Acquired
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
03:37:49 · David Rosenthal, Ben Gilbert
[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 [03:37:59] S0: of working capital to do so. That's exactly right. In the long run, it's a pretty amazing strategy since they'd been paying, I don't know, what is it, about a third of the total rentals to another distributor. And especially with these rereleases Yeah. [03:38:13] S1: It's an absolute no brainer with the rereleases. [03:38:16] S0: At this point, Disneyland plus the merchant licensing provides this really stable foundation. They almost, like, replatformed the business is what one way you could put it, where it's the same, like, spiritual entity, but instead of the business being in the films, they now have the business in this stable foundation. And they do the films to, like, add new stuff to the pile, but the platform itself is Disneyland, TV, and merchant, and licensing. So then a few years later in 1961, Walt Disney Productions, after twenty two years of being in debt to Bank of America, finally paid off their last loan. [03:38:54] S1: Roy must have been so happy on that day. And Walt was already scheming how to blow some more money. Yes.
03:38:54 · David Rosenthal, Ben Gilbert
[03:38:54] S1: Roy must have been so happy on that day. And Walt was already scheming how to blow some more money. Yes. [03:39:04] S0: So one thing we foreshadowed is is Sleeping Beauty. We talked about Sleeping Beauty Castle. You might be wondering what ended up happening with the film. This, like many of the other films we talked about, did not recoup costs. I mean, since then, it's done phenomenally well and made probably hundreds of millions of dollars in cumulative profit for Disney, but did not pay back at the box office. [03:39:26] S1: Mhmm. Part of that was it had a really high production cost. Right? After all the success of Disneyland and all the ballyhooing about the flywheel and everything in the Wall Street Journal article. I mean, [03:39:37] S0: they went building around it. [03:39:39] S1: Whole hog on this one. [03:39:40] S0: Yeah. They spent $6,000,000 making it. It was the most expensive to produce to date. Yep. But, I mean, Walt was pretty distracted with Disneyland, so he wasn't that kind of authoritative voice to help the team find the great story in there. But, yeah, if if it wasn't such an extravagantly detailed animation piece, then it probably would have been profitable. [03:39:59] S1: And, hey, given the company's business model, they're happy to play the long game. Right.