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Role of IP in the Growth of Disney

February 13, 2020

By Lucy Rana and Shubhankar Shashikant

Almost a 100 years old, animator Walt Disney with his brother Roy Disney started a company that changed the landscape of American Animation forever. This radical growth in animation was given recognition to by the United States by incorporating animation into their cultural history and by naming Walt Disney a cultural icon.

However, this did not happen overnight, Disney Company worked through their fair share of ups and downs to become one of the topmost animation giants of all times. A major chunk of this profit stems from the copyright portfolio that the company generated from the get go. From scripts, to characters, to animation style, to movies and even TV shows, Disney has created and acquired copyright each step of the way to maintain their exclusivity and exploit their Intellectual Property (IP).

So what changed for an animation company that made it the most dominant player in the media markets across the world? More specifically what made a copyright intensive industry outshine its competitors as well as outshine many other sectors and industries around it?

The answer is simple, it’s the smart and calculated way of exploitation of their IP and simultaneous acquisition of copyright intensive players. To put emphasis on the growth of Disney, one just has to look at the past decade of their economic performance.

Disney: What did they do right?

Disney collaborated! Yes, that’s right, the first and foremost notable move of Disney was that it did not keep all its eggs in one basket and always invested in media and infrastructure heavily. The most resent of these investments happened earlier this year (2019) only, the merger of Twenty-First Century Fox. Inc. (21CF) is one of the major acquisitions that Disney has undertaken especially as it includes 21CF’s film and television studios along with cable networks such as FX and Nat Geo and also 21CF’s international television businesses including 21CF’s 30% interest in Hulu. This investment thus can be split as three very separate and prominent acquisitions. The merger has already been put to profitable effects such as the use of Nat Geo shows on Disney’s very own DTC (Direct to Consumer) service by the name of “Disney+”. Disney+ also hosts an array of content which has been acquired by Disney over the past decade such as Pixar, Marvel and the Star Wars franchise.

Apart from the various IP intensive companies that Disney has acquired, the company also has its major income coming from merchandising (an ancillary economic right to copyright) and through the Disney Theme Parks and Resorts. These product and infrastructure based markets provide for a total economic output of approximately 40% of the total revenue by Disney.

In the year 2019, Disney has seen a revenue of approximately USD 70 Billion and 66% of it is revenue generated by IP intensive areas of its functioning. To better understand these figures a sectoral split of Disney’s areas of work along with the profit that they generated is given bellow.

Media Networks = $27.3 billion (39.2%)

Parks & Resorts = $24.5 billion (35.2%)

Studio Entertainment = $13.3 billion (19%)

Consumer Products = $4.7 billion (6.7%)[1]

What is the role of IP in Disney’s Growth?

Disney prides itself with creating some of the most memorable fictional characters in modern culture. Characters ranging from Mickey Mouse to Nemo the clownfish are all fan favorites even today. With such an immense list of familiar household names (characters), Disney has over the years accumulated a boundless IP resource which is part of the financial assets of the company. This resource includes the IPs of the various acquisitions of Disney. For example, Disney sued Academy of Arts and Sciences in 1989, for using the portrayal of Snow White in an opening number for Academy Awards telecast, as the character is both trademarked and copyrighted by Disney.

The company exploits these IP resources via. Three major platforms:

  1. Media Networks
  2. Studio Entertainment
  3. Direct-to-Consumer (D2C) and International platforms

Of these, the most profitable is the Media networks, bringing in a whopping 33% (Approx.) of the total business for the company whereas the fastest growing in terms of contribution and growth rate is the D2C platform. The direct-to-consumer business makes revenue by collecting fees from distributors for distributing the company’s channels, subscription fees that is collected for various streaming websites and by way of selling advertising time. The charted expectation of growth from the D2C sector in terms of Disney’s 2020 revenues is a jaw-dropping 16.5 billion USD, which is expected to be 20% of the total expected revenue of 81.4 billion USD in the year 2020.

Disney’s Copyright Exploitation:

As Disney has a near endless spectrum of copyright content, it is not possible to pin-point the exact figure of the economic output that they produce but for a general understanding a few instances are shortlisted as under.[2]

  1. Direct-to-consumer platforms which aims at providing $10.7 billion, i.e. 63% of the $17 billion in expected revenues over the next 2 years.
  2. Hulu’s and Fox’s addition helped the growth of $6 billion (approx.) in FY 2019. Whereas, Disney+ has already found a firm footing in the D2C division for the company.
  3. Disney+, launched in November 2019, is set to help Disney with an addition of $4 billion (approx.) to its revenue over the next two years. This is also likely to increase the subscriber count manifold.
  4. Direct to consumer division is projected to become the 3rd largest profitable venture of the company. The charted growth for the segment in terms of revenue in the coming 2 years is expected to rise from13% in 2019 to 23% in 2021.[3]

Endnote for Copyright Intensive Industries:

Disney as a company has seen a lot of economic ups and downs but has always been able to channel their IP resources to their own advantage along-with making long-term profitable collaborations with other IP intensive industries function either complementary to their core work or to an industry which can further provide them with a platform to help them exploit their IPs, for example theme-parks, digital content circulation, marketing etc.

If a copyright intensive company wants to learn from Disney’s way of functioning to device ways of expanding their growth the following pointers from the articles can act as the major takeaways for ready recognition:

  • Content creation needs to be coupled with collaborations to keep the IPs relevant and expand consumer base.
  • Content marketing strategies can be coupled with industries that can act as substitution for marketing, such as: merchandising, advertising, and in Disney’s case, theme parks and resorts.
  • Invest in other IPs to increase your IP portfolio. Create 2 separate portfolios, one for indigenously developed IP (i.e. by the company itself) and one for third party IPs in which you share a stake.

Lastly, the biggest takeaway by the Disney growth model is that, to expand and grow one must keep up with the changing times and rely on technology and modern resources for reaching a bigger consumer base.

Related Posts

Animation and it’s Protection under Copyright

[1] Available at: https://dashboards.trefis.com/no-login-required/aLYpgkEL/Walt-Disney-Revenues-How-Does-Disney-Make-Money-?fromforbesandarticle=dis191008

[2]  Available at: https://info.legalzoom.com/legal-use-disney-characters-21231.html

[3] Available at:  https://dashboards.trefis.com/no-login-required/aLYpgkEL/Walt-Disney-Revenues-How-Does-Disney-Make-Money-?fromforbesandarticle=dis191008

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