Achieving Greater Profitability from Existing Assets (i.e., Controlling Costs)
Which brings me to #2 on our overall strategic list. Now that we have what we believe is the world's greatest collection of entertainment assets, we need to manage it for maximum financial return. Many elements of our entertainment infrastructure, such as our parks and cable operations -- both of which had record revenues and operating income in 1999 -- are performing well and growing steadily. Other elements, such as the Disney Stores, are in need of retooling. But all of them can operate better, generating more cash and consuming less capital. This added cash flow, in turn, can be directed to new and existing businesses that have the greatest potential for growth, or to share repurchase. With the goal of increased cash flow, we are focusing on returns on our invested capital as a primary measure of performance for all of our businesses.
During the `90s, as we were focused on expansion, and as enormous profits continued to flow into the company, inefficiencies crept into our operations. The time has come to do as my maternal grandmother always strongly suggested I do: "Turn off the lights when you leave the room!" We are now working to "turn off the lights" by squeezing inefficiencies back out of our company. Costs are being reduced at the studio, marketing operations are being consolidated, the number of films produced is being cut back, all television production is being integrated into ABC, and we are cutting duplication in worldwide operations.
Furthermore, not every asset is worth holding onto or may not have adequate growth potential. Along these lines, we have sold off Fairchild publishing, a great magazine company but not one that is core to our businesses. And, we have closed Club Disney, a very well-accepted project creatively but one that did not meet our requirements for return on investment. As you can see, if an asset is non-core, or doesn't generate an adequate return on capital, we will discontinue it, sell it or finance it differently.
Then there are the mundane-sounding areas of our company that you're certainly not used to reading about in one of my letters. I tend to get more excited about new movies or television shows or cable services or theme parks or Internet experiments or interactive games. I love talking about expanding the revenue lines of our business. But the cost lines are also extremely important. If we want to continue to play in the creative sandbox and thereby generate long-term growth, then we'd better make sure that we stay responsibly in the financial box and thereby keep our operating margins healthy.
This is why we are focusing added attention on such areas as procurement. In 1999, we established a new group called Strategic Sourcing, which has already renegotiated contracts with more than 100 of the vendors that supply us goods and services, better leveraging our tremendous purchasing power. Let me give you one example. Each year, we send our guests home with 110 million packages of merchandise. That's enough to create a line of shopping bags and gift boxes that would more than circumnavigate the world. We have found that by standardizing the size of all those bags and boxes and by consolidating and leveraging our purchasing power with vendors, we will be able to save roughly $1.5 million a year. Now take many, many more such initiatives like this one, and the savings can be enormous.
The beauty of efforts like these is that they achieve significant savings without compromising the guest experience. And the savings do add up. By bringing this common sense approach to all of our purchases -- from tacks to trucks to toilet paper -- in five years, we should be saving more than $300 million annually from the Strategic Sourcing program.
In the area of live-action film production, we have reduced costs through lower production budgets, a smaller slate of films, consolidation, reduction in talent deals and trimming of overhead. These efforts have combined to reduce investment by $400 million in 1999, with an additional $100 million reduction anticipated in 2000. Despite these cuts, we were once again number one in the domestic and international box office. This was no small feat. We have been number one in the domestic box office for five of the last six years. During the `90s, we were cumulatively more than $1 billion ahead of our next competitor in total U.S. box office. And internationally, we are the only company to reach $1 billion in annual box office revenues more than twice ... and we have surpassed the $1 billion mark five years in a row. The overall economics of the film industry continue to be challenging due to current high costs, but it is important for all of our businesses that we be involved in this area. With ongoing discipline, we can continue to succeed at the box office while improving the bottom line.
Another way we are working to achieve greater profitability from existing assets is through the more effective cultivation of our relationship with our guests. For example, research shows that there are about four million Walt Disney World guests who are particularly passionate about all things Disney. You may be one of them. Until now, these individuals have pretty much had to find us. Like many other leading branded companies, we have established a Customer Relationship Management program to identify and communicate with our best customers. We're going to reach out to them with special offers to promote a stronger personalized two-way relationship.
The final, and potentially the most significant, way that we intend to better manage our existing assets is through our international restructuring initiative. In 1999, we created Walt Disney International. Our growth overseas has been strong and exciting. But we have not duplicated the level of success we have achieved in North America. As a result, Disney is in the ironic position of being one of the best-known brands on the planet, but with too little of its income being generated outside of the United States. The U.S. contains only five percent of the world's population, but it accounts for more than 80% of our company's revenues. If we can drive the per capita spending levels for Disney merchandise to just 80% of U.S. levels in only five countries -- England, Italy, Germany, France and Japan -- then we would generate an additional $2 billion in annual revenue. With Walt Disney International coordinating all our lines of business overseas, we are now organized to maximize the opportunity to achieve these kinds of results.