23 Jan Three Lessons Tech Startups Can Learn from Disney
There is much to learn from the journey of the Walt Disney Company through its almost one century of existence. Being one of the most valued US companies today, let’s see how Disney proved that Mickey Mouse money is serious money after all.
It’s not just the revenue
In 1993, Disney acquired Miramax, an independent film producer, and distributor. Some of the known classics brought by Miramax are the 1994 Quantin Tarantino film, “Pulp Fiction” and the Ewan Mcgregor led film “Trainspotting” in 1996. These movies brought in multi-million dollars in sales despite being low budget films, which pretty much explains the Miramax business model — small production, big bucks.
At that time, the acquisition was an attempt by the then Michael Eisner-led Disney to expand its market beyond the family oriented, children friendly audience. The films made were not exactly the typical Disney films you would expect, a number even quite controversial. In 1994, when Miramax released the movie “Priest,” a film with a gay priest as the lead character, multiple conservative religious groups in the United States boycotted Disney films for multiple years.
Since then until the early 2000s, Miramax has been successful in bringing in blockbuster hits, taking part a significant share in Disney’s revenue from its film entertainment business unit. Despite this fact, when Bob Iger assumed his role as CEO, he made the decision to sell it off. In 2010, Miramax was sold for $660 million. After selling Miramax, Bob purchased Marvel Studios and Lucasfilm.
Disney has businesses beyond film entertainment. From parks to retail stores, to even hotels. Bob Iger wanted to integrate them in a way that one business unit can benefit from the other. With Marvel characters like Ironman, he can create Iron-man themed rides in Disneyland and Iron-man merchandise for its retail stores. He won’t be able to do the same for a “Pulp Fiction” character, more so for Trainspotting. Bob Iger knew it wasn’t just about the revenue, it’s also how the vision makes the different business units cohesive.
For most tech startups in the Philippines, the default solution to solving runway issues is to raise money. One key lesson from Disney is that there are multiple ways to “pluck the buck.”
During Eisner’s time, Disney needed to raise $31 million to expand their Disney parks (Disneyland, etc). In the 1980s, this amount is staggering. Instead of raising outside capital, the group looked into the possibility of raising this money through their current businesses.
Disney studied how their Disney park goers perceive the value they get from their Disney parks. From this study, they realized that customers consistently ranked the value they were getting for the price of the tickets very highly. This gave Eisner the idea to increase the price tickets of the parks. Back then, the group figured out that by just increasing the ticket prices by $1, they would be making an additional profit of $31 million per year! The solution made sense, and it saved the company from possibly diluting themselves by adding more investors.
Tech disrupts if you don’t do anything about it
Between 2011 to 2016, Disney’s broadcasting and cable business units have seen a massive decline in subscribers and revenues. This period was when over the top streaming services like Amazon Prime, Netflix and Hulu were rising. In early 2017, Netflix’ 49.4 million subscribers in the US is more than the combined 48.6 million subscribers of the top 6 US cable companies.
Disney realized the threat to this and decided to participate in multiple ways. One is by having a stake in Hulu. With their recent acquisition of 21st Century Fox, Disney now owns a controlling 60 percent in Hulu. They are now planning to fuel more investment to the company for it to be able to produce more original content to combat Netflix’s budget of $8 billion per year in creating original content.
Coopetition — you learn from the enemy by being within. Disney allowed its content to be licensed by Netflix. Today, you can watch a wide variety of Disney content from Marvel films to animated children shows on Netflix. For a while, this seemed to be a relationship that works for both parties, but in 2017, Bob Iger announced that it was pulling out its content from Netflix (which is a big bulk of its content library) to move them to their own streaming service, Disney+. This is actually what triggered Netflix to double down in creating its own content, and on the other hand, shows how Disney always had the upper hand even from the beginning, being the owner of the content.