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Tuesday, May 24, 2005

Disney defeats bigots

Posted by: Hammer / 12:45 PM

Hey, good news from the culture wars. The American Family Association has admitted defeat. It has ended its nine year boycott of Walt Disney.

The boycott began because of Disney's "promotion of homosexuality", among other things.

The boycott did not go well. Disney was valued at $42 billion in 1996, $48 billion in 2004, and $59 billion right now.

The AFA can now focus all its energy on Sponge Bob Squarepants.


Updated money quote:
"This isn't going away," Wildmon said. "It may take several years, but we will be successful. Michael Eisner thinks we're just a small group of narrow-minded bigots that he can ignore, and that's just fine. Because if I'm at war with an opponent who underestimates my strength and resolve, that's the best ammunition I can have." - L.A. Times (07/02/96)

8 Comments:

The boycott did not go well. Disney was valued at $42 billion in 1996, $48 billion in 2004, and $59 billion right now.

Market cap up 40% since 1996. Impressive.

How about some context?

Viacom's market cap from 1996 to today: up 349%.

Time Warner, from 1996 to now: up 290%.

The S&P 500 is up 61% from 1996 to today.

Not that the boycott had a whit to do with it, but Disney's financial performance has been pretty poor.

By Blogger Joseph Thvedt, at 4:08 PM  

If a 40% capital increase is poor, I wish the two companies that I had worked for between 1996 and 2003 had this poor performance. Instead they went bankrupt.

By Anonymous Anonymous, at 6:47 AM  

The S&P 500 is also down 21% since August 2000. Viacom is down 47% since June, 2000. Time Warner is down 76% since November, 1999. True, Disney isn't the most successful media company, but it has performed very well of late.

By Blogger Hammer, at 7:41 AM  

Sure, you can pick the dates you want to show anything about a particular stock. For example, since you mentioned the S&P 500 since 2000, you could compare that to, say, Disney, which underperformed both the S&P and the Dow.

But we (and by "we" I mean "you") were talking about the period of the boycott. During much of that period, many Disney shareholders have been so frustrated with the company's performance they've been calling for the head of Michael Eisner. They eventually got it.

But again, I don't imagine the boycott had the least thing to do with it. I was just pointing out that your remark about Disney's stock performance didn't support your argument.

By Blogger Joseph Thvedt, at 8:33 AM  

The question was whether the boycott worked. Disney stock is up 40% since the boycott began. I don't think that's a good indicator of success.

Since you suggest it, lets compare Disney to the S&P 500 and the Dow since 12/31/1999. In that time period, Disney shares have fallen .20 cents, from 27.87 to 27.66 (.7%). The Dow fell from 11,497 to 10,503 (-8.6%). The S&P 500 fell from 1469 to 1194 (-19%).

By Blogger Hammer, at 9:06 AM  

The question was whether the boycott worked.

I thought we were, but you keep bringing up all of these arbitrary periods, apparently because the numbers come out better.

Disney stock is up 40% since the boycott began. I don't think that's a good indicator of success.

If you're going to draw conclusions like that, don't you think the results of competitors and stocks in general might usefully be used as a benchmark? 40% by itself, even 40% since 1996, is just a number.

Since you suggest it, lets compare Disney to the S&P 500

Yes, I suggested it, in my original post using the appropriate time period, and subsequently as an example of an out-of-context comparison that means little.

By Blogger Joseph Thvedt, at 7:40 PM  

I don't follow any more. You said:
[S]ince you mentioned the S&P 500 since 2000, you could compare that to, say, Disney, which underperformed both the S&P and the Dow.
I provided the numbers on the comparison I thought you were suggesting.

That said, Slate looked at the Eisner era at Disney, from 1984 to 2004:
In 1984, when Eisner took command, the "Mouse House" produced only one animated picture every three to five years. Its entire film library had only 158 features, and its single cable channel, the Disney Channel, lost money. In addition, Disney had virtually no income from sales of videos. To keep afloat, the company depended on its amusement parks and its Mickey Mouse licensing. Yet even with these assets Disney had a tax-free cash flow of just $100 million. Its share price, reflecting this precarious financial position, was $1.33 (adjusted for splits).

In 2005, Disney was one of the richest companies in America. Its enterprise value—Wall street's favored measure of an entertainment company—had increased 32-fold since 1984 and stood at $69 billion. Its tax-free cash flow had increased 29 times, to $2.9 billion. Its film library had grown to 900 features, which were licensed on TV and sold on video and DVD, and its home-entertainment division accounted for nearly one-third of the revenues of the entire industry. Its share price, reflecting this robust health, had risen to $28.25.

Eisner's success becomes even more impressive when compared with his peers. Between 1984 and 2005, TimeWarner wrote off $99.7 billion; Vivendi-Universal, $40.6 billion; Viacom, $21.2 billion; News Corporation, $7.2 billion; and Sony, $2.7 billion. Among the six companies ("the sexopoly") that now dominate the TV industry, Disney alone did not write off any loss during this time.

As it became increasingly clear that Eisner had hit the jackpot with ESPN, these fund managers focused more and more on Eisner's inability to convert the enormous appreciation of Disney's assets into a stock-market payoff. One way to bring about that payoff would be to install new management who were willing to sell assets—even ESPN. Although Disney's shares had increased by 10.6 percent since 2001—which was a better performance than most of Disney's rivals—that was not enough to satisfy investors.

By Blogger Hammer, at 7:41 AM  

One last attempt. I promise.

First, I want to say that this is a silly argument, but I'm only going to take 49.9% of the blame for that. I'll give you the edge for judging the effectiveness of the boycott by the stock price.

If I were asked to make that judgment, I would decline, because I suspect that it had an infinitesimal effect on Disney's stock price, if even that. If forced at gunpoint, I would have to come to the oppposite conclusion from yours, because, and this is the crucial point, my only point, really: Disney's stock performance during the period of the boycott was relatively poor.

That's all I'm saying. Nothing more. I'm not saying anything about the company's performance, other than stock price since 1996. I'm not saying anything about Michael Eisner's performance, other than as perceived by investors in recent years, which the Slate article also addresses. I wish I'd bought Disney stock 20 years ago. What I don't wish is that I'd bought it in 1996.

Clearly Disney is a hugely successful company. They were in 1996, and they are now. Michael Eisner undoubtedly had an enormously successful run during his 20+ years. Eisner and Disney since 1984 have kicked some serious stock market butt compared to most companies. This all may be interesting, but it just doesn't address your claim about stock price vs. boycott.

By Blogger Joseph Thvedt, at 4:58 PM  

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