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________________________________________________________________________________________________________________ Professor Michael G. Rukstad, Professor David Collis of the Yale School of Management, and Research Associate Tyrrell Levine prepared this case. This case was developed from published sources. HBS cases are developed solely as the basis for class discussion. Cases are not intended to serve as endorsements, sources of primary data, or illustrations of effective or ineffective management. Copyright © 2001, 2005, 2009 President and Fellows of Harvard College. To order copies or request permission to reproduce materials, call 1- 800-545-7685, write Harvard Business School Publishing, Boston, MA 02163, or go to http://www.hbsp.harvard.edu. No part of this publication may be reproduced, stored in a retrieval system, used in a spreadsheet, or transmitted in any form or by any means-electronic, mechanical, photocopying, recording, or otherwise-without the permission of Harvard Business School.
M I C H A E L G . R U K S T A D
D A V I D C O L L I S
The Walt Disney Company: The Entertainment King
I only hope that we never lose sight of one thing-that it was all started by a mouse. - Walt Disney
The Walt Disney Company's rebirth under Michael Eisner was widely considered to be one of the
great turnaround stories of the late twentieth century. When Eisner arrived in 1984, Disney was languishing and had narrowly avoided takeover and dismemberment. By the end of 2000, however, revenues had climbed from $1.65 billion to $25 billion, while net earnings had risen from $0.1 billion to $1.2 billion (see Exhibit 1). During those 15 years, Disney generated a 27% annual total return to shareholders.1
Analysts gave Eisner much of the credit for Disney's resurrection. Described as "more hands on than Mother Teresa," Eisner had a reputation for toughness.2 "If you aren't tough," he said, "you just don't get quality. If you're soft and fuzzy, like our characters, you become the skinny kid on the beach, and people in this business don't mind kicking sand in your face."3
Disney's later performance, however, had been well below Eisner's 20% growth target. Return on equity which had averaged 20% through the first 10 years of the Eisner era began dropping after the ABC merger in 1996 and fell below 10% in 1999. Analysts attributed the decline to heavy investment in new enterprises (such as cruise ships and a new Anaheim theme park) and the third-place performance of the ABC television network. While profits in 2000 had rebounded from a 28% decline in 1999, this increase was largely due to the turnaround at ABC, which itself stemmed from the success of a single show: Who Wants To Be a Millionaire....