Walt Disney (NYSE:DIS) is one of the most powerful companies, in one of the most powerful sectors of any economy: entertainment. Before it became a $60 billion dollar company, with interests spanning the globe, Disney was more closely associated with the vision of the man after whom it was named. It was this vision that laid the groundwork for the company to become the media giant it is today. In this article we'll look at the rise of Walt Disney, both the man and the company, and the lessons found there, for entrepreneurs today.
TUTORIAL: Starting A Small Business

Setting Forth, Again and Again
Like many creative talents, Walt Disney started his career working for others. In 1919, Walt was back from driving for the American Ambulance Corps in World War I, and looking for work as an artist. He found it at Pesmen-Rubin Commercial Art Studio, where he met and befriended Ubbe Iwerks. Iwerks proved to be one of the most talented animators in the world and a key to Walt's later success.

At the start of 1920 Walt and Iwerks were both out of a job, so they tried to open up their own studio. This first business promptly failed and the pair left for paying work, doing animation at Film Ad Co., where they worked on the advertising shorts that were shown before the features. Before too long, they were working together on side projects that grew into Laugh-O-Grams, a series of comedic shorts. Walt and Iwerks set forth together again and turned Laugh-O-Grams into a business. However, once again, the venture ended belly-up in 1923, after which, Walt left for Hollywood.

The Brothers Disney
Perhaps Walt's least appreciated skill was convincing others to buy into his vision. In Hollywood without Iwerks, Walt convinced his brother Roy to help him start Disney Brothers Studio, later renamed Walt Disney Studio. Sure enough, Walt soon had Iwerks convinced to come back to work with him, as well.

Learning Hard Lessons
Walt Disney Studio was no more profitable than the previous incarnations, but it was staying afloat. The company was doing work for Universal Pictures, creating a character called Oswald the Lucky Rabbit. In 1928, Walt and Roy had the unpleasant surprise of finding out that all of their animators, with the exception of Iwerks, had been hired away by one of the people he was dealing with at Universal. To add salt to the wound, the rights to Oswald belonged to Universal.

The experience embittered Walt and made him swear to only work for himself. Walt began looking to deliver his films directly to distributors, but he needed a new character. (To know more about how to keep a business, read: Keeping A Small Business Afloat.)

The Mouse
There is some controversy over where Mickey Mouse came from; theories range from a wastepaper basket in Kansas to Iwerks flipping through animal photos and sketching. However he originated, Mickey Mouse represents the start of Disney as we now know it.

Walt assembled a new team to work with Iwerks on this new character. The first two films were not hits, but the third, "Steamboat Willie," was a huge success. It was also the finest early example of a film that synchronized sound and animation.

Being on the cutting edge of animation technology became par for the course, as the company pushed the boundaries of animation. The next decades, including the Great Depression, saw Disney create the first color cartoons, as well as the first animated feature length film, "Snow White and The Seven Dwarfs."

The costs of these groundbreaking films was so high, and the margins so low, that a poor box office could still sink the studio. Walt and Roy started 1940 with great films, but a lot of debt. From 1923 to 1938, the Disney Brothers partnership was actually split into four companies that were successful in varying degrees, before being absorbed into one in 1938.

The company name that lived on was Walt Disney Productions and, on April 2, 1940, Walt Disney Studios issued 155,000 shares of 6% convertible preferred stock. This issue was in the over-the-counter market and raised around $3.5 million for the company. (To learn about convertible preferred stock, read: Introduction To Convertible Preferred Shares.)

The brothers soon found themselves back in debt, however, as the box offices continued to be slack for films that we now consider masterpieces, namely "Bambi," "Fantasia" and "Cinderella." This isn't to say they weren't successful, they were just very expensive to make.

Instead of slowing down, Walt looked to do more. The brothers set up their own distribution company, Buena Vista, and began producing high-margin nature documentaries. Walt also began to have visions of the ultimate amusement park, but it was a gamble his company couldn't afford.

In order to create the "happiest place on earth," a lot of financial maneuvering needed to take place, and Walt made it happen. Even after funding a private company, using a loan from his own life insurance, Walt needed much more capital. He had himself to offer, but he was clever about it. Walt set up another private company that owned the merchandising rights to his name. Incidentally,Walt Disney Productions paid $46.2 million in shares to buy company back, in 1981.

He then offered to create a TV series for a TV network that would invest in Disneyland; ABC jumped at the chance. Walt had his funding and ABC had one hour every Sunday that turned into a cultural phenomenon, watched by millions. Originally named Disneyland, but wearing different titles over the years, the show ran for 29 seasons.

In 1955, Disneyland finally opened and became a huge success. Over the next five years, Walt Disney Productions purchased Disneyland by buying Walt's private company. Over these same five years, the gross income at Walt Disney Productions grew from $6 million to over $70 million.

