Which Disney death led to their current Dark Ages?

[AlanH]

There are two issues here although they are related. The other thread is one I started http://www.disboards.com/showthread.php?t=912787.

In that thread I agreed with Raidermatt that Disney has been moving away from the business of content creation to that of content distribution. Being primarily a distributor of content put Disney in the same boat as other entertainment distribution companies. So when bad times hit the industry, it hit Disney as well. Perhaps if Disney had not been moving away from content creation it would have fared better.

That said the strategy does affect what Disney considers "core" vs "non-core". For example, as we discussed in the other thread, WDI is no longer a core business of Disney since it is a creator of content.

 

[YoHo]

Try reading the threads in question Scoop, all those questions have been discussed.

I don't see why your incorrect deconstruction of a certain element's point of view has anything to do with this topic. Matt is saying that Disney no longer does things in the way tha produced good results. You insist on equating that to an abandonment of core sections of the business.


To address your asked and answered questions, As has been pointed out, Content distribution is a far more precarious business to be in and is not a very useful business for a movie studio to be in as the point of a movie studio is to create movies.

At the risk of muddling my post it actually is a change of core focus. Disney was in many respects an engineering company. That engineering company created enduring themeparks beloved the world over. Now they are becoming a content distribution company. Why? They certainly have made money hadn over fist as an engineering company.

 

[raidermatt]

Obviously, because its Raidermatt and my beliefs about his ultimate motives as a poster,,,

Which you believe are?

I'm simply trying to understand how he can claim both things are unrelated.

The outsourcing of core businesses is a subset of "everything" else. So yes, they are related, but you can't apply every argument on this subset to "everything" else.

Certainly my hyperbole did not extend to the overall "Eisnergeddon" concept, so its not helping matters when you make that leap on your own.

It's really too bad that it was Raidermatt who made the post I disagreed with, because, had it been most anyone else, it would have been a point of clarification/discussion rather than contention.

Sorry, I'm not sufficiently motivated to create new ids to help your comprehension.


Now, does it make sense for a company to internally develop anything, or does it even matter?

Of course, it depends. There's several layers.

One is what type of company do you want to be? Are you a company that creates content, and then looks for the best way to distribute it? Or are you a distribution company, looking for the appropriate content for your distribution capabilities?

To use your example of Pixar, clearly they are the former. Their strength is content creation. So if they should decide to start outsourcing their core functions, such as story development and animation, that would be a huge risk, and likely not the optimal strategy.

Disney WAS a similar type of company at one time, though they also eventually built their own distribution channels. The key to them differentiating themselves from others was clearly the content, but they also sought to minimize their reliance on other distributors. At least in part because of hard lessons learned by Walt early on.

As previously stated, Disney has moved more towards being a distributor, and is outsourcing what was at one time key core functions. But I suppose if you look at them as a distributor, then it could be argued those are no longer core key functions. If that's what they want to be, a distributor, then I suppose it makes sense to reduce or eliminate things like Imagineering and internal animation.

Should they be a distributor? As has also been previously stated, both content creation and distribution are valid business models. (Whether combining those on a large scale is valid or not is another question, as all of the current companies trying that are struggling to make it work.)

But while they are valid business models, I can't help but to continue to point out that we are Disney "fans" because of their success in content creation. That content creation has also been the reason for their brand strength that other studios/media companies have never achieved. I simply can't agree with a company who has spent decades successfully differentiating themselves from distribution companies abandoning that strategy to become another distribution company.

Maybe they'll eventually correct the ship financially, and actually figure out how to please investors (though after 10 years of stagnation, at some point you have to question that as well). If they do, great. But the opportunity cost of abandoning what made them a company with legions of fans discussing their every move on discussion boards like these, and consequently dropping enormous amounts of cash on Disney products, is incalculable.

 

[raidermatt]

If Disney had remained a company where creativity was cultivated, this question would seem ludicrous. The only reason it is a valid question to ask is because Disney has turned into a distribution company, and a focused distributor SHOULD be asking itself whether they should be creating anything.

