Under CEO Robert Iger, Disney has followed an acquisition-led growth strategy. T
ID: 470448 • Letter: U
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Under CEO Robert Iger, Disney has followed an acquisition-led growth strategy. This corporate strategy turned Disney into a more diversified company. Revenue streams from its various activities (box office, home entertainment, theme parks, cable TV, toys, licensing, and so on) have become more stable and predictable. Being more diversified also allowed Disney to compensate more easily for losses from flops such as the sci-fi movie John Carter. Disney has also shown superior post-merger integration capabilities after acquiring Pixar, Marvel, and Lucasfilm. Disney managed its new subsidiaries more like alliances rather than attempting full integration (which could have destroyed the unique value of the acquisitions). In Pixar’s case, Disney kept the entire creative team in place and allowed them to continue to work in Pixar’s headquarters near San Francisco with minimum interference. The hands-off approach paid huge dividends: Although Disney paid a steep $7.4 billion for Pixar, it made some $10 billion on Pixar’s Toy Story 3 franchise revenues alone. As a consequence, Disney has gained a competitive advantage over its rivals such as Sony, and has also outperformed the Dow Jones Industrial Average over the last few years by a wide margin.There are clouds on the horizon, however. The media industry is being disrupted: People spend much less time and money watching movies on the large screen, and spend more time consuming content online via YouTube, Netflix, Hulu, and other streaming services. The only large-screen movies that have done well recently are sequels in existing franchises such as Sony’s Skyfall, the 23 rd installment in the James Bond saga, Warner Bros.’ Batman sequel The Dark Knight Rises, and Disney’s own sequels in the Pixar and Marvel brands. Soon Disney will be adding the next installment in the Star Wars trilogy.
1. Why do you think Disney was so successful with the Pixar and Marvel acquisitions, while other media interactions such as Sony’s acquisition of Columbia Pictures or News Corp.’s acquisition of Myspace were much less successful? 2. Given the “build-borrow-or-buy” framework discussed in the Implications for the Strategist section, do you think Disney should pursue alternatives to acquisitions? Why or why not? 3. Do you think Disney’s acquisition-led growth strategy is sustainable? Are there sufficient “Mini-Disney’s” that Disney can acquire? 4. What effects do you expect from the continued disruption of the media industry on Disney? How should Disney respond?
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