Chronic Synergy

Barron's explains how Diz Co. maximizes profitability.

... Disney’s success stems, not from an immunity to occasional flops, but from an unmatched ability to wring profits from winners. Disney has far more deals with merchandise companies than its rivals -- 37% more than Viacom, 56% more than Time Warner, and seven times as many as DreamWorks Animation SKG, according to a tally last year by investment bank Sterne Agee. It has more than 300 of its own stores worldwide. And it has parks and cruise lines brimming with tie-ins to hit movies.

By expanding Disney’s ability to turn studio properties into rising profits for Disney’s adjacent businesses, Iger has been able to outbid rivals for key assets, including Pixar in 2006, Marvel Entertainment in 2009, and Lucasfilm in 2012. Disney’s deep reservoir of entertainment franchises now allows it to turn out hits with almost boring regularity. ...

Disney can buy better stuff than its competitors because it can earn bigger profits on the stuff it buys -- a virtuous circle of investment. Its abilities are amplified by its television business, easily its biggest moneymaker thanks to sports powerhouse ESPN, with generous and growing cash flows to fund businesses across the $50-billion-in-revenue company. ...

Disney has been constructed of interactive and reinforcing parts for years and years. Even when I worked there during the William McKinley Administration, Disney World added a lot to the corporate bottom line, as did merchandise, as did the embryonic Disney Channel.

From the beginning, the company's history has been one of slow, steady expansion. Walt went into live-action movies, television and the amusement park business. Ron Miller added EPCOT, the Disney Channel, and Touchstone Pictures. Michael Eisner launched a television cartoon business, overseas Disneylands, then purchased ABC-ESPN.

And Rober Iger has acquired outside entertainment companies Pixar, Lucasfilms, and Marvel, turning Mouse Inc. into the Berkshire-Hathaway of entertainment conglomerates. Somehow it's all worked like gangbusters and made a lot of stockholders rich(er). It's hard to argue with success, so I don't.