Nobody is asking whether Pixar should be abandoning internal animation in favor of looking for product from outside animation companies. Why? Because Pixar still focuses on its creative content and does it well. Even if Pixar decided to build its own distribution arm in favor of relying on making deals with other distributors, there would still be no question that their key focus still needed to be on their content creation.

That's a position Disney WAS in at one time. However, over time, the turned from using distribution to maximize the profitability of their content to making distribution their core business.

So, given today's Disney, with today's management, yeah, they probably should stick with distribution. Its all they know. But that still doesn't change the fact that they never should have taken that road in the first place, and that if somehow, someway, we could get a management team that understands that and has the talent to act on it, Disney would be far better off.

 

[raidermatt]

We've been through this before... No, its not easy. Then again, neither is distribution.

They are merely different business models. You could argue that content creation is more "difficult", but as ususally is the case, more difficult also means higher potential reward (and yes, risk). But lets not overstate that difficulty either. True, nobody has replicated Walt's success on the same scale, but two points with that. (1), While maybe nobody has replicated the scale, the creativity is still there. As you point out, SOMEBODY is creating, they aren't doing it for the same company (but could they?)(2), Disney doesn't have to replicate what Walt did, which was start from scratch. They had the processes and culture in place. Sure they had some creative issues post-Walt, but the primary reason for their troubles was not WHAT they created, but HOW they handled what they created, and how they utilized their resources.

Yes Walt was the reason for Disney's phenomonal success, but that doesn't mean nobody else was capable of successfully continuing the strategy.

And yes, as I've already noted, the change from content to distribution was not sudden and has not yet removed all creation from the company. But certainly it has had a huge impact on two very key areas, imagineering and animation.

 

[cristen]

You see though, in my opinion, Disney as a company never "created" anything. At most, since Walt died, it has been a vehicle for creative people to use.

An Imagineer doesn't come up with a great idea because they are an Imagineer. It's because they are a creative person. So, Imagineering is one vehicle to express that creativity, but that's all it is--a vehicle. Thus, it doesn't surprise me when Eddie Sotto's post-Imagineering work is more creatively compelling than his Imagineering work.

Same with animators. Post-Walt, Disney has never created anything. Individuals have. Just because they worked under the Disney banner doesn't make their stories more compelling--unless someone is truly a brand monkey.

So, for me, if Disney World can create more compelling and creative attractions, shows, resorts, whatever, by using independent contractors, then have it--go for it.

We, as the guest/consumer win when the result is great. The means may be interesting but ultimately they don't matter because how the magic gets from backstage to on stage for the guest is not a matter of show.

 

[BRERALEX]

what they said ^

 

[YoHo]

Chad, by your logic, all US Technology firms should fire thier engineers and just OEM from Taiwan. IBM never created anything, Intel. Never created anything. They were just vehicles for talented engineers So if those engineers go elsewhere, or Taiwan Inc. Makes a cheaper widget, then IBM and Intel should just shut down engineering and OEM the product. Who cares as long as it's good quality.....Of course, they'd have less quality control, and significantly less control of supply and ship dates and productizxation dates. Oh and if something goes wrong, the process to fix it is significantly more difficult. Oh and maybe a competitor might get a look at our plans because of poor security on the server....etc.etc.etc. But still, why should they create their own product?

 

[YoHo]

Perhaps this more clearly illustrates my position

 

[BRERALEX]

then they do a survey and find the music really doesn't help with the rowing. so they fire that dude.

They also see that now they don't need such a large boat with all that extra room. Let's sell the big one and get a smaller one.

The following year why own the boat let's lease it.

Forget the lease and the help let's outsource it. Until they are left with a shell of what they once were.

I like this game!

 

[raidermatt]

IF THEY CAN EXECUTE BETTER

Once again, the only reason this is an issue is because Disney has lost its creative focus, which is why there seem to be so many more appealing options than internal creative development.

When it becomes apparent that others are better than you are at your core functions, you have two choices. One is to improve your own work. The other is to get into a different business. That latter is not always the best choice.

