Acquired
02:17:55 · David Rosenthal, Ben Gilbert
[02:17:55] S1: Yep. [02:17:55] S0: And so the appetite for making more things like those three movies drops to, like, zero. Yeah. I mean, at this point, there's a financial reality that Disney owes a dividend to these shareholders, which interestingly enough, it actually suspended. In 1942, they actually didn't pay out the dividend, but they do have to pay Bank of America. The films aren't gonna be the thing doing it. And, conveniently, they've got the US government saying, can you help us with some propaganda films? [02:18:22] S1: Yep. [02:18:22] S0: Can you help us encourage people to pay their taxes and buy war bonds and support the troops? And so Disney kinda looks at everything, how it's all playing out and says, yeah, that's what we're gonna be doing for the war. [02:18:35] S1: So all of the studio production work during The US's time as an active participant in World War two, yeah, basically, just gets repurposed to propaganda and training materials for the government. [02:18:49] S0: And insanely, they do use Disney IP. Like, you see all these crazy old posters with, like, you know, Donald Duck holding a gun. And, I mean, the the stuff you sort of would never see with these characters today. But not only did Disney say, we're work for hire, they said, we we can use the Disney IP. But interestingly, David, do you know about Mickey Mouse's role? [02:19:12] S1: Oh, no. [02:19:13] S0: They really did not employ Mickey Mouse. They protected Mickey Mouse from the war image, and Donald Duck sort of led the [02:19:23] S1: charge Interesting.
02:19:23 · David Rosenthal, Ben Gilbert
[02:19:23] S1: charge Interesting. [02:19:24] S0: On all the the the war films. [02:19:26] S1: Well, part of this is because, canonically, Donald Duck is a sailor. [02:19:29] S0: Right? Okay. That makes sense. [02:19:31] S1: Yeah. Yeah. But then it makes sense to protect Mickey too. [02:19:34] S0: And Donald's also the more, like, fighter out of character. Yeah. Mickey started off as this troublemaker, but then kinda became the, like, nice protagonist. [02:19:43] S1: Yeah. The goody two shoes, and then Donald was the foil. Yeah. Yeah. So all of this, though, to our point earlier, does nothing either for the flywheel model or for generating new IP to feed it. [02:19:55] S0: Or pushing the envelope of technology or pushing the bounds of creativity, like all the things that contribute to Disney's core. Yep. They they are financially floated, though, by the war. I mean, the way that they make it through this period is they they actually are generating net income reliably. Not a lot. [02:20:12] S1: But From the government work? Exactly. And there's one other big innovation, an actual bright spot that comes out of this back against the wall moment during the war that the company's in financially. Do you know what that is? Oh. [02:20:29] S0: Oh, the Disney Vault. [02:20:30] S1: The Vault. Yes. Yes. So in 1944, the company is so cash strapped that they come up with the, again, at at the time, crazy seeming idea to rerelease Snow White in theaters because, hey. We can't make new stuff, but people sure like that old movie. Let's just put it in theaters and see what happens.
02:20:30 · David Rosenthal, Ben Gilbert
[02:20:30] S1: The Vault. Yes. Yes. So in 1944, the company is so cash strapped that they come up with the, again, at at the time, crazy seeming idea to rerelease Snow White in theaters because, hey. We can't make new stuff, but people sure like that old movie. Let's just put it in theaters and see what happens. [02:20:53] S0: And the thing you gotta remember is with no home video and no TV, no one had seen Snow White in seven years. [02:20:59] S1: Exactly. [02:21:00] S0: It truly vanished off the face of the earth except for the copies of the film that were held in the Disney vault. [02:21:05] S1: In the Disney vault. Yes. So in 1944, they rerelease Snow White in theaters, and it brings in $3,000,000 in revenue to Disney on just a, like, a few 100,000 in cost. They basically just gotta print a few new copies of the film and then distribute it out to theaters. [02:21:28] S0: Right. The theaters get their normal cut. The distributor gets their normal cut. But Disney's cost to develop the film is, like, zero zero. [02:21:33] S1: Yeah. They've already developed it. It's already done. This is an enormous boost for the company. And, Ben, to your point about the seven year gap since the initial release, it turns out conveniently that seven years is just about the right amount of time for a new generation of children to come along and reach an age, where they would be interested in consuming Snow White that haven't seen it before, and they discover it for the first time. And yet it's infrequent enough that it doesn't dilute the IP.
