The House the Mouse Built

Last month I talked about the reasons behind Disney's buying spree, from a marketing perspective: With a diverse range of properties, there's less likely parents and kids will suffer Disney fatigue. Here is why it makes sense from a financial perspective, but from the marketing view as well. It all comes down to that old chestnut: Content is king:


The acquisitions of Marvel and Lucasfilm will also bolster the company's theme parks as well. Iron Man, Hulk, Indiana Jones, and Darth Vader provide a draw for a wide range of age groups that will visit the parks and cruise lines each year. And it's big business.

Parks and resorts are Disney's second-largest business, generating 30.6% of the company's revenue in the past fiscal year. The studio entertainment segment generated just 13.8% of revenue and just 7.3% of operating income. If we assume that studio entertainment's $722 million of operating income continues, it would take 21.3 years to pay for the three acquisitions highlighted above, so Disney clearly thinks there's money to be made elsewhere and parks and resorts are a likely key.

Then of course there's that other old warhorse of capitalism, the middleman. With so many varied properties in its portfolio, there's less need for it to partner in the long run with third parties to distribute that valued content:


I think that Disney is beginning to position itself as a multidimensional provider of content that will have a lot of bargaining power in the future. The company recently shut down Disney Movies Online, a movie streaming service that never quite had the features consumers demanded. But the service was largely outsourced, and sources say that Disney is developing Disney Movies Anywhere, a service that will have more access across multiple devices.

So, let's assume that Disney creates a way to download or stream Disney content on your tablet or smartphone. There now becomes less need for Netflix, Disney could bypass iTunes, and even cable companies could lose a lot of bargaining power. WatchESPN is already available with your cable subscription; what if Disney offered that on its own?

The bottom line is that Disney has a lot of flexibility as our digital media future unfolds and the addition of popular content gives the company that much more bargaining power.

All I know is that this company will likely be liberating my dollars from my wallet for years to come.