The Walt Disney Company: The Entertainment King Essay

The Walt Disney Company: The Entertainment King Essay.

The Walt Disney Company is based in Burbank, California with a geographic scope as sales are generated internationally. Their main competitors include 21st Century Fox, and Time Warner who also compete in the media industry, producing television programs, films and videos. Disney had a net profit margin of 15.41%, which is higher then the industry at 12.78% and a ROE of 16.61% compared to the industry at 17.21%. Although their net profit margin is higher then the industry their ROE is lower then the industry which results in looking further into the DuPont formula to get a better understanding of this.

My analysis shows Disney benefits under a strategic structure, which focuses on financials on Disney’s various divisions, corporate synergy, managing the brand, and continuing creativity.

These strategic recommendations are the result from challenges Eisner faced. Disney’s slump towards the end of the century was accounted for deteriorating financial performance. With cost rising in the programming and producing film department Eisner concluded the company needed to cut back operations.

Acquisition of ABC proved to be Disney’s biggest problem to date. While they were seen to be ideal partners, ABC was a large enterprise with a clashing of cultures between themselves and Disney.

The synergy between the two companies allowed Disney to cut costs by merging Touchstone Television into a division of ABC, but Disney was challenged with damaging the brand. My recommendation to address the problem would be to head back to Walt Disney’s focus of teamwork, communication, and cooperation. This will allow the company to push themselves in the creativity department along with accounting for loses of key executives. The “gong show” was a great way to start creativity, but it has been fading over the years.

The Walt Disney Company: The Entertainment King Essay

Walt disney company’s yen financing Essay

Walt disney company’s yen financing Essay.

Walt Disney, an American leisure and entertainment company, receives royalty payment from Tokyo Disneyland every year. The royalties were denominated in yen and were constantly growing and becoming significant for the company (8 billion Yen in 1984, with 10-20% projected growth). However, the depreciation of the yen against the dollar could incur the risk of devaluation on the royalties to be received, indicating that Walt Disney should perform hedging.

Different solutions are available. First is to (1) buy options to sell yens for dollars or to buy dollars with yen.

However this option existed only for maturities of two years or less, which is much less than the time scale of 10 years that Walt Disney was considering. Same issue also applies for the second solution, (2) the future contracts which would allow the company to exchange yen for dollar at a pre-defined rate. Also this issue would still persist if Walt Disney would like to (3) convert its existing dollar debt into yen liability since its Eurodollar note issues matured in one to four years and an attractive rate is hard to find.

Moreover this option does not provide any additional cash. The fourth option of (4) FX forward contracts from the bank which could provide long-dated FX forward rate would limit the company’s future credit capacity since the bank would consider these contracts as a part of their total exposure. (5) The Eurodollar debt has long maturity as well, but the company’s current debt ratio is already too high, and the (6) Euroyen bonds are not possible for this case due to restriction in the form of regulation from Japanese government.

There are two available options for Walt Disney, (7) creating a yen liability through loan from a Japanese bank, or (8) an ECU/yen swap proposed by Goldman Sachs. After calculating the IRR of each option, we came to the conclusion that the swap has a lower IRR; therefore Walt Disney should go for this option.

WALT DISNEY AND ITS PROBLEMS

Walt Disney was founded in 1938 as successor to the Walt and Roy Disney Company. Headquartered in Burbank, California Walt Disney had a wide range of activities including theme parks (Disneyland, Walt Disney World), motion pictures, television programs and The Disney Channel, but also some peripheral activities including developing resort and home communities, commercial and industrial properties, as well as educational material and teaching aids. The company also licensed its name to various consumer products companies.

Consolidated revenues of Disney increased by 27% in 1984, total entertainment and recreation revenues increased by 6%, while film entertainment revenues increased by 48%. In total net income grew by 5%, total assets great by 15%, but the ratio of debt to equity grew significantly as well.

In 1983, Tokyo Disneyland was opened, run by an unrelated Japanese company, paying royalties to Walt Disney Productions. By 1984 the royalties had increased significantly to JPY 8 billion. The royalties were denominated in yen and the director of finance at business, Rolf Anderson, expected these royalties to grow by another 10-20% for the coming years. However the depreciation of the yen against the dollar could incur high risks for Walt Disney, which should be hedged. In exhibit 4 of the case it can be seen how the yen/dollar rate has increased from 225.7 to 250.8 from 1980 till mid-1985. In the following sections we are providing an analysis of possible solutions for hedging the risks stemming from the fluctuation of the yen against the dollar.

POSSIBLE OPTIONS AVAILABLE WITH DISNEY TO HEDGE THE FOREIGN EXCHANGE RISK:

If we take the exchange rate of 1984 i.e. 237.30 JPY/USD (see Case, p8) the revenue of Disney (8 billion yen) was equal to approximately 33.7 million USD. This represented around 11.6% of the Disney’s total operating revenue of the year 1984. The growing revenue and the depreciating yen can hinder some of the financial plans of Disney and hence it was important for Mr. Anderson to hedge this risk of foreign exchange. Mentioned below are the different options that were available for Mr. Anderson to hedge this risk.

First solution that the company could have used is to buy/sell options. But the problem Mr. Anderson faced for this was the short-term nature of this solution. Indeed, such options existed with at best a maturity of two years, which was not good enough for the timescale he was considering (10 years horizon).

The Future Contracts option, which would permit the Walt Disney Company to exchange Yens against Dollars at a pre-defined rate (and would protect them from the on-going depreciation), is apparently the same issue: it is impossible to find contracts with maturities of more than two years.