02:21:33 · David Rosenthal, Ben Gilbert
[02:21:33] S1: Yeah. They've already developed it. It's already done. This is an enormous boost for the company. And, Ben, to your point about the seven year gap since the initial release, it turns out conveniently that seven years is just about the right amount of time for a new generation of children to come along and reach an age, where they would be interested in consuming Snow White that haven't seen it before, and they discover it for the first time. And yet it's infrequent enough that it doesn't dilute the IP. [02:22:08] S0: So Walt's got an amazing quote on this actually from the second rerelease in 1951 of Snow White. In the eight years since then, our first rerelease, our potential audience has been increased by 25,000,000 children who either were not born or were too young to attend a motion picture theater in 1944. You're an adult much longer than you're a kid. [02:22:29] S1: It's so amazing. And they totally stumble into the seven year thing. Like, it's not like they intended when they made Snow White to say, okay. We're gonna put it in the vault, and then seven years from now, we're gonna take it out. It just happened that seven years later, they had a big cash crunch. They needed some easy profits, and they put Snow White back in theaters. And seven years, you know, give or take a couple years, basically becomes the core Disney IP cadence to this very day.
02:22:29 · David Rosenthal, Ben Gilbert
[02:22:29] S1: It's so amazing. And they totally stumble into the seven year thing. Like, it's not like they intended when they made Snow White to say, okay. We're gonna put it in the vault, and then seven years from now, we're gonna take it out. It just happened that seven years later, they had a big cash crunch. They needed some easy profits, and they put Snow White back in theaters. And seven years, you know, give or take a couple years, basically becomes the core Disney IP cadence to this very day. [02:22:55] S0: And Disney could uniquely do it versus other studios because their IP was more timeless. It's animated, and it's based on these timeless sort of lessons and these fairy tales, of old. Like, there there are there are these simple but resonant stories. [02:23:12] S1: And it carries through right to today. What is the cadence between Disney's Frozen movies today? Frozen one comes out 2013. Frozen two comes out 2019. Frozen three slated for release next year, 2027. Six to eight years like clockwork. [02:23:31] S0: It's interesting they've applied it to sequels now too. Yep. Alright. So now we've got four components to the flywheel business. Your original three, genuinely compelling new intellectual property with characters that you resonate with. Two, maximize distribution of each element in the primary delivery vehicle. You've got three, feed that IP into as many ancillary profitable flywheel nodes as possible. And now we've got four Yep. The vault, the rereleases.
02:23:31 · Ben Gilbert, David Rosenthal
[02:23:31] S0: It's interesting they've applied it to sequels now too. Yep. Alright. So now we've got four components to the flywheel business. Your original three, genuinely compelling new intellectual property with characters that you resonate with. Two, maximize distribution of each element in the primary delivery vehicle. You've got three, feed that IP into as many ancillary profitable flywheel nodes as possible. And now we've got four Yep. The vault, the rereleases. [02:23:58] S1: Strategically rerelease it every seven or so years, frequently enough to capture each new generation of children, but not too frequently, lest you dilute its impact. With effectively evergreen content. Yep. Roy has a great quote that he would tell the Wall Street Journal many years later. Our product is practically eternal. And it's so true. Yep. So despite this genuine innovation of adding the vault concept to the flywheel, By the time the war ends in 1945, Disney is not in a good place. The flywheel is basically completely broken. There hasn't been any compelling IP generated for the past several years. And worst of all, Walt himself is disengaged and disillusioned. [02:24:55] S0: Yeah. But clearly something happened because the Disney we know today is quite successful. [02:25:01] S1: Yes. But before we continue the story. [02:25:03] S0: Yes. Listeners, this is a great time to thank our friends at ServiceNow, longtime friends of the show. So if you are managing a large enterprise today, you've got AI everywhere. You've got copilots and models and agents all running across every team.