Jay Rasulo, Disney CFO, outlines strategy for film production

[crazy4wdw]

From the Hollywood Reporter:

Disney CFO Outlines Strategy, Explains Forgoing Third Party Financing
by Alex Ben Block 1/6/2015 5:19pm PDT

The Walt Disney Company will continue as the only major movie studio in Hollywood that does not seek or use third party financing to lay off the risk on its slate of movies, according to Disney senior executive vp and CFO Jay Rasulo.

Speaking at the Citi 2015 Internet, Media and Telecommunications Conference, Rasulo said it is part of their strategy to focus investment in a limited number of movie franchises, mostly properties from Marvel, Star Wars, Pixar or the Disney-branded films.

"We feel we are strategically stacking the deck toward success," explained Rasulo. "Rather than give that success away by bringing in financial partners and having them experience the upside, we have the capital — we're not a capital constrained company — and we've decided these, each and every one, are good bets and good investments."

He said in any creative endeavor there will be movies that underperform, but they know each of the franchises has a following. "We feel each and every film is more likely to be a hit than not," added Rasulo. "So it's less for us about protecting downside risk — which is what you do when you sell off participations on the financial side — and more about being able to harvest what we believe is the potential upside of those films."

Rasulo said Disney also looks at movies differently than most other companies. They see the release in theaters, on TV and other platforms as only part of their business. "The back end is what the Walt Disney Company is good at," said Rasulo. "The consumer products business, the theme parks and resort business, the interactive entertainment business — all use the feeder that comes out of the theaters and the Disney Channel."

He cited Frozen as an example of a movie that has driven their business around the world and brought revenue in everything from theaters to toy stores and theme parks.

"It fundamentally changes the economics of the film business for us," added Rasulo, "and when you look at these ultimates (how much they think a movie will make eventually), you have a lot longer tail on them."

See more Hollywood's 100 Favorite Films

Rasulo said they take a similar long-term view of the theme park business and investments in cable channels and content, some of which, like sports rights, require significant capital investment upfront.

"There is a long-held belief at Disney," said Rasulo, "that you don't invest around business cycles, because whatever we put out there, whether it's a film, a television show or the Disney Channel, or a show on ABC Family, theme parks or cruise lines, are long-term assets that have a long life and we hope have long-term affinity with consumers."

Rasulo said CEO Robert Iger laid out the strategy some seven years ago — what he called the three pillars: great creative products, use of new technology and expansion internationally

One example of the use of technology, Rasulo said, was the deal with the Dish Network that this week resulted in an announcement about Sling TV, which will carry ESPN and other Disney networks.

"Sling TV is a product targeted at a very specific customer," said Rasulo, "that is television interested but a broadband only household. That is a fairly narrow target and this is a product that is really targeted. It does not substitute for the value of the extended basic cable package which we still believe and most customers in America still believe is an incredibly strong value."

Pushed to comment on the long-term prospects for cable networks as these over the top players siphon off customers, Rasulo said, "We love the cable business. We think it's a great value proposition for consumers."

He noted Disney has made massive investments in cable, not to acquire channels, but to boost the existing portfolio by acquiring more sports rights and programming and then using technology to "expand our business model."

Asked if he was concerned about huge investments in sports rights at a time the business models may change, Rasulo said "not all sports cable channels are created equal."

He meant that a regional sports network is dependent on the teams it carries which he believes limits its potential; while ESPN as an all sports channel targets sports fans and has unlimited upside. He said that gives them an advantage.

He defended the money spent on sports rights by pointing to the current college football playoffs, where Disney owned outlets have 33 or 36 games, which he said has driven viewership. "We look at it as a strength," added Rasulo, "not a vulnerability."

As an example of how technology can make a difference, Rasulo cited the theme parks where they have introduced an app called My Magic Plus in the last year or so. "People who plan spend more time with us on their trip to Orlando," said Rasulo.

Disney's strategy going forward is to do less not more, he explained, but to do the things they take on in a bigger way and all over the globe. "Narrowing our focus," Rasulo called it. "More investment in properties we think have legs."

He said they have cut out a lot of businesses that were "not big enough for a $50 billion company to pursue."

 

[Yellowstonetim]

I am stoked for the future! These guys sure know what they are doing. They can have another Lone Ranger or two in the next few years and it won't even register on their profit meter with the movies they are releasing.

And I will say it again: The 3 pronged plan is genius and paying off in spades. I know people wanted more in the parks sooner, but now it is going to come and it will come from a very solid profitable company ready for the long run.

