Tom Staggs and Bob Iger just finished two days of presentations at two different investor conferences. With the fiscal year coming to a close shortly, I thought I would run down some of the points that were made by both men in regards to the state of the company.
The company is still focused on its three pillars of creativity, technology, and international expansion. In regards to creativity Disney is focused on diversifying its creative engines. In the past, most of the intellectual property was coming out of the studios. Now, intellectual property is coming from theme parks, publishing, video games, and of course the Disney Channel. Not only is the creative content coming from domestic sources, but Disney is hoping to invest around 100 million dollars a year on creative content from outside the United States. An example of this is Secret of the Magic Gourd which was produced and released in China. Disney also has partnerships to make films in India.
International growth is a driving force of Disney's exceptional financial performance. Disney has expanded the Disney Channel worldwide which Disney is using to introduce the brand to new markets. Disney has focused on India where it launched a Disney Channel and acquired an existing children's channel to become a recognized children's brand in a place Disney was not invested in three years ago. Bob is also eyeing Russia as a market for growth. Disney has expanded its presence there from 2 people to 80.
Looking at technology, Disney is pleased with the performance of ABC.com and the new Disney.com. The rise in visitation to Disney.com is presumed to be tied to High School Musical which Disney finds encouraging. They love that the online component was an integral part of the High School Musical experience. It looks like Disney might be pulling the plug on Disney Mobile, which as a subscriber and former subscriber to Mobile ESPN is a little annoying. Technology is also being used to improve the experience at the theme parks, make the company run more efficient, and bringing the product more directly to the consumer.
Looking at Parks and Resorts, Disney will grow spending on this segment while not having any plans to build a new domestic park in the forseeable future. Bob Iger did mention that Carland will be built at Disney's California Adventure and it was used as a valuable investment that is taking advantage of the Pixar acquasition. Cars is an important franchise to keep alive because of its amazing consumer products performance. Disney will continue to manage this franchise to keep it as fruitful as possible going forward.
Investors are worried about an economic downturn that could affect Disney. Bookings at Disney parks are up over last year, so there is not sign of worry on this buisness. Bob and Tom feel that people are unlikley to cancel family vacations even if there is a downturn. International visitation is still down from its pre-9/11 levels but is going up. They feel that difficulty in getting visas is what is keeping international visitation low even though the weak dollar is helping a bit.
A downturn in advertising is expected but ABC has had a strong upfront. Since Disney divested its radio holdings, it is less impacted by advertising since ABC only owns 10 television stations, Disney Channel does not accept advertising, and ESPN's revenue comes primarily from subscriber fees.
The studios is continuing to focus on Disney branded films. Because of the return on films, Disney is trying to moderate its spending by releasing fewer films. Bob mentioned that some studios are releasing 30 films a year and that it is impossible for the marketing departments to keep up. By focusing on fewer films, most of which are Disney branded, allows Disney to market these films better and create franchises that last longer and can be used at various divisions of the company.
Since Bob took over the stewardship of the Walt Disney Company, the company has gone above and beyond. Now that the company is running on all cylindars, the question becomes how will Disney continue to grow. Disney has been generating free cash flow that it has been using to repurchase shares. Going forward, look for Disney to acquire and invest in new buisnesses if it can find opportunities at the right price and will grow the company.