The Walt Disney Company – October 2011 - 10-K Report

Main Business Assets

The Walt Disney Company is a conglomerate of companies which consists of media networks, parks and resorts, studio entertainment, consumer products, and interactive media. Media networks include those such as ESPN, ABC Family, the ABC television network, and others, with the ABC television network being one of its largest assets, as it “had affiliation agreements with 238 local stations reaching 99% of all U.S. television households” (3). Parks and resorts of the Company include Florida’s Walt Disney World Resort, California’s Disneyland Resort, and cruises and resorts in other parts of the world including Asia and Europe. Studio entertainment includes the distribution of DreamWorks motion pictures as well as Walt Disney Records, which publishes and distributes music. Consumer products include products from Disney media or studio entertainment, and interactive media includes the Company’s distributed games for handheld systems or consoles. The Walt Disney Company, “on December 31, 2009… completed an acquisition of Marvel Entertainment, Inc. (Marvel)” (1). The 10-K does not describe the financial aspects right away, but rather points out that, “Marvel businesses are reported primarily in our Studio Entertainment and Consumer Products segments” (1). In the Studio Entertainment section, the 10-K describes the movies that the Walt Disney Company has now acquired the rights to due to its acquisition of Marvel, including “Spider Man, The Fantastic Four, and X-Men” (12). It also describes that, “this transaction will allow the Company to control and fully benefit from all Spider-Man merchandising activity” (12). The Company discusses its new assets and acquisitions impersonally, and it is clear that the potential profit that could be made from these transactions is always in mind. The Company has also “acquired a 49% ownership interest in the Sven TV network from UTH Russia Limited” (2).

Risk Factors

            The Walt Disney Company discusses many risk factors in its 10-K report, including risks due to the economy, global conditions, advancement of technology, the loss of privacy or other company/employee information, natural disasters, consumer preferences changing, labor disputes, regulations from the government, employee benefit changes, and seasonality of its attractions. The 10-K states, “the most recent decline in economic conditions reduced spending at our parks and resorts… [it] also reduce[s] attendance at our parks and resorts” (16). Other threats to revenue includes “the unauthorized use of our intellectual property rights” (17), as well as “natural disasters; health concerns; international, political, or military developments; and terrorist attacks” (17). One such example of this was in the spring of 2011 when the earthquake in Japan caused a tsunami, which “resulted in a period of suspension of our operations and those of certain of our licensees in Japan, including Tokyo Disney Resort and resulted in a loss of revenue” (17). The 10-K’s description of The Walt Disney Company’s competitors is rather vague, as the list of “competitive pressures” (19) has bullets which describes competition as follows, “our studio operations compete for customers with all other forms of entertainment” (19). Most of these descriptions discuss the competition for “viewers,” “guests,” or “customers” (19). Specific examples may include competition for family programs, such as competing with PBS or PBS kids for viewership. The Company may also compete with other channels, such as HBO or others, for viewership. The scarcity of natural resources may also affect the company – California is notorious for its water shortages and a dry year could cause the cost of water for the Disneyland Resort in Anaheim to have to pay more, which would increase the Company’s costs. If a hurricane were to land near the Disneyworld Resort in Florida, it would cause the park to close or cause the attendance of the park for that amount of time to significantly decrease, meaning it would reduce revenues for the Company.