 

[lockedoutlogic]

I am stoked for the future! These guys sure know what they are doing. They can have another Lone Ranger or two in the next few years and it won't even register on their profit meter with the movies they are releasing. And I will say it again: The 3 pronged plan is genius and paying off in spades. I know people wanted more in the parks sooner, but now it is going to come and it will come from a very solid profitable company ready for the long run.

taking a lot off of quotes that can easily be forgotten, aren't you?

 

[wallrock]

Pretty easy to focus on movie finances and avoid third party involvement when sponsorship is the name of the game for anything from an attraction to a coffee shop in the parks.

Goes to show that Disney is indeed moving more and more to a company where media is the dominant form of revenue.

 

[lockedoutlogic]

Pretty easy to focus on movie finances and avoid third party involvement when sponsorship is the name of the game for anything from an attraction to a coffee shop in the parks.

Goes to show that Disney is indeed moving more and more to a company where media is the dominant form of revenue.

Indeed...

Narrowing the focus...Also is a no-brainer, corporate statement.

If your inclined to believe a company uses dwarves to peddle "magic"...it would possibly mean that they'll ramp up quality under this " narrow" plan

If you think that they are soulless and being ruined by accountants and dividends...you think that "narrow" focus means an excuse to lower investment in the products and would lead to more shaving for profit.

Most of us are not centrists...as we hang out on some to degree on one wing or another... Occasionally switching from to starboard..

Deep down...we all kinda hope that the truth is dead center - it's the only way we all get "some" of what we want and have a shot at "most"

It's times like these where I wish I knew I was at least 50% wrong...but flooding frozen everywhere...buying Star Wars...and saying things like "things are coming...but we want to do them right...so time is on our side (it's not on the consumers)...it'll be awesome (brow scrunched)"

...these things do not instill confidence if you don't go into the conversation already buying the argument before its even made. On either side.

 

[Yellowstonetim]

The many quotes regarding the 3 part plan have been around for awhile. What I am stoked about are the clear results we are beginning to see. Marvel, Star Wars, Pandora, Disney Animations renaissance, Disney Tokyo, etc... and soon the Hollywood's Star Wars Studios Theme Park.

Investors in movie projects spread the risk and also spread the profits, directly reducing Disney's profits. Sponsorships of rides/pavilions decrease initial costs by a large margin, but do nothing directly to affect profits. That is why it is so hard to get sponsors for pavilions of any kind anymore.

Media has always been the priority. Disney as a brand existed first in cartoons and films and both DL and WDW were populated with things from the films. I am glad they are focusing first on media and then second on everything else. It is all about the media.

And remember; Walt had lots of accountants and was all about money. If it didn't remain profitable it wouldn't be here. The more profitable the better things will be for we fans of the parks.

Lockedoutlogic, I KNEW you were going to post!

Cheer up buddy, it's all gonna be good.

 

[lockedoutlogic]

The many quotes regarding the 3 part plan have been around for awhile. What I am stoked about are the clear results we are beginning to see. Marvel, Star Wars, Pandora, Disney Animations renaissance, Disney Tokyo, etc... and soon the Hollywood's Star Wars Studios Theme Park.

Investors in movie projects spread the risk and also spread the profits, directly reducing Disney's profits. Sponsorships of rides/pavilions decrease initial costs by a large margin, but do nothing directly to affect profits. That is why it is so hard to get sponsors for pavilions of any kind anymore.

Media has always been the priority. Disney as a brand existed first in cartoons and films and both DL and WDW were populated with things from the films. I am glad they are focusing first on media and then second on everything else. It is all about the media.

And remember; Walt had lots of accountants and was all about money. If it didn't remain profitable it wouldn't be here. The more profitable the better things will be for we fans of the parks.

Lockedoutlogic, I KNEW you were going to post!

Cheer up buddy, it's all gonna be good.

I know you have a strong background here and I'm not gonna patronize you... But the Walt comparison falls flat...

He loved money and had no problem
Taking it...but he didnt have the "limits" of Investment that the modern stock market (ie corrupt and built on lies ) places on the suits now.

They may be well intentioned... But they have firm/hard lines they won't cross.
You just hope that those limits don't fall on this side of the line of "creativity"

And FYI... Eventually you'll come my way...
You'll accept that you should be skeptical of
Them and make them EARN your money...instead of believing they're "Inherently good".

The truth shall set you free.
Strong profits does not mean a well built Disney... It never did and it never will.

The large gambles/ investments yielded the best results for the consumer... Even up through evil Michael.