Since we like to use Pixar as an example, sure, when you look at things now, "outsourcing" animation to Pixar seems like a pretty good option. But if Disney had the same internal capabilities, the choice wouldn't be so clear. We'd be saying why share profits with Pixar when Disney can produce the same thing internally and keep all of the profits for itself.

Further, its not a simple case of axing all the creatives and then hiring them back as contractors. Disney is now in competition with every other distributor for their works, just like in the Pixar situation.

Again, distribution has its place, but there is tremendous benefit to creation as well. Even the distributors know this, which is why they've tried to marry content with distribution. They realize it is more profitable to own what you distribute. The problem is, the distributors don't really know how to create the content. Disney, however, was the exception. They started as a creative company and built its own distribution capabilities. They had the ability to pull this off if they had maintained their creative focus.

Instead, however, they have focused on distribution and have adopted that mindset to the point that their creative force has dried up in many areas, and external options seem so much more appealing.

Again, all of your reasons make sense for a distributor who can't create content to match what's available elsewhere. The problem is, in Disney's case, they didn't have to let things get to that point.

 

[DoxaRich]

The more I read about this, the more I think there are to two facts we are failing to realize. One was Walt, the other was the day and age in which he lived. Walt was a creative genious who was blessed to be born in a time when there was nothing like what he imagined could be. He didn't just move the bar up a few inches, he took it to Olympic heights. He also lived in a time where 5 percent ROI was acceptable.

The competion has spent the last 35 years catching up and even surpassing the staggering lead Walt left the company. This was easy to do for at least two reasons: Walt was no longer the guiding light of the company and also because it's easy to duplicate what already exists.Walt left a blueprint Helen Keller could follow.Henry Ford revolutionized the automotive industry. Every new auto manufacturer to some extent follows his assembly line innovation but the first car Hyunday (sp) produced didn't have a crank on the front of it.

Disney does not - and never did - have a monopoly on creative talent. So now it comes down to business models.An underlying theme to many threads on this board has been that Disney is not Disney if it does business the way other companies do.I'm sorry, but I don't think even Walt would support that theory. I can't imagine he never saw someone else doing something a better way and didn't borrow from their example.If I've learned anything at all about Walt it's that he was fluid,flexible,not afraid of change and was always looking for a better way.For all we know he may have thought outsourcing was the greatest thing since the talking mouse.

Personally I would like see Disney keep things in house. Maybe if I owned a few million shares I'd feel differently. I believe Disney will not only survive but also thrive if it picks the right companies to partner with - ala Pixar.To some of us it may not feel like the same Disney we grew up with, but that's something we have to get over.

 

[raidermatt]

I can't imagine he never saw someone else doing something a better way and didn't borrow from their example.

The problem, however, is they are not borrwing from the best examples. They are borrowing from the easiest examples.

Look, this would be a different discussion if Disney were succeeding financially, meaning the stock was doing well over the long term. I would still believe that they could be doing better, but at least there would be some results to support the strategic direction Disney has taken.

If the company is performing well, then you could point to that and say Disney has no choice but to do things this way, and its working. Again, I would disagree that its the optimal direction, but I realize I would have an even more difficult time than I have now.

But its not working. I'm not standing here alone asking you to ignore a soaring stock price and take a leap of faith on an untried business model that nobody else is following. You can't say Disney has to do certain things because the environment demands results when its been proven that doing those certain things aren't bringing the desired results.

Now, you can argue like Scoop that they just need to make better decisions, but then you also have to look at the fact that none of the big players in this industry have figured how to make this model work.

With regard to Walt, we can't just sit here and say that since we don't know for sure what he would have done, we have to support the current strategy. Those two statements have no logical relation to each other. But you can look at how he did business and understand that the company was content driven, and that he understood the value in that if you did it right. That has not changed. The content still has to be created. Somebody is going to do it. Give me a solid reason why Disney can't do it.

Let's also remember that they do still make some efforts at creation, though with mixed results. Are you calling for an end to that, because they should be looking for other companies who can do it better? Should they even be bothering with Chicken Little? If so, why?

