Walt Disney (DIS 0.18%) has long been a company built on intellectual property (IP). At first, that was its famed cartoon characters and its unique takes on fairy-tale princesses and princes.
In recent years, however, the company has expanded its character army. First, it bought Pixar in 2006. That gave the company ownership of an animated film studio that has produced a steady stream of blockbuster films, many of which have spawned sequels. After that, in 2009, the company purchased Marvel and its library of superhero characters, and in 2012 it bought Lucasfilm, bringing Star Wars into the Disney IP library.
It's a strategy that's been bolstered by the company's resurgent animation business that produced Frozen and the more recent hit, Coco. Disney has been able to acquire or create characters and then wring every last dime out of them.
A property like "Star Wars" can easily be exploited in the company's theme parks. Image source: Walt Disney.
What does Disney do?
First, it establishes characters in a hit movie. Recently, Disney took the Guardians of the Galaxy, an obscure group of Marvel characters, and turned it into two hit films -- the first grossed $773 million globally and the second grossed $863 million globally.
Once the first film became successful, the Disney team went into overdrive. It offered toys, shirts, and other gear, launched a cartoon on one of Disney's cable networks, and, perhaps most importantly, brought characters into its theme parks. So far, this has included repackaging the Tower of Terror at Disney California Adventure into a Guardians-themed ride.
In addition, characters from the film have appeared at Disney's Hollywood Studios in Orlando, Florida. And, the company has begun construction on a massive indoor roller coaster at Florida's Epcot, which will be one of the park's signature attractions when it opens.
Basically, once Disney establishes a property, it leverages it every way possible. That will almost certainly include its new streaming network, which launches in 2019. That's something it can do across its various video, film, and theme park platforms.
Here comes streaming
Few companies, including the broadcast networks, own enough content and IP to take on Netflix without investing billions. Disney is the lone exception. In addition to all the characters it can leverage into new programming, the company also has an extensive library of films, cable shows, and ABC programs it produced.
Netflix closed 2017 with 52.81 million subscribers in the United States and 110.64 million subscribers across the globe. Those are numbers Disney won't hit quickly, but it's not unreasonable to see those as targets when you combine the audience for its separate planned entertainment and sports streaming services.
Disney's archive alone would be a strong draw for families, but its ability to use its IP to create shows that force people to subscribe is strong. What Star Wars fan will pass up a live-action series set in that universe? The same can be said of so many other Disney properties (albeit most not on the level of Star Wars). The same is true on the sports side due to ESPN's rights deals, well-known personalities, and archive of shows.
Big things ahead
Yes, Disney has struggled a bit, especially at ESPN, due to cord cutting. That may continue in the short-term, but ultimately viewers haven't stopped watching, they are simply changing how they watch. Eventually, Disney's platforms will catch up to those changes, and the company's strong IP (including ESPN) will draw viewers.
The Mouse of House has a formula, and it's one that limits risk while maximizing revenue. The mix of what's included in that formula may change with cable and streaming currently being in flux, but it all comes down to whether the company has the IP to attract eyeballs. Disney most certainly does, and that should serve the company well for decades.
