Disney’s diversification strategy
The Walt Disney Company (DIS) believes that its brands are a core part of its growth strategy. The company is strengthening its brands in international markets, as is evident from its agreements with Alibaba (BABA) to launch DisneyLife in China (FXI) and its ESPN programming distribution agreement with Tencent Holdings (TCEHY).
Disney is reaping the benefits of its earlier acquisitions of Pixar, Lucasfilms, and Marvel as the movies from franchises such as Marvel have done extremely well at the global box office. The success of these movies also enabled Disney to “leverage” these franchises across its other business segments.
At a Deutsche Bank investor conference early this month, Disney stated that in the five years prior to fiscal 2015, the company has grown at a CAGR (compound annual growth rate) of 14%. In these five years, the company’s cable business grew at a CAGR of 9%, while its other businesses had a CAGR of 20%. This indicates that the company is not relying primarily on its cable business for growth and is diversifying successfully into other businesses.
Disney’s franchise-focused strategy
Disney uses a franchise-focused strategy that enables it to monetize its intellectual property across segments for an extended period of time. The company’s 11 franchises have had retail sales of more than $1 billion in the last two fiscal years.
Other efforts by Disney to strengthen its brands include producing the Marvel series exclusively for Netflix (NFLX), broadening the reach of the Marvel brand. Disney has also stated that in fiscal 1Q16, the company’s Star Wars and Avengers franchises were major growth drivers for the company’s consumer products and interactive media business. The company is also investing in VICE Media, a company that appeals to Millennials, who fall in the 18–34 age group. Disney makes up 0.85% of the SPDR S&P 500 ETF (SPY). SPY holds 3.9% in the computers sector.