The fictional Toy Story character, Buzz Lightyear proudly proclaims, “To Infinity and Beyond!” His popular catch phrase in my view aptly describes the success of Disney owned Pixar Animation Studios. Disney’s continued focus on maintaining its leadership in the creation of high quality entertainment is a key reason we believe the company is a good investment and a recommended holding on our S.E.L.E.C.T. List.
Toy Story 3 Movie Trailer 2 Sneak – Buzz & Woody – June 24
Toy Story 3 brought in an estimated $109 million during its debut weekend of June 18. Pixar continues its perfect record of 11 consecutive films reaching the #1 box office spot in the first weekend of release.[i] Pixar began in 1979 as part of Lucasfilm. In 1986, Apple co-founder, Steve Jobs purchased the company from George Lucas for $10 million. In 2006, Pixar was sold to Disney. Steve Jobs is now a member of the Board of Directors of Disney and owns approximately 7% of the stock. Pixar has earned twenty-four Academy Awards, six Golden Globes, and three Grammys. [ii]
Buzz Lightyear trains for NASA mission
Disney’s Studio Entertainment division, which includes Pixar, generated 17% of the firm’s revenue in 2009. The largest grossing segment is Media Networks, providing over 45% of Disney’s revenue. 24 – hour sports programming offered through ESPN is popular with viewers. Last year, ESPN purchased the television rights to broadcast Premier League soccer in the United Kingdom. We like the fact the ESPN’s income comes from multiple sources. In addition to advertising revenue, ESPN receives affiliate fees from households that receive content via cable, satellite, or telecom providers.
We think the ABC network will see an increase in advertising revenue due to the popularity of shows like Dancing with the Stars, the Bachelorette, and Desperate Housewives. Disney minimizes production costs by generating much of its own content with shows like Hanna Montana that air on the Disney Channel. 45% ownership of A&E, the History Channel, and Lifetime Networks round out Disney’s television broadcast network.
We believe last year’s acquisition of Marvel Entertainment will complement Disney’s expansive list of widely recognized characters and stories. Marvel Entertainment adds popular super heroes and villains such as X-Men, Spider-Man, the Hulk, Wolverine, and Iron Man to the Disney Team.
The Marvel Brand can be promoted through Disney’s media infrastructure, marketing and distribution system. Disney’s Consumer Products and Interactive Media divisions, currently generating 9% of the company’s revenue, should easily integrate and expand the marketing of Marvel Brand toys, clothing, books, action figures, console and online games.
Disney has reached an agreement with the Chinese government to build a theme park in Shanghai. As shareholders, we are pleased to see Disney’s efforts to expand in China. 29% of sales in 2009 came from the company’s Parks and Resorts division. Disney management recognizes the long term importance of expanding into a growing Chinese economy with over 1.3 billion people.
The company continues to introduce new choices for vacationers. Disney’s cruise line business will launch 2 new cruise ships in 2011 and 2012. Next year, travelers to Hawaii can visit a new Disney resort with 21ocean front acres on the island of Oahu.
The Walt Disney Company is included in three widely recognized socially responsible indices: the Dow Jones Sustainability, the FTSE4Good, and the KLD Index. To be included in these indices a company must meet stringent social, ethical and environmental criteria. Disney CEO, Robert Iger said, “We’re particularly proud of the ambitious long-range environmental goals we have set and with the accompanying three to five year targets to reduce emissions, waste, electricity, and fuel use, as well as impact on water and eco-systems. We are also committed to using our skills as a media company to inspire kids to take more personal responsibility for preserving the planet we share.”[iii]
We believe the company’s great brands and tremendous storehouse of content, characters and stories give Disney a unique advantage in the entertainment industry. Disney meets our S.E.L.E.C.T. criteria by making a positive difference with Shareholders, Employees, Leadership, Environment, and Customers over Time. Our Investment Team seeks to uncover and purchase only the highest quality companies we believe well serve all the above referenced constituents. I think the Toy Story character, Woody, sums up the effort when he said, “Reach for the sky!”
Quotes from Walt Disney:
“If you can dream it, you can do it.”
“It’s kind of fun to do the impossible.”
Investors Asset Management, Inc. carefully researches each investment recommendation. The sources of our information are believed to be accurate but cannot be guaranteed. We advise readers not to assume that future results will be profitable or equal past performance made by our organization, and that there is risk involved in any form of investment.
[i] Reuters, “Toy Story 3” sets worldwide box office abuzz, June 20, 2010.
[ii] Information for this article comes from the history and press box page on Pixar, www.pixar.com.
[iii] Information for this article comes from the investor relations page on Disney, www.disney.go.com and the 2009 Disney annual report.
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