Acquired
04:11:04 · Ben Gilbert, David Rosenthal
[04:11:04] S0: I mean, isn't Universal running effectively the the same playbook but with less valuable IP or IP that they don't own, so they have to sort of share it, think like Harry Potter Yep. Or just at smaller scale. [04:11:19] S1: Yeah. Still nobody else is Disney. And and to me, I think it all comes back to when we first talked about the flywheel all the way in the beginning of the episode. I think animation is super, super key. I mean, Bob Iger, when he took over the company in 2005, had that famous quote of, as animation goes, so goes the company. Yep. There really is something unique about animated IP in its timelessness, in the ever availability of its stars, in the better economics of not having to share too much on the back end or in merchandising fees, etcetera, with stars. And then I think really just, like, the ability of people to form deep lasting relationships with the characters versus Yeah. Live action. And because Disney's always had animation in its core, that's what creates all this special IP. And it's all created in house. You know, it's funny. [04:12:14] S0: I throw a Harry Potter. Universal doesn't own all of the rights to everything Harry Potter, but Disney for sure does own all the rights to everything Buzz Lightyear, now that they own Pixar or Aladdin or Mickey Mouse. Like, this is true vertical integration. [04:12:29] S1: Yes. Yes.
04:12:29 · David Rosenthal, Ben Gilbert
[04:12:29] S1: Yes. Yes. [04:12:30] S0: There's also Disney, for all its ups and downs, made the decision to never sell its catalog so they could compound longer than everyone else. A lot of these other studios have sold their back catalogs, and some of them are are worthless since it's live action films in black and white that no one's ever gonna watch. But Disney hasn't. They own everything they've ever made, and that ties to Walt's Oswald experience. [04:12:56] S1: Yep. And I think there's something else too that only comes when you really fully embrace the flywheel business model and the trade offs that it involves, and it's the vault and the reissue strategy. Yeah. Disney let's put Marvel aside for a minute. With the exception of Marvel [04:13:17] S0: You gotta put Star Wars in that pile too. Because I know where you're going with this. And I the way you feel about Marvel, I feel about the, overexploitation of Star Wars. [04:13:24] S1: Yeah. Yeah. Okay. Good. Good. Good. Alright. Let's let's put Star Wars aside in the pile too. Core Disney and Disney Animation and Pixar have been so disciplined over the years about metering out their content and the core delivery of that content on an infrequent enough basis that it doesn't dilute it. And Marvel, ironically, I think, really is the counterexample here.
04:13:24 · David Rosenthal, Ben Gilbert
[04:13:24] S1: Yeah. Yeah. Okay. Good. Good. Good. Alright. Let's let's put Star Wars aside in the pile too. Core Disney and Disney Animation and Pixar have been so disciplined over the years about metering out their content and the core delivery of that content on an infrequent enough basis that it doesn't dilute it. And Marvel, ironically, I think, really is the counterexample here. [04:13:48] S0: Yeah. It was on a great, great run, but honestly, it feels like the Disney plusification of Marvel. We'll get to this in the next episode. But that that my gripe would be that the developing a lot of content to always have something fresh there. Maybe what the issue that we're both describing is actually a blurring of flywheel point two and flywheel point three. Point two was maximize distribution of each core IP's primary initial delivery vehicle. And your point three was feed IP into as many ancillary profitable flywheel nodes as possible. Kinda feels like with direct to consumer Disney plus, those two things got confused. [04:14:28] S1: That blurred. Yep. [04:14:29] S0: And like, yeah. What's the difference between ancillary content and primary content? It all ends up in the same place. And that's kinda how I feel when I watch some of the overexploited IP now. Mhmm. Mhmm. It goes back all the way back to the point you made, I don't know, six hours ago or whatever, that you you have to be really clear about giving a nice lane around your primary medium and delivery vehicle so that stuff still feels scarce, special, and canonical.
