REV: JULY 25, 2001
D
MICHAEL G. RUKSTAD DAVID COLLIS
O
The Walt Disney Company: The Entertainment King
I only hope that we never lose sight of one thing—that it was all started by a mouse. —Walt Disney
The Walt Disney Company’s rebirth under Michael Eisner was widely considered to be one of the th great turnaround stories of the late 20 century. When Eisner arrived in 1984, Disney was languishing and had narrowly avoided takeover and dismemberment. By the end of 2000, however, revenues had climbed from $1.65 billion to $25 billion under Eisner, while net earnings had risen from $0.1 billion to $1.2 billion (see Exhibit 1). During Eisner’s first 15 years, Disney generated a 27% annual total 1 return to shareholders. Analysts gave Eisner much of the credit for Disney’s resurrection. Described as “more hands on 2 than Mother Teresa,” Eisner had a reputation for toughness. “If you aren’t tough,” he said, “you just don’t get quality. If you’re soft and fuzzy, like our characters, you become the skinny kid on the 3 beach, and people in this business don 't mind kicking sand in your face.” Disney’s performance in 1998 and 1999 had been well below Eisner’s 20% growth target. Net income rose just 4% in 1998 and fell 28% in 1999. Return on equity had averaged 20% through the first ten years of the Eisner era, but began dropping after the ABC merger in 1996, and fell below 10% in 1999. Analysts attributed the decline to heavy investment in new enterprises (such as cruise ships and a new Anaheim theme park) and the third-place performance of the ABC television network. While profits in 2000 had rebounded, this increase was largely due to the turnaround at ABC, which itself stemmed from the success of a single show: Who Wants to be a Millionaire. Analysts were starting to ask: Had the Disney magic begun to fade?
The Walt Disney Years, 1923-1966
At 16, the Missouri farm boy, Walter Elias Disney, falsified the age on his passport so he could serve