Wouldn’t you love to own a business like Disney? (Well obviously you can by purchasing some shares off the shelf) It’s a brand that makes people and kids happy. Disney makes money off happiness. People hand over good money to people who can make them feel good or change their emotions. Think Tony Robbins, your doctor or the latest movie you saw at the silver screen. But really how does Disney make money?
Disney owns theme parks and resorts in USA (California, Florida), Japan, Hong Kong and in France (Euro Disney). Then they have the range of movies as well as the TV productions and TV shows, and then they have their toys and other merchandise. So where does Disney make money? According to their 2006 balance sheet, Disney made $14.6 billion off TV networks, $9.9 billion off Parks and Resorts, $7.5 billion off studio entertainment and $2.1 billion from consumer products.
Then Disney has the killer income stream off all. Royalties from licensing their brand. Retail sales for the Walt Disney Company is set to hit $26 billion. What are they licensing away? Disney Princesses, Mickey Mouse and Winnie the Pooh, Disney/Pixar’s Cars, Pirates of the Caribbean and Disney Fairies. The company said it plans to expand its licensing business, targeting tweens and its preschool programming on the Disney Channel, and hit movies. Disney shows like “High School Musical,” “Hannah Montana” and “That’s So Raven” are fueling the company’s success. Retail sales for Disney’s tween business is expected to reach $400 million worldwide this year. For example, a line of “High School Musical” merchandise will launch at Wal-Mart for back-to-school with a 52-week sponsorship on Disney Channel that includes in-store promotions, circulars and Wal-Mart’s PRN programming. In addition, “High School Musical 2” will be released in August on Disney Channel and another film in the franchise will hit theaters in 2008. Meanwhile, Disney is rolling out a two-disc CD set, “Hannah Montana 2/Meet Miley Cyrus”, a new DVD, “Hannah Montana Pop Star” supported by a 50-city tour in October. At retail, the franchise will expand its apparel, stationery and home decor line into footwear from Payless Shoes and an expanded line of youth electronics including an LCD TV and electric and acoustic guitars. The company is supporting the franchise with a global publishing program. Disney Fairies books are published in 51 countries and 33 languages. Disney will launch “Fairy Haven” and the “Quest for the Wand” by Gail Carson Levine in the U.S. this summer and worldwide this fall. In addition, Disney Fairies magazine, which is available in 24 countries, will launch in 11 more by 2008. This summer, Buena Vista Worldwide Home Entertainment will launch a global marketing program to support the “Tinker Bell” movie. The campaign includes a range of lifestyle products targeting six-to-nine-year-old girls.
Disney sits at the helm of a licensing bonanza. And that is how Disney makes money. Although it isn’t all smooth sailing for licensors. Back in November 1997, Golden Books Family Entertainment paid about $47.7 million in royalties to Disney over four years. But in 2000, Golden Books pulled the plug on their 70 year relationship between the two companies. Golden Books officials hinted that the Disney license wasn’t as valuable as it once was. Also to note that their company had emerged from bankruptcy around that time. The company ran into trouble in part because discount children’s book publishing is a volatile business, tied closely to licenses for products whose popularity is hard to predict.
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