04:14:29 · Ben Gilbert, David Rosenthal
[04:14:29] S0: And like, yeah. What's the difference between ancillary content and primary content? It all ends up in the same place. And that's kinda how I feel when I watch some of the overexploited IP now. Mhmm. Mhmm. It goes back all the way back to the point you made, I don't know, six hours ago or whatever, that you you have to be really clear about giving a nice lane around your primary medium and delivery vehicle so that stuff still feels scarce, special, and canonical. [04:14:56] S1: Yep. Yep. Yep. But I think for every other studio out there, their incentives have always been and are always going to be release as much content as quickly as possible. Yeah. Especially once they have a franchise that's working. Get the sequels out as fast as possible and get the sure profits from them. [04:15:16] S0: And Disney is playing a many decade compounding game, which can take three decades to really kick in. And all these other studios change ownership every decade. And so there's really not the right, like, ownership incentive structure to play a three decade game. [04:15:33] S1: Yep. And I think this impacts the creative decisions too. Because when you don't need to release content, you can keep working on the content and make sure that you only release it once it's truly great. [04:15:48] S0: Yeah. There's one other point on this though that we haven't really touched on, which is universe cohesion. [04:15:54] S1: Mhmm. [04:15:54] S0: Here's my favorite way to make the point. What's your favorite Paramount song? Right. [04:16:00] S1: Yeah. No idea. The Top Gun theme song?
04:16:00 · David Rosenthal, Ben Gilbert
[04:16:00] S1: Yeah. No idea. The Top Gun theme song? [04:16:03] S0: What's your favorite Universal song? [04:16:05] S1: Right. Yeah. [04:16:06] S0: But, like, everyone's got a litany of answers to what's your favorite Disney song. Yes. They actually managed to associate all of this love and heritage and fandom and universe interaction with the studio itself. [04:16:20] S1: It's back to becoming the lifesavers of animation. Yep. So okay. As I was thinking about this, was I trying to ask myself, are there any other companies in the broader [04:16:30] S0: Nintendo. [04:16:31] S1: Landscape? Ah, you got it. They do this. I thought I was gonna get you, which is so great because Nintendo and Disney, you know, Nintendo started on the back of Disney, right, as we talked about on our Nintendo episodes. Right. It was the Disney license for the playing cards in Japan that kicked off modern Nintendo. Yep. Yes. But, yes, they have this exact same ethos and flywheel. [04:16:55] S0: But interestingly, they sort of don't play together now. I mean, that's the thing about vertically integrated companies is they don't really work together. [04:17:02] S1: Right. And Nintendo is partnered with Universal now for their perks. I kinda suspect the way that a relationship between Disney and Nintendo the only way it could work would be if one of them buys the other. Right.
04:17:02 · David Rosenthal, Ben Gilbert
[04:17:02] S1: Right. And Nintendo is partnered with Universal now for their perks. I kinda suspect the way that a relationship between Disney and Nintendo the only way it could work would be if one of them buys the other. Right. [04:17:14] S0: Yep. Yep. Great. Seven powers? Great. So listeners, this is the part of the show where we walk through Hamilton Helmer's seven powers framework that effectively helps analyze why does a business get to be more profitable than its nearest competitor and do so sustainably. And those seven are scale economies, network economies, counter positioning, switching costs, branding, cornered resource, and process power. And I think we're just analyzing this for pre 1984 Disney. [04:17:44] S1: Yep. Well, easy one to start with, counter positioning for days, being willing to invest in a feature length animated picture. I mean, that was the peak of this relative to anybody else doing animation leading up to Snow White. [04:17:59] S0: Right. Because their competitive set would have needed to be people who have the talent of their animation staff, which is not zero people, but few people, and who had all the cash from Mickey and the Mickey merch, which would have been almost no one. I don't know, actually. That's almost like capital as a moat to go pursue Snow White. Because they weren't there was no one else who really could have done it.