings and
expand its customer base.

Threats

Intense competition keeps market share under check

There is strong competition in many of Disney's key segments. Its broadcasting services compete
for viewers with other television networks, cable television, satellite television, videocassettes, DVDs,
and internet. This high level of competition is particularly important with respect to advertising
revenues, where it also competes with other media such as newspapers, magazines, radio and
billboards. Disney's broadcasting division competes with organizations such as CBS and Fox, with
strong market presence and technical expertise to challenge it in every aspect of business. The
parks and resorts segment competes with other parks and resorts operators like Xanterra Parks &
Resorts and smaller local US based amusement parks for visitors. Intense competition threatens to
erode the company's market share in its different lines of business.

Proliferation of piracy in entertainment industry

The proliferation of piracy in the entertainment industry is a significant and rapidly growing
phenomenon. New technologies such as the convergence of computing, communication, and
entertainment devices, the falling prices of devices incorporating such technologies, and increased
broadband internet speed and penetration have made the unauthorized digital copying and distribution
of films, television productions and other creative works easier and faster and enforcement of
intellectual property rights more challenging. This facilitates the creation, transmission and sharing
of high quality unauthorized copies of Disney's content. The proliferation of unauthorized copies and
piracy of these products has an adverse effect on the company's businesses and profitability as
these products reduce the revenue that the company could potentially receive from legitimate sale
and distribution of its products and services. Thus, increasing instances of piracy will have an adverse
effect on the company's businesses and profitability.

Regulatory risks

The company's television and radio broadcasting are highly regulated, and each of its other
businesses is subject to a variety of US and overseas regulations. These regulations include the
US Federal Communications Commission (FCC) regulation of its television and radio networks and
owned stations, including licensing of stations, ownership limits, prohibitions on 'indecent' programming
and restrictions on commercial time in children's programming. These regulations are also in the
form of federal, state and foreign privacy and data protection laws and regulations and regulation
of the safety of consumer products and theme park operations. Changes in any of these regulatory
areas may require the company to spend additional amounts to comply with the regulations.

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