The Force is with Mickey Mouse

The marriage between Disney’s “Business Model Canvas” and its five core operating assets should allay fans’ concerns that Star Wars has fallen to the Dark Side.

mickey and star warsGrowing Up a Star Wars Fan

It was 1995 and at the age of five my life was forever changed—I fell in love with the epic space opera Star Wars Episode IV: A New Hope. That Halloween I dressed up as Darth Vader and vividly recall making some candy fly into my trick-or-treat box through nothing more than my mastery of the force! My Star Wars mania accelerated as I immersed myself in Star Wars books and video games, all as I fantasized about a galaxy far far away. It should come as no surprise that I, along with many Star Wars fanatics, approached the announcement of Disney’s $4 billion acquisition of Lucasfilm [1] and Disney’s intent to create another Star Wars trilogy [2] with moderated skepticism. It was as recently as 2008 that George Lucas, my Jedi hero and the creator of Star Wars, stated that “there will definitely be no Episodes VII-IX…that’s because there isn’t any story” [3]. Surprised as I was, I resolved to dig into Disney and understand if Lucas had, in fact, fallen to the dark side.

Disney’s Business Model Canvas—A Recipe for Success

Disney's Business Model 1957

My first foray of research led me to Disney’s Business Model Canvas [4], which looks for parallels between Disney’s five business segments—Parks & Resorts, Media Networks, Disney Consumer Products, Disney Interactive, and Studio Entertainment. At the core of Disney’s strength is the firm’s ability to reinforce and align one business segment with another, enabling Disney to focus on finding powerful creative assets that generate fundamental value across all of Disney’s entertainment assets. This idea is perfectly illustrated in the sketch above from the Disney Archives, originally published in 1957 [5]. This diagram, while updated and rebranded as the Disney Business Model Canvas, outlines that Disney has a business model advantage wherein the firm is able to not only create synergies with acquired assets, but also unique synergies across all operating assets that no other competitor can. For example, in recent history Disney acquired ABC & ESPN (1995), Fox Family (2001), Pixar (2006), Marvel (2009), and Lucasfilm (2012). These acquisitions have led Disney to 40% revenue growth in the last decade with an operating margin of 20.50%, which is a significant out-performance to its industry comparables [6]. From a stock price perspective Disney has increased from $23.75 to $114.24, a 381% net increase and 17.01% 10-year CAGR. [7] However, as a die-hard fan I care more about the creative results Disney has delivered, not the firm’s financial dominance, right?

Disney’s Operating Assets—A Boon for the Star Wars Universe

Arguably, wrong! Disney’s financial success hinges on its ability foster content-creation. A case in point is Marvel Studios. Since Disney acquired Marvel there have been seven new movies released from the Marvel brand, including the Avengers and Iron Man 3, which grossed $1.5B [8] and $1.25B [9], respectively. Incredible financial results aside, the Avengers scored a 92% [10] on Rotten Tomatoes and Iron Man 3 a 79% [11]. Additionally, as part of the Walt Disney Company, Marvel fans now have the ability to live out their creative fantasies through a host of additional entertainment including: video games, books, T.V. shows, and toys.

Star Wars' Content Galaxy

Now to the critical question: can we expect the same results for Star Wars? In short, YES! When Disney acquired Lucasfilm it set in motion a galaxy-sized plan (see above) that is expected to more than double the creative content of the entire Star Wars universe over the next five years by leveraging all five of Disney’s operating assets [12]. Examples include the newly released Battlefront video game and plans for Star Wars attractions at Disney’s theme parks. For fans this means more ways than ever to interact with the canon. Fans that are still skeptical can rest easier knowing that Lucasfilm was purchased with 40M Disney shares making George Lucas Disney’s second-largest non-institutional shareholder, meaning the creative and financial success of Star Wars ties directly to Lucas’ own success [1].

The Light Side Prevails!

Disney will triumph over the Dark Side because its unique business model enables Mickey to acquire and multiply existing content bonanzas across its five operating assets to create more value to fans and shareholders than any competitor. Personally, I couldn’t be more excited! Now I can finally live out my child-hood Darth Vader fantasies at Disneyland, online and once again on the big screen!

 

REFERENCES:

[1]- http://www.usatoday.com/story/money/business/2012/10/30/disney-star-wars-lucasfilm/1669739/

[2]- https://www.youtube.com/watch?v=sGbxmsDFVnE

[3]- http://www.polygon.com/2015/1/13/7537523/george-lucas-new-star-wars-trilogy-episode-7-lucasfilm-disney

[4]- https://movindustry.files.wordpress.com/2011/10/disney1.jpg

[5]- https://hbr.org/2013/05/what-makes-a-good-corporate-st

[6]- http://www.gurufocus.com/news/243063/walt-disney-a-sustainable-business-model

[7]- http://finance.yahoo.com/echarts?s=DIS+Interactive#{%22range%22:%2210y%22,%22allowChartStacking%22:true}

[8]- http://www.boxofficemojo.com/movies/?id=avengers11.htm

[9]- http://www.boxofficemojo.com/movies/?id=ironman3.htm

[10]- http://www.rottentomatoes.com/m/marvels_the_avengers/

[11]- http://www.rottentomatoes.com/m/iron_man_3/

[12]- https://backissues.ew.com/storefront/2015/star-wars-john-boyega/prodEW20151120B.html

Source of featured image: https://www.youtube.com/watch?v=AZi_OIcxp44

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1 thought on “The Force is with Mickey Mouse

  1. Simeon,

    Thanks for an interesting analysis of the integration of Star Wars to the world of Mickey Mouse. I, like you, am a long-time fan of Star Wars and I’m extremely excited about the Force Awakens (combined among the various types, I have probably seen the trailers close to 200 times!). However, differently from many Star Wars fans, I was never concerned about this acquisition. Disney had proven, with ample credibility, that it could acquire a well-esteemed IP of characters and stories (like Marvel) and deliver high-quality content offered across a myriad of platforms for fans to enjoy. Having watched the Force Awakens trailers, listened to the comments of Bob Iger / Kathleen Kennedy / JJ Abrams about the importance of the franchise, and observed the many different ways in which Star Wars stories will be delivered by Disney (as you well point out), leaves me at ease that the future of the saga will be in good hands.

    My question to you is, what do you think has been different about Disney’s business model that has allowed it to understand exactly what customers need and when / how they want it despite not having a track record in a given area (ie Marvel, Star Wars, ESPN)? Would you agree that it seems that Disney has understood the high-demanding Star Wars fans even better than George Lucas ever did after Episode 6?

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