Disney’s “The Lion King”
“The Lion King” (A): The $2 Billion Movie” is a case describing the transformation that Disney underwent after being taken over by Michael Eisner and the subsequent release of “The Lion King. ” Prior to the appointment of Eisner as CEO underperforming both creatively and financially, with critics claiming Disney was failing to innovate and move with the times, and financial analysts taking the company off their stock-to-buy lists due to a dip in share prices.
Eisner was able to reinvent and restructure the company by implementing various different managerial ideologies and business models, to which the success of the “The Lion King,” one of the largest grossing movies of all time, is a testament. The earliest incarnation of the Walt Disney Company did not implement much of a corporate structure. The Disney brothers, Walt and Roy, ran their business in an informal, nonhierarchical manner and saw no need to establish official titles or structures.
Disney’s “The Lion King” Essay Example
Employees were on a first name basis; Walt Disney stated, “If a person is important to the company, then other employees will know it. ” Their original success came primarily through producing animated versions of classic stories such as “Peter Pan” and “Sleeping Beauty”. Disney was known for reworking timeless tales, as opposed to generating new content. However, the death of Walt, in 1966, and Roy, in 1971, showed a noticeable downward shift in in the company’s profits.
Between 1969 and 1984, Disney had produced a series of cinematic disappointments, and belief in the company had started to wane. Several consumers and fans lost faith. Remarks such as “Disney isn’t changing with the times and have lost their appeal”, “The movies are missing heart. The old ones had heart”, started to arise, consequently causing Disney’s stock price to drop severely. By 1984, a number of financial analysts had taken Walt Disney Company off their stock-to-buy list, since the shares dropped from $75 per share to $47 per share.
It was in the aftermath of these events that Eisner was brought on board. When Eisner first joined the company, it was clearly in need of restructuring. The Disney theme parks accounted for 80% of operating income, film for just 1%. Film production costs were far above the industry average, and company net income was down. It was clear that changes needed to be made. In the rebuild, Eisner’s motto was “transform the company from a creator of content to a creator and distributer of content.
” In other words, this meant that Eisner strove to lessen the financial impact that came with risky, expensive films that failed to be commercially successful by equipping Disney with the capabilities to produce cheaper films in-house. He also sought to diversify Disney’s customer base and introduced new channels through which revenue could be generated, outside of box office blockbusters. One of the most successful of these endeavors was The Disney Store, which not only generated huge profits, but also kept Disney connected to their customers in a fresh, unprecedented way.
Eisner was able to manage change collaboratively by using the framework. The first step in framework is to build a climate of psychological safety through trust and mutual respect. Employees in the Disney Company were not going to be ridiculed for any mistakes or by the company. Eisner established a path of communication to encourage people to speak up. Known for his tough leader reputation, in which he often stated, “If you aren’t tough, you don’t get quality”, Eisner mentioned that the company needs an atmosphere in which people feel safe to fail.
He believed that failure should not only be tolerated, and that the fear of criticism for submitting a ‘foolish’ idea should be thrown out; otherwise, people become too careful and shy. Eisner took Disney’s existing flat, nonhierarchical organization and transformed it into a well-defined and clear infrastructure by addressing the rational change, to bring back the movies that had “heart”, and be the company that used collaborative problem solving and learning (by taking new ideas and coming up with a way to promote the idea).
This turned Disney’s organic structure into a functional mechanistic structure. In creating other avenues through which to boost profits outside of what Disney had conventionally done, Eisner was creating a safety net for the company, and establishing a profit multiplier business model. Through this model, Eisner generated capacity divisions (Creative Content, Broadcasting, and Theme Parks and Resorts), while using the animation as a core to help reach the added value of profit, bringing in huge returns for shareholders and reviving the flagging Disney brand.
The Creative Content division worked several times across the many divisions in order to benefit consumers and shareholders. It is made up of theatrical films, home videos, audio products, television production and distribution, Walt Disney Theatrical production, character merchandise and publication licensing, The Disney Stores, newspapers, technical, and specialty publishing, books and magazines, and Disney interactive. The Broadcast Division consists of radio and television stations, cable and international broadcast. The Theme Parks and Resorts Division consisted of Disney parks, hotels, and resorts.
Eisner also recognized the huge financial potential of animation, despite the fact that many thought animation was something of a dying art. Eisner recognized that animated characters could easily be repackaged and manipulated in various different capacities to generate profit. Eisner reaffirmed Disney’s commitment to animation, which had been a cornerstone for the company since its inception. With the new business model in place and Eisner at the helm, the way was paved for “The Lion King” to be a huge commercial success.
The profit multiplier business model is an organic form with a horizontal structure that places a strategic focus on adaptability culture. It focuses on the external environment through flexibility and change to meet customer needs. With this in hand, Disney decided to meet customers’ needs by adding the retail store – creating more direct links with its customers. Disney formed a dynamic and creative workplace by ensuring that each division meet the customer’s needs through the production of movies and merchandise.
This accumulation of resources, as well as taking advantage of its external resources (alliances with companies such Mattell, Nestle, Coke A Cola, etc.. ) helped Disney successfully promote their image and product. Alliances weren’t Disney’s only source back to the top. Its accessibility to financial resources, allowed for its animation department to go on a trip to Africa, in order to get a more accurate depiction of the scenario they thought would best bring its upcoming “The Lion King” to life. “The Lion King” was Disney’s first original storyline, and it took 4 years and an estimated $50 million to complete.
Eisner’s new structure called for the animators to present the new movie concept to heads of all departments, so that all departments such as Home Video, Consumer Products and Theme Parks could be poised and ready to brainstorm and find ways to exploit these new characters. The idea was not to just to capitalize on the movie after it’s release, but to harness its potential before it was even completed to ensure that Disney could make as much money through all of its different outlets and channels as possible.
Incorporating Hollywood A-listers such as Elton , Whoopi Goldberg, and Time Rice served as noticeable advantage in Disney’s brand recognition. The movie grew to gross $2 billion in revenue for Disney, a runaway success that must be largely attributed to Eisner’s profit multiplier business model. To conclude, “The Lion King” is a perfect example of the way in which careful planning and business structuring can lead to overwhelming success.
The way in which Eisner was able to exploit original content to gross the most revenue by diversifying profit channels is a model that is consistently being replicated today almost twenty years later. Its success in providing creative content resulted in a huge impact across the division of the company, giving Disney a structure that will both, keep Disney at the top and keep its stock prices at a level that has people like James Jones saying, “you don’t get rich working for Disney, you get rich owning Disney stock. ”