The Walt Disney Company has a diversified set of businesses in movie-making, television show production, media distribution (e.g., ABC and ESPN), interactive and theme parks (e.g., Disneyland, Disney World, Disneyland Paris, and Shanghai Disneyland), and retail and consumer product sales. It is the second largest mass media producer after Comcast, which owns NBC and Universal Studios. While other more focused media content providers such as Discover Communications, CBS, and Viacom have seen decreasing revenues because of lower ratings and TV ad weakness, Disney was strengthened through its other businesses based on its diversification strategy. Although its ad revenues have decreased like other more focused content producers and distributors, its other businesses are growing and allow it to maintain higher earnings compared to other rival media producing firms. Disney’s strategy is successful because its corporate strategy, compared to its business-level strategy, adds value across its set of businesses above what the individual businesses could create individually. In the literature this is often known as synergy, or in the more academic literature, economies of scope (defined earlier in Chapter 6). First, Disney has a set of businesses that feed into each other: its studio entertainment, consumer products and interactive media, media network outlets, parks and resorts, studio entertainment parks, and retail enterprises have overlapping aspects. Within its studio entertainment businesses, Disney can share activities across its different production firms: Touchstone Pictures, Hollywood Pictures, Dimension Films, Pixar Films, and Marvel Entertainment. By sharing activities among these semi-independent studios, it can learn faster and gain success by the knowledge sharing and efficiencies associated with each studio’s expertise. The corporation also has broad and deep knowledge about its customers, which is a corporate-level capability in terms of advertising and marketing. This capability allows Disney to cross-sell products highlighted in its movies through its media distribution outlets, parks and resorts, as well as consumer product businesses.

Questions

1. What corporate diversification strategy is being pursued by Disney? What evidence do you have that supports your position?
2. How does the corporate office create a parental advantage, which is difficult to duplicate by its more focused competitors?
3. What are synergies and economies of scope and how do they work at Disney to lower its overall costs?
4. Given the diversification approach that Disney uses, what are some things that they can do to deal further with the trend toward cord-cutting and competition from large streaming and content producers such at Netflix, Amazon, and other content producers?