Question

Search for at least two significant news items or events that have affected Walt Disney or its industry over the past year. Briefly describe each event. Next, discuss how this event will affect the company’s operations and the financial ratios. Make certain that the item is truly newsworthy unless it is a major surprise.

Answer 1

First news is related to Walt Disney acquisition of Rupert Murdoch-owned 21st Century Fox (which includes Star India). This deal will create synergies and also leads to reducing more than 300 jobs that are redundant and thus helps in saving operating costs. This was $52 billion all-stock deal but after rival Comcast made a rival deal, Disney increased its offer to $ 71.3 billion in cash and stock. This deal is expected to help Walt Disney reach the top spot in Indian Entertainment genre with biggest media properties like Indian Premier League, English Premier League, and Hindi TV shows. The merged company will have close to 80 channels up from Disney's eight channels now. Overall this deal will benefit the company to gain operational efficiency, increase its market position ( no.1 in the Indian market), increase revenues through ad space online(Hotstar) and through TV.

Another news is recent announcement of entry of apple in entertainment space with its own streaming television service charged at $5 a month which is lower than the rate Walt Disney Co is going to charge ($7 a month). Disney this year decided to part with Netflix on streaming deal and launched its own streaming service from November. But with the announcement of streaming service by Apple, this sector will become more competitive. Since the online streaming is the future of the entertainment industry and most of the revenue of the industry is expected to come from this, this will directly affect Walt Disney Co. The revenues will be affected as subscribers will get distributed between Disney, Apple, and Netflix. The operational costs will rise due to heavy discounts that the companies have to offer to increase subscribers and thus the overall impact on operating profit will be seen.