Acquired
02:50:15 · David Rosenthal, Ben Gilbert
[02:50:15] S1: Yep. [02:50:15] S0: There was just so much more running room with his concept than he had time on this earth to execute. [02:50:21] S1: Yep. [02:50:22] S0: Do you know how I know the 1966 market cap? Is this ringing any bells for you, David? No. So during the Buffett partnerships, Warren Buffett saw that Disney was an underpriced asset in 1966 right before Walt died. Wow. So Buffett bought a bunch of the stock in '66 since it had a market cap under $90,000,000 at the time. [02:50:49] S1: $90,000,000. The company [02:50:51] S0: was doing 21,000,000 in pretax earnings. And at this point, because this is after Disneyland, this is after a bunch of stuff, it had more cash than debt. Wow. [02:51:01] S1: This is like Ben Graham bargain investing. [02:51:03] S0: And even more so like Charlie Munger investing because it was a great business at a great price. [02:51:09] S1: Yeah. [02:51:09] S0: Wow. A $90,000,000 company doing 21,000,000 in pretax that has Disney's flywheel is the buying opportunity of a lifetime when Buffett bought it. [02:51:18] S1: That's why he's the goat. [02:51:19] S0: He did, of course, sell it. So Right. [02:51:23] S1: Well, that was the right move after Walt's death as we will see in a few minutes.
02:51:23 · David Rosenthal, Ben Gilbert
[02:51:23] S1: Well, that was the right move after Walt's death as we will see in a few minutes. [02:51:27] S0: Anyway, that's sort of how I would characterize Walt's relationship with wealth and sort of what his his goal was in this personal services contract. This whole thing ultimately becomes so contentious that three board directors actually resign from the public company. There's also a shareholder lawsuit that gets brought. And for sort of strange reasons, it doesn't end up going through. But the remaining board members end up approving it. Essentially, was Roy's way of saying, okay. Company doesn't wanna be too tied up in this project if it fails, but we will provide you a way to get more cash flows from the company so you can figure out how to do more of the funding of this thing yourself. Wow. Fascinating. So, like, just to reflect to to this point in history, this is something I really never realized. The origin of Disneyland is, at least so far in the story, not about the company intentionally looking for more places to put its intellectual property. [02:52:20] S1: No. It's very intentionally not the flywheel in the beginning. [02:52:23] S0: There are essentially zero synergies as conceptualized so far for Disneyland. [02:52:30] S1: Yep. But all of that's about to change because Disneyland, even post all of the budget expansion after SRI and moving to Orange County and a 160 acres, is getting so out of hand in its budget that it needs to actually come back to the company.
02:52:30 · David Rosenthal, Ben Gilbert
[02:52:30] S1: Yep. But all of that's about to change because Disneyland, even post all of the budget expansion after SRI and moving to Orange County and a 160 acres, is getting so out of hand in its budget that it needs to actually come back to the company. [02:52:50] S0: Sort of. Sort of. So here's the corporate structure. Originally, they thought they would need about $5,000,000 for the Anaheim Disneyland. Spoiler, they would go way, way over that. But because they thought it was gonna be this expensive, Walt went back to the company again and said, look. I know we did this personal services contract thing, but, like, I think it's better if this is actually a Disney thing, and let's figure out a way to really tie it all together here. At a $5,000,000 price tag, the company cannot afford to fund this. Yep. If you look at 1952 when planning began, Walt Disney Productions made less than half $1,000,000 in net income. So 10 times that for the park's budget is is is not gonna fly. There's not cash for it. But at this point, the company is kinda like, alright. The proverbial train is moving forward here. There is actually a good plan to integrate a whole bunch of Disney stuff into the park. This can be a a Walt Disney productions thing in one way or another. We're good for $500,000, but we need to go find the bulk of the $5,000,000 somewhere else.
02:52:50 · Ben Gilbert, David Rosenthal
[02:52:50] S0: Sort of. Sort of. So here's the corporate structure. Originally, they thought they would need about $5,000,000 for the Anaheim Disneyland. Spoiler, they would go way, way over that. But because they thought it was gonna be this expensive, Walt went back to the company again and said, look. I know we did this personal services contract thing, but, like, I think it's better if this is actually a Disney thing, and let's figure out a way to really tie it all together here. At a $5,000,000 price tag, the company cannot afford to fund this. Yep. If you look at 1952 when planning began, Walt Disney Productions made less than half $1,000,000 in net income. So 10 times that for the park's budget is is is not gonna fly. There's not cash for it. But at this point, the company is kinda like, alright. The proverbial train is moving forward here. There is actually a good plan to integrate a whole bunch of Disney stuff into the park. This can be a a Walt Disney productions thing in one way or another. We're good for $500,000, but we need to go find the bulk of the $5,000,000 somewhere else. [02:53:52] S1: Yep. What can we do? So in order to go get the bulk of the financing for the park, Walt comes back fully into the fold at the Disney studio and does something that no other movie executive is willing to do at this point in time. He embraces television. He goes to the TV networks for money.
02:53:52 · David Rosenthal, Ben Gilbert
[02:53:52] S1: Yep. What can we do? So in order to go get the bulk of the financing for the park, Walt comes back fully into the fold at the Disney studio and does something that no other movie executive is willing to do at this point in time. He embraces television. He goes to the TV networks for money. [02:54:18] S0: Yeah. And the fascinating thing is it's in part because they don't really want a pure financial partner for the park. Like, they don't wanna just go raise a bunch of debt that they'll then have to pay back. This has hamstrung them so many times. They're trying to think creatively of how can we do, like, a one plus one equals five thing here where we have this Disneyland Inc joint venture, and someone else is, you [02:54:44] S1: know, building this thing and funding it. So, yeah, at the time, the prevailing sentiment in Hollywood was that TV was a threat, that if Hollywood movie studios started putting their content on TV, it would steal audiences away from the theaters. It's just like in our NFL episode where baseball was deathly afraid of television. I think the quote was radio whets the appetite for attending baseball games live, and TV satiates it. [02:55:12] S0: Yes.
02:55:12 · Ben Gilbert, David Rosenthal
[02:55:12] S0: Yes. [02:55:12] S1: But Walt realizes just like the NFL did, that TV actually was a huge new opportunity. Walt says, when television first hit, I went back to New York, and I spent a week in New York just to study television. I had the feeling then that it was important and that we ought to get in it. The feeling of the motion picture business was that television was something we should fight or we should ignore it and maybe it would go away or some darn thing. I said, television is gonna be my way of going direct to the public, bypassing the middleman. I said, Roy, this television thing can be the greatest thing because we will be going direct to the public. And he also thinks it might be his ticket to financing the park. [02:55:56] S0: So ABC had been wanting to do something with Walt. I mean, lobbying over and over and over again, because Walt did this one special a few years before. I think it was on NBC, not ABC. And it it was great. Like, there is something very compelling about Walt Disney and Disney stuff in a television special. [02:56:17] S1: Yes. Yes. Avuncular Walt Disney beaming into living rooms around America. [02:56:25] S0: But ABC is the third place network. Yep. They don't have as many affiliates. They don't have as much reach. If you're gonna get a partner for something that you really wanna take advantage of the full reach of a television network, it's not ABC. [02:56:39] S1: You really want CBS or NBC?