Winseck Article

            “Source diversity,” as Winseck writes in his article, is a “measure of the number of media owners in any given area” (34). He also writes that “source diversity” is for “those who see greater consolidation” (36). After originally reading Winseck’s article, I agreed with his concluding thoughts, including that, “source diversity is shrinking” (45). This means that more companies are becoming conglomerates or being purchased by large companies (such as The Walt Disney Company), and that there are less independent companies to choose from. The shrinking of “source diversity” means that The Walt Disney Company, along with other very large companies that have been around for a long time, are buying up different mediums, which contributes to the idea of horizontal integration. The Walt Disney Company now controls media outlets, retail outlets, resorts, theme parks, studios, movie entertainment, etc – they have many companies “across the board,” so to speak. As I read the 10-K, I realized just how much that the Company controlled, and the fact that The Walt Disney Company’s ABC Television networks are able to reach 99% of the television watching United States astounds and also scares me. It shows just how monopolized and concentrated the media market is in our society, and it prevents diversity. It prevents diversity because a rival company would have to have close to as many assets as the Company does in order to attempt to challenge it, which, in my opinion, seems impossible at this point. Winseck also writes that, “the desire to limit risks propels the creation of media conglomerates” (42). A company such as The Walt Disney Company may also attempt to reduce risks by forming a “web of alliances,” in Winseck’s words, in order to protect its assets. The Company would partner with another company in order to provide a mutually beneficial situation where each company would look after each other’s assets, protect each other, while mutually profiting from the agreement. For example, the 10-K states that, “the Company currently has sports rights agreements with the National Football League, college football and basketball conferences, National Basketball Association…” (6). In any of these situations, a Company-affiliated station would air the program, game, or show, which would attract viewership to the station as well as also for the program, since the station is a prominent one which people enjoy and choose to watch.

Hoover’s List of The Walt Disney Company’s Top 5 Competitors

The Walt Disney Company’s Top 5 Competitors include News Corp., Time Warner, NBC Universal, CBS Corp, and Viacom. 

A Review of Sapir and Postman

Both Edward Sapir and Neil Postman provide very interesting perspectives on communication and its relation to society. Sapir explains in “Communication,” in The Encyclopedia of the Social Sciences, that the two important results of the “far-reaching techniques of communication” (77) are that it, one, “increases the sheer radius of communication” (77), and two, “lessens the importance of mere geographical contiguity” (77). The first result means that communication, which consists, according to Sapir, of primarily “language, gesture, imitation of overt behavior, and social behavior” (77), is able to reach people all over the world. The telephone, radio, and television allow for media programs of all different purposes to reach people which were once impossible to communicate with. For example, Radio Liberty and Radio Free Asia allow the United States to influence peoples living under dictatorial or oppressive regimes and inform them of the truths about their own governments as well as about the world. The second result is that communication has caused societies which may be continents or countries apart to be influenced in similar ways through a certain medium, thus allowing these physically distant places to, in Sapir’s words, “be actually much closer to one another than adjoining regions” (77). He says that these two results lead to the “tendency to remap the world both sociologically and psychologically” (77).

            Both of these results of “far-reaching techniques of communication” are applicable to more modern technologies such as social media, for example, Twitter and Facebook. Both Twitter and Facebook allow people to connect with and possibly meet other people who share similar interests and hobbies from all over the world. It no longer matters where an individual lives, as he or she will be able to communicate with someone who lives across the globe with a few keystrokes and mouse-clicks.

            Postman states in Teaching As A Conserving Activity that, “our social institutions do not create information. It is information that creates our social institutions” (40). He argues that curriculum in schools are a “design for controlling and shaping the minds of the young” (38). Postman argues in this chapter that information is of the utmost importance, and information helps to build as well as drive society. He also claims that schools have the power to morph young minds because of the information that they convey, and he compares that to media and says that media has a similar effect upon populations and societies. He also states that, “The dominant patterns of information within a culture… form a substantial part of the ‘genes’ of a culture” (43). This contributes to his argument that information is essential and woven into the framework of culture and societies.

            Postman writes that, “information is not reality. It is an abstraction of it… the printing press, the computer, and television are…metaphors through which we conceptualize reality in one way or another… they will classify the world for us” (39). This can be applied to social media platforms today such as Twitter and Facebook. According to Postman, Twitter and Facebook categorize and morph reality into ways that make it easier for us to comprehend and interact with. My Facebook profile is information about me and is a representation of it, a medium through which my personal details are communicated with another person sitting behind a computer screen. If I had a Twitter page, it would be a “conceptualize[d] reality,” because the world of Twitter is not reality, although the people typing behind their computer screens are. The information shared may be accurate, but Twitter itself classifies information under certain “hashtags,” for example, “#worldpeace,” like Postman stated.