The Walt Disney Company could have entered a foreign currency swap as they did last year by trying to convert part of their dollar debt into a yen liability. This type of hedge was short-term since Disney’s Eurodollar note issues matured in one to four years. The problem regarding such hedging was first it was very difficult to find attractive yen swap rates for such maturities (one to four years), and secondly it would not provide any additional cash to Disney, which is something Mr. Anderson was looking for.

That short-term issue could have been dealt with FX forward contracts. Unfortunately, the banks would consider these contracts as a part of their total exposure to Disney, and it would compromise Walt Disney’s capacity to have credits in the near future. Their debt indeed, has already increased drastically in the last two years and they would not like to lever it more.

Disney could have thought of Eurodollar debt issue (whose maturity is long enough), which could be swapped into yen. But because the debt ratio of company was too high it was not a viable option for Mr Anderson. Euroyen bonds were also out of question since the current Japanese Ministry of Finance guidelines didn’t allow Disney to do so (see Case, p5, §2).

The first viable option in front of Disney was to create a yen liability through a term loan from a Japanese bank at the lower Japanese long-term interest rate. This option was attractive, as the proceeds obtained from this could have been used to settle their short-term debt, improving their debt structure by decreasing the leverage. Mentioned below were the terms of the loan.

TERM LOAN IN JPY

It was a loan with a principle of JPY 15 billion, the term of the loan was 10 years with interest rate of 7.5% (annual percentage rate) paid semi-annually. It also had 0.75% front-end fees and was a bullet loan where semi-annual interest payments are done and the principle is paid at the maturity. So if we deduct the fees from the loan amount that Disney asked for they would be left with 14.8875 (15%-0.75% of 15) billion JPY. Also the interest Disney had to pay each time equalled (7.5% of 15 billion = 1.125 billion JPY annually) 0.5625 Billion JPY semi-annually. If we calculate the IRR (internal rate of return) or basically the all in cost (AIC) of the debt:

The IRR comes out to be 3.804 % (semi-annually) or (1+3.804%)2-1 = 7.753% annually.

Walt disney company’s yen financing Essay

Big Hero 6 Animation Essay

Big Hero 6 Animation Essay.

Hiro Hamada is a 14-year-old robotics genius who lives in the futuristic city of San Fransokyo, and spends his time participating in back-alley robot fights. His older brother, Tadashi, worried that Hiro is wasting his potential, takes him to the robotics lab at his university, where Hiro meets Tadashi’s friends, GoGo Tomago, Wasabi, Honey Lemon, and Fred, as well as Baymax, a personal healthcare companion Tadashi created. Amazed, Hiro decides to apply to the school. He presents his project—microbots, swarms of tiny robots that can link together in any arrangement imaginable—at an annual exhibition to gain admission.

Professor Callaghan, the head of the program, is impressed, and Hiro gets in. When a fire breaks out at the university, Tadashi rushes in to rescue Callaghan but the building explodes and both are killed. As a result of losing his brother, Hiro secludes himself from others. One day, Hiro accidentally activates Baymax. Baymax follows one of Hiro’s microbots to an abandoned warehouse, where he and Hiro discover that someone has been mass-producing Hiro’s bots; they are attacked by a masked man called Yokai, who is controlling the bots.

Realizing this man has stolen his project, Hiro decides to catch him and upgrades Baymax with armor and a battle chip containing various karate moves. After Yokai attacks Hiro, Baymax, GoGo, Wasabi, Honey, and Fred in a Mitsubishi Minica Toppo, the six form a superhero team. The group discovers that a former lab of Krei Tech, a prestigious robotics company, was experimenting with teleportation technology. The test went awry when the human test pilot vanished inside an unstable portal. Yokai is revealed to be Professor Callaghan, who explains that he stole Hiro’s bots and used them to escape the fire. Realizing that Tadashi died in vain, Hiro angrily removes Baymax’s healthcare chip, leaving him with only the battle chip, and orders him to kill Callaghan. Baymax loses all of his softness, and develops a threatening, evil aura. The team (other than Hiro) tries to stop Baymax with no success. Baymax almost kills Callaghan until Honey manages to insert the healthcare chip back in.

Angry at his friends, Hiro goes home but breaks down when Baymax asks him if killing Callaghan will make him feel better. To soften Hiro’s loss, Baymax plays humorous clips of Tadashi’s running tests on him during Baymax’s development. Hiro realizes that killing Callaghan is not what Tadashi would have wanted and makes amends with his friends. The group discovers that the test pilot was Callaghan’s daughter Abigail; Callaghan is seeking revenge on Alistair Krei, the president of Krei Tech, whom he blames for her death. They save Krei and destroy the microbots, but the portal remains active. Baymax detects Abigail from inside the portal and he and Hiro rush in to save her. On their way out, Baymax’s armor is damaged and he realizes the only way to save Hiro and Abigail is to propel them through with his rocket fist.

Hiro refuses to leave him, but Baymax insists until Hiro tearfully gives in. Hiro and Abigail make it back, and Callaghan is arrested. Sometime later, Hiro discovers Baymax’s healthcare chip, which contains his entire personality, clenched in his rocket fist. Delighted, Hiro rebuilds Baymax and they happily reunite. The six friends continue their exploits through the city, staying unknown, and fulfilling Tadashi’s dream of helping those in need. During the end credits, it is shown through newspaper headlines that Hiro has been awarded a grant from the university and a building is dedicated to Tadashi. In a post-credits scene, Fred accidentally opens a secret door in his family mansion and finds superhero gear inside. His father, who turns out to be Stan Lee, arrives and embraces him, stating that they have a lot to talk about.

Big Hero 6 Animation Essay