Acquired
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.
03:33:57 · Ben Gilbert, David Rosenthal
[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. [03:34:19] S1: Yes. Incredible. So the article walks through at Disneyland, they've installed animated dioramas as an attraction that they're charging a 35¢ admission fee for. These are animated dioramas of Sleeping Beauty, the upcoming movie. Next, Disney is producing and selling Princess Aurora dolls and costumes. They are working on producing and publishing books of the Disney version of the fable that will be told in the movie. [03:34:48] S0: Of course, they are. [03:34:49] S1: And, of course, there are segments in the Disneyland TV show about Sleeping Beauty. They're already preparing the soundtrack album to go on sale before the movie's released. And then finally, comics of Aurora and the Sleeping Beauty story are already starting to come out as part of the Disney treasury of classic tales syndicated comic strip. [03:35:16] S0: Fascinating. [03:35:16] S1: Just amazing.
03:35:16 · David Rosenthal, Ben Gilbert
[03:35:16] S1: Just amazing. [03:35:17] S0: The other thing this article reveals is that Disney was intentionally making its TV shows in color even when TVs were still black and white because they thought it was likely TVs would go color soon, and they knew that the IP they were making would stay valuable for decades. I mean, the foresight. They are so bought in on we're just dumping valuable IP onto the pile, and we want it to live forever. [03:35:39] S1: Yep. Now there is one other thing we haven't talked about, which is that Disney in house their own film distribution right before the launch of Disneyland. [03:35:49] S0: Yes. Yeah. And this actually comes up in that journal article too. Yep. They create something called Buena Vista distribution, and they left RKO Radio Pictures, who had been their distributor since, I think, 1936. Howard Hughes ended up owning it, and it had been kind of a train wreck as he spiraled out of control toward the end of his life. Disney didn't really wanna be a part of that chaos. And at the same time, Walt had really started thinking about Disney as vertically integrated entertainment, not just a film studio who would rely on others for distribution. So in '53, two years before Disneyland opened, they incorporated Buena Vista. The Living Desert was their first film. It's one of these nature documentaries. [03:36:34] S1: Mhmm.
03:36:34 · David Rosenthal, Ben Gilbert
[03:36:34] S1: Mhmm. [03:36:34] S0: Then quickly thereafter, they did Lady and the Tramp and 20,000 Leagues Under the Seas distribution through Buena Vista instead of through an outside distributor. It was kinda like a test. Like, can we Yeah. Pull this off? They got pretty good at it pretty fast with the exception of international where they then had to rely on sub distributors for a long time. But Disney had become such a household name, especially because of that weekly ABC show and because of Disneyland, where they were pretty uniquely well suited to actually self distribute without a middleman. I mean, this is like Walt's dream from the early cartooning days. [03:37:14] S1: It's kinda surprising that they didn't start doing it after Snow White. I mean, who's gonna turn down a Disney picture? [03:37:21] S0: Alright. You tee me right up because I was wondering the same thing. Cash flow. Yeah. You can't be a distributor unless you're on great financial footing because the cash flow cycle means that you are fronting money to print films, distribute them before you actually get paid by the theaters when tickets sell. So Disney didn't have the working capital to pull this off until their real strength in the mid fifties. [03:37:49] S1: That's such a good point. I always had wondered why more studios didn't vertically integrate and own their own distribution, and that makes sense. You need a lot