Acquired
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.
03:39:59 · David Rosenthal, Ben Gilbert
[03:39:59] S1: And, hey, given the company's business model, they're happy to play the long game. Right. [03:40:03] S0: So the weird thing is the financial blip that happens in this year 1959. Everything is true about this really stable platform. But if you look at that year, the financial year 1960, the company actually shows a loss. Like, they flipped briefly from looking increasingly profitable to suddenly net income negative because Sleeping Beauty had that hole. Mhmm. ABC canceled Zorro and Mickey Mouse Club, which were both TV shows that Disney was making, which was related to Walt Disney Productions blowing up the Disneyland deal and saying, you guys are kinda difficult to work with now. We wanna buy you out of Disneyland. And ABC is like, alright. Then we're gonna stop paying you huge sums for your TV shows and giving you all this free marketing. So that relationship ended there, at least for [03:40:50] S1: For the moment. ABC would come back in the Yes. [03:40:54] S0: But the takeaway is the company is actually financially stable now. This is okay. [03:40:58] S1: Yeah. The last time that Walt and the company bet big on investing in production ahead of revenues was 1940 with the move to Burbank and having Pinocchio and Fantasia and Bambi in production all at once. [03:41:11] S0: Any one of those almost killed the company on their own. [03:41:13] S1: Yeah. Now though, post Disneyland, they've got this stable base that they can take these big swings.
03:41:13 · David Rosenthal, Ben Gilbert
[03:41:13] S1: Yeah. Now though, post Disneyland, they've got this stable base that they can take these big swings. [03:41:19] S0: Yeah. Merchant licensing taught them to crawl, and then they they walked and ran with Disneyland in terms of that that stable platform. Just to illustrate this bounce back point, here's the trend. 1957, they do 3,600,000 in net income, then the next year, 3.9, then the next year, 3.4, then, ah, 1960 happens. That perfect storm of badness, $1,300,000 loss. Then they bop right back. 1961, 4.5, then 05/2002, then 06/2005, then '7, then '11, then '12. I mean, they just stability. Mhmm. Mhmm. [03:41:54] S1: And then Walt decided that it was too stable, and he needed to blow it all up again. [03:42:04] S0: Or at least he wanted to. [03:42:06] S1: So he starts wondering, how can I bet it all again? [03:42:10] S0: And in a bigger way. Right? Is Disneyland like, is is a theme park gonna really be my legacy? Are these animated films really gonna be my legacy? I shouldn't I do something actually meaningful to the world? [03:42:21] S1: Yes. I mean, this this idea of a physical Disney location worked really well. But what if we don't stop at an amusement park? What if the next time we build an entire city? Maybe like, an experimental prototype community of tomorrow. You know, Epcot. [03:42:48] S0: And if you think you know what we're talking about because you've been to Epcot, that's not it. [03:42:53] S1: Not what we're talking about.
03:42:53 · David Rosenthal, Ben Gilbert
[03:42:53] S1: Not what we're talking about. [03:42:54] S0: That's a theme park named Epcot, but Walt had this insane, insane vision that never got built but got pretty far along in the process for, again, a fever dream, not just of a place that you go for a day, but a place where you live and you work and you are transported in futuristic transport mechanisms. And all the most innovative companies locate their innovation centers all in in one place together. And there's this beautiful tower in the center of it. I mean, this is the ideal future. [03:43:35] S1: So this was Walt's final project, the Florida project that never got built, as you say. And I think it all kinda stems back to Burbank and that brief moment before the strike. When the studio at Burbank really was this utopian physical place that was the perfect marriage of art and commerce, I really think that that's what Walt always wanted to realize in the world. And now after the success of Disneyland, his ambition is restocked, and he wants to build it in this city. [03:44:19] S0: To my mind, the most interesting part about this is how far it got.