On this day in economic and business history...
Walt Disney began his eponymous entertainment empire (NYSE:DIS) on Oct. 16, 1923, when he signed his first contract to produce a series of short black-and-white cartoons known as the Alice Comedies. The Disney Brothers Studio, as it was initially called, was at first a partnership between Walt and his brother Roy Disney, who headed the company through five decades as its first CEO. The two Disney brothers built their namesake company from a tiny contract animator into a world-famous entertainment empire -- Walt died in 1966 and Roy passed away five years later, and by that time Disney was already a billion-dollar company. This is how they did it (you can click on the links for more background on each event):
- 1927: Disney launched its first original character, Oswald the Lucky Rabbit.
- 1928: Mickey Mouse debuts in Steamboat Willie.
- 1932: Disney pioneers full-color cartoons with synchronized soundtracks.
- 1934: Donald Duck debuts in The Wise Little Hen.
- 1937: Snow White, the first full-length animated film, premieres in theaters.
- 1940: Disney issues its first (preferred) shares.
- 1954: Disneyland, the first Disney TV show, debuts on ABC.
- 1955: Disney's first theme park, Disneyland, opens its doors in Anaheim, Calif.
- 1957: Disney goes public.
At the time of Roy's death, Disney had released 20 animated feature films (nearly all of them classics), produced dozens of full-length live-action features (both scripted films and documentaries), and just opened Walt Disney World in Orlando, Fla. The Disney brand had given the world more beloved characters than perhaps any other entertainment company in the world, but the company's post-founder period was far from stable. A string of high-profile flops and leadership struggles culminated in a failed hostile takeover in 1984, which would have sundered the mighty Disney stable into its component parts for sale to other entertainment companies. This led to the installation of Michael Eisner in the Disney corner office the same year, planting the seeds of the sprawling, modern Disney we know and (mostly) love today.
These years were not kind to Disney: Its share price only grew by about 35% between Roy Disney's death in 1971 and Eisner's installation in 1984. However, the Eisner and post-Eisner eras cemented Disney as the world's entertainment brand par excellence. This era of "modern Disney" was highlighted by several major acquisitions, as well as other canny diversification efforts:
- 1991: Disney joins the Dow Jones Industrial Average (DJINDICES:^DJI).
- 1991: Disney's publishing company releases its first book.
- 1994: Disney opens a software development division.
- 1995: Disney buys Capital Cities/ABC, gaining ESPN in the process.
- 1998: Disney launches its cruise line with Disney Magic.
- 2006: Disney buys Pixar.
- 2009: Disney buys Marvel.
- 2012: Disney buys Lucasfilm.
Nine decades after its formation, Disney is a $120-billion global entertainment titan with world-famous theme parks, a fleet of cruise ships, a wide range of successful television shows, and a regular lineup of blockbuster movies. And it all began with Walt Disney's trademark signature on a piece of paper. If you'd made an investment in Disney's IPO, it would have produced gains of 175,000% -- not counting the dividends paid over the years, which alone produced 165 times the value of the original investment by the time the company's 90th anniversary rolled around.
A triple-digit milestone
Today, the Dow Jones Industrial Average regularly swings 100 points in either direction during the course of a trading day, to the general indifference of millions of long-term investors. But Oct. 16, 1987, was the first such triple-digit day in the Dow's history; a then-record decline of 108.36 points "[capped] a disastrous week that left many on Wall Street battered, poorer, and nervous about what might lie ahead," in the words of The Washington Post.
It had been nearly five years since the Dow had clawed its way above 1,000 points for good, and even as that five-year bull market abruptly began ran out of steam in the fall of 1987, it still clung to returns in excess of a double. However, feelings were widespread that the market was getting a little overheated. Portfolio manager Joe Rosenberg of Loews told the Post: "Stocks have been selling [for] 20 times earnings with the lowest yield in this century. How could anyone say that stocks [are] the place to be?"
The Dow's dramatic final-hour drop was blamed on computerized trading -- an ominous sign not lost on those who returned to Wall Street the following Monday to experience the most brutal sell-off in market history. Gallows humor, which would soon (but only briefly) bleed out of the market, was in full display after the Dow's first triple-digit drop. The Post, in closing, highlighted one of Wall Street's favorite jokes at the time: "What do you call a yuppie arbitrageur? Waiter." You probably had to be there.
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