Acquired
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.
03:30:06 · David Rosenthal, Ben Gilbert
[03:30:06] S1: You actually have new IP generation coming out of Imagineering and the parks. Right. [03:30:11] S0: A lot of stuff hasn't done as well. Like, a haunted mansion has never really worked as a movie. Never really worked. Jungle Cruise. But, yeah, that that that is a great point that the parks serve as a way to feed the rest of the flywheel, not just be a sink of it. So this year, 1955, with the park, with TV revenue from Davy Crockett, Mickey Mouse Club, this is basically the inflection point for the company. Revenue doubled from '54 to '55, and it would just keep on climbing for decades from this point forward. Disney effectively stops being a movie studio, and it becomes this new form of diversified, stable entertainment company. [03:30:49] S1: Yes. In November 1957, Disney finally lists its stock on the New York Stock Exchange. Stock had obviously been held by the public ever since the 1940 stock offering, but it wasn't listed and traded on the New York Stock Exchange until 1957. [03:31:05] S0: Interestingly, post IPO, Walt and Roy do still effectively control the company. 47% of the voting power of the company is held by the Disney Voting Trust. And so you just don't need that many other shareholders for your votes to carry the day. Yep. So even as a public company, it was still their sort of family company [03:31:24] S1: Yep. [03:31:25] S0: For a little bit. That would sort of wane over the decades from here.