Acquired
03:22:55 · David Rosenthal, Ben Gilbert
[03:22:55] S1: Well, we're gonna get into this in a minute here. Really, the impressive thing is that Disney films are now great again, and still the parks do more revenue. We're about to hit a period where the parks do a lot more net income than the films because the films suck. [03:23:10] S0: Now reflecting on all of this, Disneyland actually was not a bet the company move for Walt Disney Productions financially. It was cleverly structured by Roy to not be. But reputationally, it absolutely was. I mean, people were willing to take these giant leaps on Walt because of who he was and what he had accomplished the same way that they do with Elon or Steve Jobs or Warren Buffett getting deals that no one else could get. So Roy was, like, great at making sure it wouldn't financially bankrupt the company, but Walt was sort of betting that reputation Yeah. Extremely publicly to half the households in The US. So not only was he betting the company, he was betting his own personal fortune too. Remember that $250,000 that he put in? Yep. He sold his vacation house in Palm Springs. Yep. He borrowed a $100,000 against his life insurance, and he took on a personal loan to fund that obligation. [03:24:05] S1: Yep. All true. And all necessary because of how they had always operated the company. He wasn't taking lots of cash out of the company.
03:24:05 · David Rosenthal, Ben Gilbert
[03:24:05] S1: Yep. All true. And all necessary because of how they had always operated the company. He wasn't taking lots of cash out of the company. [03:24:13] S0: Until the sort of renegotiation of his employment contract. Yep. So there is a fascinating coda to all this crazy corporate stuff on how the park was formed. You might be wondering, well, wait. Doesn't the Walt Disney Company own the park outright now? I mean, when you visit Disneyland, don't you assume, hey, wait, this is just part of Disney. What about that weird joint venture thing and ABC and Walt personally? So here's how it all goes down. The headline is the Walt Disney company would not actually own the park and everything within its borders for a full twenty seven years after opening in 1982. So here's the the full story of who sold what and when. Pretty quickly, Walt Disney Productions exercised their right to buy out Western Publishing and Walt personally. So by 1958, three years after opening, they owned 66%. But the buyout right to ABC's stake, that wasn't prenegotiated. So in 1960, when the company actually had enough cash to do it, that's when Roy negotiated, hey. We'll pay you 7 and a half million dollars to buy out your your stake. So by 1960, the publicly traded company Walt Disney Productions did own all of Disneyland Inc. But that leaves WED Enterprises, which had been hired as a contractor to build all the stuff. [03:25:33] S1: Yes. And WED Enterprises is Imagineering today, Disney Imagineering.
03:25:33 · David Rosenthal, Ben Gilbert
[03:25:33] S1: Yes. And WED Enterprises is Imagineering today, Disney Imagineering. [03:25:37] S0: Yes. But WED Enterprises, the entity, at this point in time, also owned rights to some elements in the park. [03:25:46] S1: Right. And it wasn't consolidated into Disney the company yet. Right? It was still this separate thing owned by Walt. [03:25:54] S0: Right. So WED, which Walt is the 100% shareholder of, actually owned the railroad outright. It had been negotiated [03:26:04] S1: Of course, he did. [03:26:05] S0: As a part of the personal services contract. Because it was like, hey. I was already doing this side project, and now I'm just putting it on Disneyland. All comes [03:26:14] S1: back to trains. [03:26:15] S0: So he got ticket revenue from it as an annuity, basically. [03:26:20] S1: Right. Because all the rides cost money. So the the railroad at Disneyland [03:26:24] S0: Yes. [03:26:25] S1: Was Walt's.
03:26:25 · David Rosenthal, Ben Gilbert
[03:26:25] S1: Was Walt's. [03:26:26] S0: Same thing with the monorail. These were not owned by Disneyland Inc. They were owned by WED. Amazing. We also mentioned since WED was Walt's personal company, it owned Walt's name and likeness, which led to that 10% royalty on merchandise. In 1963, eight years after the park opened, Roy was getting very nervous that the public shareholders would sue over this admittedly very tenuous structure. So they reached a deal. Wed would get sliced into two pieces, Imagineering, the architectural engineering department, and everything else. Disney productions would buy the half of Wed that was Imagineering. So they finally in house Imagineering in 1965. The rest of the holdings would be renamed Retlaw, which is Walter backwards. [03:27:11] S1: Right. Right. [03:27:12] S0: And inside of Retlaw, Walt would get to keep the trains, the monorail, and his 10% royalty. This is in 1965. That would actually last all the way until 1982, nearly three decades after the opening, where the company says enough is enough, goes to Walt's family, because this is after he passed away. And they bought out the name rights, the monorail, and the railroad in exchange for $43,000,000 of Disney stock. Insanely, WED Enterprises, which would later be Rhett Law, got a total of $75,000,000 in checks from Walt Disney Productions for the Disneyland Railroad and for the monorail between 1953 and 1981, and another 46,000,000 for name royalties. Wow. [03:28:00] S1: So I guess the question as a Disney shareholder would have been, was it worth it? Right. And the obvious answer
03:28:00 · David Rosenthal, Ben Gilbert
[03:28:00] S1: So I guess the question as a Disney shareholder would have been, was it worth it? Right. And the obvious answer [03:28:07] S0: is yes. I mean, there's all these conflicts of interest everywhere, and this would never fly today with sort of modern shareholder and SEC and securities laws. But in practice, if you were a Disneyland shareholder then and you held through all of this, that would have worked out great for you. [03:28:25] S1: Well, speaking of how great it would have worked out for you, after the launch of the TV show, the park, the company is just firing on all cylinders again. In Disneyland, the combination of the television show and the park have really added a fifth element to the flywheel business model. [03:28:46] S0: That's right. You've got one, compelling great IP. Two, maximize distribution in the core vehicle. Three, feed the IP into as many ancillary vehicles as possible. Four, you've got the rereleases in the vault. And now five, parks and television. This is a television to amplify interest in all of the characters. You've got parks to do it's almost like the extreme bottom of funnel, the way to experience the most Disney thing you possibly could experience every once in a while, but a huge monetization event. And, of course, you do that. I I mean, I just got back from Disneyland. Guess what we're watching? A lot of Toy Story this week at my house. Right. It's a refresher on your fandom.
03:28:46 · Ben Gilbert, David Rosenthal
[03:28:46] S0: That's right. You've got one, compelling great IP. Two, maximize distribution in the core vehicle. Three, feed the IP into as many ancillary vehicles as possible. Four, you've got the rereleases in the vault. And now five, parks and television. This is a television to amplify interest in all of the characters. You've got parks to do it's almost like the extreme bottom of funnel, the way to experience the most Disney thing you possibly could experience every once in a while, but a huge monetization event. And, of course, you do that. I I mean, I just got back from Disneyland. Guess what we're watching? A lot of Toy Story this week at my house. Right. It's a refresher on your fandom. [03:29:28] S1: Thinking about it more now, television was adding another node to the flywheel for sure. The parks are almost this, like, hybrid flywheel plus IP because all of the core Disney IP, of course, goes into the parks. I mean, you've the Peter Pan ride. You've got the Star Wars rides today. But the parks are also not just a destination. [03:29:53] S0: Right. They're they're a source of IP development, not just a a a sink of IP development. [03:29:58] S1: And, I mean, this would literally become true with pirates of The Caribbean much later. [03:30:03] S0: I mean, that's gotta gross billions after all these sequels. [03:30:06] S1: You actually have new IP generation coming out of Imagineering and the parks. Right.