Acquired
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.
03:31:25 · Ben Gilbert, David Rosenthal
[03:31:25] S0: For a little bit. That would sort of wane over the decades from here. [03:31:28] S1: Yep. Once the company's listed publicly and people start to realize the incredible power of the business behind Disney, in early nineteen fifty eight, The Wall Street Journal runs a front page story about Disney's unique business model. And this was one of the most fun things to discover in our research. [03:31:51] S0: So the article's title is Disney's land, Walt's profit formula, dream, diversify, and never miss an angle. [03:32:00] S1: And this article in the Wall Street Journal is where the famous Disney flywheel illustration comes from. The Ben you are holding up live that you have framed in your studio. [03:32:15] S0: This has been on the wall of my office for years. So the legend that's [03:32:19] S1: out there that everybody believes is that this was a napkin sketch that Walt himself drew. No. It was actually created by a Disney studio artist as an illustration for this Wall Street Journal piece. Disney confirmed this for us when we were visiting them in the archives, and then we asked the Wall Street Journal to pull the original piece out of their archives. We'll link to it in the show notes. So cool that this is the origin of where it all came from. [03:32:48] S0: Yeah. It it serves as an illustration for something that at the time was actually a pretty difficult to articulate concept of a business flywheel. I will say the word flywheel never appears in the Wall Street Journal article. [03:32:59] S1: No. That nomenclature would get added later.
03:32:59 · David Rosenthal, Ben Gilbert
[03:32:59] S1: No. That nomenclature would get added later. [03:33:01] S0: But it was like the journal saying, hey, Disney. Help us with some kind of illustration that makes this point that you have a wholly unique new business model in the media landscape. [03:33:12] S1: And it's a beautiful, beautiful diagram. The whole article is great. Roy has these amazing quotes within it. He says, our diversified activities are related and tend to complement each other, helping us to do relatively fine business in the face of otherwise difficult times for the motion picture industry. Integration is the keyword around here. We don't do anything in one line without giving a thought to its likely profitability in our other lines. So spot on. And then they walk through the steps of the company's flywheel with their plans for their upcoming feature film release of Sleeping Beauty, which was still a year away from release at the time of the article. [03:33:57] S0: In 1958, how crazy is this? At Disneyland, which opens in 1955, there is the centerpiece of the whole thing is Sleeping Beauty Castle. That movie wouldn't come out for another four years. Right. Right. Right. Right. Building hype for a movie that was basically in preproduction at this point. In fact, it was based on concept art that was effectively a German castle because it was so far from the film.