Merchandising, branding and expansion were all coming together for Walt Disney Productions. Sadly, though, it was destined to go on without one of its founders, as Walt died in 1966. His last feature, "Mary Poppins," was the top earning film in 1965. His brother Roy took over.

Beyond Walt and Roy
After the death of Walt and his brother Roy, Disney struggled. The company was listed in 1957, and despite its past successes and several profitable theme parks, the rise in its stock price was nominal.

In the 1980s, the company was thought to be so undervalued in terms of brand assets, which included the film catalog and the theme parks, that hostile takeover artists began circling. The company fended off the takeovers and began to focus on profiting from its vast brand equity.

From the 1980s to the 1990s, the stock grew in leaps and bounds, making Disney the largest entertainment empire in the world. The company has continued to prosper, helped in no small part by the foundation that Walt and Roy laid for the company.

The Bottom Line
Financial history is full of outsized personalities and towering figures. Many of the richest men in history got there by building empires of fur, oil, steel, rails and, yes, software. All of these are tangible products with a simple formula: keep the costs down and sell more. Disney, the man and the company, were birds of a different feather.

Only by constantly innovating and pushing the boundaries of not just animation, but what Disney was as a business, did the company go from a moderately successful animation studio, to a complete entertainment experience,with theme parks, merchandising, cruise ships and on and on.

Walt Disney famously said "if your dream it, you can do it." The story of his life and the creation of his company reminds us that once you dream it, you must continually re-dream and re-imagine it, to succeed. (For additional reading, check out: Wall Street History: Antitrust, OPEC And Disney.)

Related Articles
  1. Stock Analysis

    Inside Disney and Fox's Online Streaming Deal With China's Tencent

    Learn about the online streaming deal and its benefits between Disney, Fox and Tencent for rights to distribute the Star Wars franchise.
  2. Economics

    Investing Opportunities as Central Banks Diverge

    After the Paris attacks investors are focusing on central bank policy and its potential for divergence: tightened by the Fed while the ECB pursues easing.
  3. Chart Advisor

    Now Could Be The Time To Buy IPOs

    There has been lots of hype around the IPO market lately. We'll take a look at whether now is the time to buy.
  4. Stock Analysis

    The Biggest Risks of Investing in Pfizer Stock

    Learn the biggest potential risks that may affect the price of Pfizer's stock, complete with a fundamental analysis and review of other external factors.
  5. Entrepreneurship

    4 Things to Know About Your Company To Make a Successful Pitch to Investors

    Learn how to make a successful pitch to investors. Regardless of your industry, size or market, there are some questions all investors need to have answered.
  6. Entrepreneurship

    Top 4 Billionaires Living in Los Angeles

    Learn how these multibillionaires built their fortunes to stand out from the crowd of the countless ultra-rich who call Los Angeles home.
  7. Investing Basics

    3 Business Tips from Restaurant Reality Shows

    The reality TV shows "Restaurant Impossible" and "Kitchen Disasters" offer lessons not just for restaurateurs, but for all business owners.
  8. Markets

    PEG Ratio Nails Down Value Stocks

    Learn how this simple calculation can help you determine a stock's earnings potential.
  9. Entrepreneurship

    4 Most Successful Indiegogo Campaigns

    Learn about some of the most successful crowdfunding campaigns on Indiegogo, which raised millions of dollars for everything from electric bikes to beehives.
  10. Entrepreneurship

    Top 10 Features Of a Profitable Rental Property

    Find out which factors you should weigh when searching for income-producing real estate.
  1. Who are Disney's (DIS) main competitors?

    The Walt Disney Company (DIS) has built a diverse empire since its beginning in the 1920s, creating a huge range of lucrative ... Read Full Answer >>
  2. When did Facebook go public?

    Facebook, Inc. (NASDAQ: FB) went public with its initial public offering (IPO) on May 18, 2012. With a peak market capitalization ... Read Full Answer >>
  3. What does low working capital say about a company's financial prospects?

    When a company has low working capital, it can mean one of two things. In most cases, low working capital means the business ... Read Full Answer >>
  4. Do nonprofit organizations have working capital?

    Nonprofit organizations continuously face debate over how much money they bring in that is kept in reserve. These financial ... Read Full Answer >>
  5. Can a company's working capital turnover ratio be negative?

    A company's working capital turnover ratio can be negative when a company's current liabilities exceed its current assets. ... Read Full Answer >>
  6. Does working capital measure liquidity?

    Working capital is a commonly used metric, not only for a company’s liquidity but also for its operational efficiency and ... Read Full Answer >>

You May Also Like

Trading Center