Acquired
01:47:44 · David Rosenthal, Ben Gilbert
[01:47:44] S1: Right. It's the share of Disney, the studio, plus their distributor. [01:47:48] S0: That's exactly right. And so then I know I'm doing some financial gymnastics here. [01:47:53] S1: Well, hey. All of this Hollywood accounting, even through to this very day, is so obscure and arcane, I think on purpose so that neophytes to the business don't really understand the deals that they're making. [01:48:05] S0: If you go look at what is really the source of truth here, the 1940 IPO prospectus, which we are gonna get to, you can very clearly see that over a one year and nine month period, they make $4,500,000 in film rental income, the producer's share. So this is just Disney's from Snow White and the Seven Dwarves. So that's our real source of truth that we know. $4,500,000. Now they had about $2,300,000 of debt Yeah. From the $1,500,000 of production costs plus the interests that they owed Bank of America. [01:48:45] S1: Yep. So a huge portion of the net that they're taking home just from the box office of Snow White is going to repay the debt, let alone operating expenses for the studio, etcetera, etcetera. So, yes, it's, like, great for the company, but it's not quite as transformative from the box office alone as people would think. [01:49:10] S0: Right. So they they effectively have $2,200,000 left over after paying the theater, paying the distributor, paying back the principal on the loan, and paying the interest. Okay. $2,200,000 in 1937. Still a lot of money, but, they wanna go build a gigantic campus.
01:49:10 · Ben Gilbert, David Rosenthal
[01:49:10] S0: Right. So they they effectively have $2,200,000 left over after paying the theater, paying the distributor, paying back the principal on the loan, and paying the interest. Okay. $2,200,000 in 1937. Still a lot of money, but, they wanna go build a gigantic campus. [01:49:29] S1: Yes. But, Ben, of course, Disney isn't just making $2,200,000 in profits from Snow White. There's all that good, good flywheel revenue to come along with it. So, you know, if Walt thought that the flywheel worked well for Mickey Mouse, Snow White is, like, a whole another level. So before the film is even widely released around the country. They have their next major flywheel node, their next business model innovation already in market, The movie soundtrack. I couldn't believe this when I learned it. Snow White was the very first movie soundtrack ever created and sold to the public. It all started with Snow White. There were no sound movie soundtrack at homes before then. And it is a huge hit, both because, you know, it's a great soundtrack. But, like, before this album, there was never anything that audiences could take home actually of the picture that they saw in theaters. There's no home video. Right? There's no streaming. There's no television. Right. You go to see something in the movie theater. Sure. You could buy a piece of merch like a doll or a costume, and there were a lot of those out there for Snow White. But you couldn't take home the movie except in the form of the soundtrack. [01:51:02] S0: And the songs are are quite catchy. [01:51:04] S1: It's a lot of work.
01:51:04 · David Rosenthal, Ben Gilbert
[01:51:04] S1: It's a lot of work. [01:51:05] S0: And off the work. [01:51:06] S1: Yeah. So the soundtrack is huge. Beyond that, there supposedly, I read, are 2,183 separate SKUs of Snow White merchandise that get pumped into the global markets by Kay Kayman's consumer products organization. [01:51:28] S0: Unreal. [01:51:28] S1: The New York Times actually writes this, that, quote, sales of Snow White products might be America's path out of the depression. Wow. That's how successful it was. I mean, this movie was such a grand success artistically for Walt, for the studio, for the whole medium of animation and legitimizing it right alongside live action, and for the flywheel business model of Disney. So all of this enables Walt to pursue his next dream, which is that he wants to build a brand new state of the art animator's paradise. Ben, as you alluded to, the new Disney Burbank animation studio, still the, corporate headquarters of the company to this very day. [01:52:21] S0: Right. He basically sees the success of Snow White and thinks, oh, yeah. We're we're gonna do a lot lot more. More [01:52:27] S1: of these. [01:52:28] S0: Let's let's build all the infrastructure to, like, really do that right.
01:52:28 · Ben Gilbert, David Rosenthal
[01:52:28] S0: Let's let's build all the infrastructure to, like, really do that right. [01:52:32] S1: Yes. So Walt's goal with the new Burbank studio was to be able to house 1,200 plus animators and staff up from, call it, 300 before Snow White. And then, Ben, what did you say? Seven fifty that the ranks had swelled to during Snow White. Yep. And he thinks that with this new campus, everything that they're gonna install there, and all the additional staff, that Disney will now be able to produce two new feature animated releases every single year plus shorts. So, like, it took three years to make Snow White. With all the learning from that, all the innovations of the new campus, all the new staff, he thinks they're now gonna be able to pump out great new feature films every six months. [01:53:19] S0: Which was a complete pipe dream, and they never able to do. [01:53:23] S1: Walt also, in his mind, think comes to see this Burbank campus as really a utopian like place, kinda almost like a college campus. I mean, Walt didn't even graduate high school, let alone go to college, but he intentionally places it in Burbank, which back then was like the sticks outside of LA. Yep. He wanted the Disney lot, the Disney studio to be this special place, kind of away from all these other studios controlled by their distributor bosses back in New York. And he kinda, I think, really wanted to create this band of merry men and women type feeling where they could achieve the impossible, like producing two feature animated films a year.
01:53:23 · David Rosenthal, Ben Gilbert
[01:53:23] S1: Walt also, in his mind, think comes to see this Burbank campus as really a utopian like place, kinda almost like a college campus. I mean, Walt didn't even graduate high school, let alone go to college, but he intentionally places it in Burbank, which back then was like the sticks outside of LA. Yep. He wanted the Disney lot, the Disney studio to be this special place, kind of away from all these other studios controlled by their distributor bosses back in New York. And he kinda, I think, really wanted to create this band of merry men and women type feeling where they could achieve the impossible, like producing two feature animated films a year. [01:54:05] S0: Well, the thing he sort of didn't factor in is that you might be able to make Snow White faster in the future, but every idea that you have is gonna be a different new idea that's gonna be more ambitious and have more cost and require more people. And so this Burbank studio was necessary even to keep The [01:54:23] S1: same pace. [01:54:23] S0: Producing films every three years. Yes. But this the the lot itself is unbelievable. It's 51 acres. There are sports fields, a cafeteria. There's art classes. There's massages available. There's sunbathing in the penthouse club. In many ways, this is like the Googleplex before the Googleplex. [01:54:40] S1: This is 1940 when they opened this. [01:54:42] S0: And you're right. It's it's kinda designed to keep you there. Why would you need to go anywhere else? And, really, there's nowhere else else to go around here. [01:54:48] S1: In Burbank.
01:54:48 · David Rosenthal, Ben Gilbert
[01:54:48] S1: In Burbank. [01:54:49] S0: It reminds me a little bit of, Epic Systems too. [01:54:51] S1: Yeah. Yeah. Yeah. Yeah. Very similar. Very similar. [01:54:54] S0: So here's an example of the lengths that they went to on this campus. So I was looking at Google Maps planning our visit, David, and it looks weird. It's it's offset from the Burbank Street grid at an angle. And we asked the person who were showing David and I around listeners, why this is. And he said that it was Walt's priority when they were building it to offer the exact perfect conditions for lighting to animators, which, of course, David, you know the the spoiler here. [01:55:24] S1: Yes. To have offices that face north because northern light is true light. [01:55:29] S0: Do you know why northern light is preferable? [01:55:31] S1: No. I just know that that's what our our very kind tour guide told us.