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Web 3.0 & Walt Disney (Part 1)

Posted on Monday, Nov 5th 2007

Introduction

The Walt Disney Company is a diversified entertainment company. Disney is a Dow 30 company, had annual revenues of over $34 billion in its most recent fiscal year and a market capitalization of about $65.6 billion as of July 31, 2007. Our prior coverage about Disney is here.

It operates in four major business segments – Studio Entertainment, Parks and Resorts, Consumer Products and Media Networks. The Studio Entertainment segment produces, acquires and distributes live-action, animated motion pictures, direct-to-video programming, musical recordings, and live-stage plays to the theatrical, home entertainment, pay-per-view, video-on-demand, pay television, and free-to-air television markets. The Company also owns and operates the ESPN sports channel.

Walt Disney is looking at consolidating its business by selling off non-core businesses (e.g. US Weekly, E! Entertainment, ABC Radio), acquiring companies that are synergistic to its digital strategy (e.g. Pixar, Club Penguin, Cricinfo), and investing heavily in gaming, online and digital businesses. The Company has formed an Internet division – Walt Disney Internet Group (WDIG) to provide strategic guidance, leadership and aid in the execution of its Internet business strategies.

The Company owns and operates a number of sites, which are mostly targeted at children or deals with entertainment, movies and sports. The Company targets children and youth all over the world through ESPN.com, Disney.Com, Family.com, FamilyFun.com, Wondertime.com and Movies.com. ESPN.com is among the top five popular sports sites and Disney.com is a popular Kid’s entertainment and community site. ABC.com provides a number online services including kids entertainment, information on popular TV shows, full episodes of certain shows, games and mobile services. On television, ABC has produced many hits, and the division has managed to integrate the online site of ABC well with some of these shows like Dancing With the Stars.

Revenues in 3Q07 increased 7%, or $571 million, to $9.0 billion, net income increased 5% to $1.2 billion, and diluted earnings per share from continuing operations increased 14% to $0.58. Revenues for the nine-months ended 2007 increased 6%, or $1.5 billion, to $26.6 billion, net income increased 47% to $3.8 billion, and diluted earnings per share from continuing operations increased 44% to $1.80.

Earnings growth was primarily due to increased sales of ABC Studios productions and lower programming and production costs at its broadcasting businesses, higher affiliate and advertising revenues at its cable businesses, higher guest spending at Walt Disney World and Disneyland, higher theme park attendance at Walt Disney World, and success of Pirates of the Caribbean: At World’s End at its theatrical distribution business.

Recently Disney acquired Club Penguin, a kid-friendly virtual world where children can play games, have fun and interact with each other for $350 million. The site has 0.7 million registered users. The Company is exploring many such acquisitions in the field of entertainment and gaming. Disney’s US sports network ESPN acquired specialist cricket site Cricinfo for an undisclosed sum in June 2007. Cricinfo has a global audience of around 7 million unique users each month, publishing news, interviews, live scores, match animations and video coverage. The site is a key acquisition as ESPN is aiming to grow its online audience through niche sites. We will take a look at Walt Disney’s Internet properties in the following posts.

(To Be Continued)

This segment is part 1 in the series : Web 3.0 & Walt Disney
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