 

[YoHo]

By the way, John, I agree that IBM or any other company---IF THEY CAN EXECUTE BETTER--should certainly not stick to their increasingly outdated employment practices.

Offshore, outsource, you name it.

Great attitude for a self centered consumer (by which I mean any consumer typically, not calling you specifically selfcentered) but we're talking about how to make Disney a successful company, not where our favorite ride comes from. The contention is that DIsney will struggle to be successful if it outsources core compitency and that this is typically seen in other industries when it happens.

Engineering talent is a corporate asset just like a corporate headquarters building or a manufacturing line. getting rid of such an asset has profound effects on your businessmodel just as moving corporate headquarters would (ask Seattle or Chicago vis-a-vis Boeing)

 

[YoHo]

Now, you can argue like Scoop that they just need to make better decisions, but then you also have to look at the fact that none of the big players in this industry have figured how to make this model work.

And this is the crux.

You get two responses here
1: It's what everyone else is doing, or
2: They just need to do it better.


Well maybe if I jump off the bridge better then my friend did I won't die on impact.

There is no proof that Disney's business model which is a mimic of Warner Brother's, Viacom's, Sony's etc.etc.etc works, So much so that Viacom is changing their corporate structure.

But if Disney just EXECUTES BETTER, then they'll make this failed model work.

Sounds like the Kind of logic Dilbert's pointy haired boss would use.

 

[DoxaRich]

ABC is making money. ESPN is making money. The parks are making money. The Fab Five, Pooh and the Princess' are making money. Baby Einstein is making money. Most divisions are making money. Disney is paying dividends. P/E is very good. Analysis upgrade DIS to a buy.How many quarters of double digit growth. And yet the stock price is stagnant. I don't think outsourcing has anything to do with the stock price one way or the other.

If Valiant had been a Shrek, would that change your opinion on out sourcing ?

If Chick Little is a failure, will that justify out sourcing ? If it's a winner will FA remain 100% in house ?

As for your last question, I've already said I'd like to see Disney keep everything in house but probably more for sentimental reasons then a business one. I think Disney needs to do both. Out sourcing the RIGHT products can be a highly profitable, low risk endevour. But it has to be balanced with a strong in house product also. Why do Chicken Littles ? To show the competition you still can. To let the Pixar's of the world know they'll never have Disney by the family jewells because they can make a product that Disney can't. With a strong in house product Disney can enjoy the profits of both business models.

 

[DoxaRich]

Yoho, give the Bridge hyperbole a rest. It was a silly analogy when I was 13, it's even moreso now.

 

[raidermatt]

Why do Chicken Littles ? To show the competition you still can.

Come on, do you really think that kind of motivation is going to result in solid content creation? (It hasn't so far).

And yet the stock price is stagnant. I don't think outsourcing has anything to do with the stock price one way or the other.

Of course it does. Every business decision ultimately has an effect. And outsourcing core products is a pretty significant decision, don't you think?

Its not enough to just say they are making money. If we are going to talk about financial performance, stock performance is the bottom line. It has no bias, and it puts the company's performance in the proper perspective.

If Valiant had been a Shrek, would that change your opinion on out sourcing ?

Of course not. I've already said that even if the company's performance under the current model was strong, I would still believe they could be doing better. But then again, Valiant wasn't Shrek. Even if you support the model, you should be up in arms about the execution. And as YoHo points out again, how many companies have to fail to make the model work before we can agree it might not be the best model?

If Chick Little is a failure, will that justify out sourcing ?

To me, of course not. I'm not very confident, however, that Disney agrees. After all, their overall struggles with animation have not given them a new resolve to show the competition Disney can still do it, but instead has resulted in a "ramping down" of internal animation. I don't think they are following the strategy you think they are.

 

[raidermatt]

If you have a bridge phobia, or a hyperbole phobia, then how about:

If somebody else goes in the wrong direction, will I be better off going that direction, even if I travel better?

The point remains, and there's nothing silly about it.

 

[YoHo]

Why would a get rid of such an apt comparison?