Investment Analyses The Walt Disney Company



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Investment Analyses –

The Walt Disney Company








Overview

The Walt Disney Company is the world's largest media conglomerate. The company is primarily classified as Television Broadcasting in the US (NAICS code: 515120), but has additional assets that encompass movies, publishing, and theme parks. The company’s largest subsidiary is the Disney/ABC Television group, which includes the third largest television network in the US, ABC. Through this they operate 10 broadcast stations and several cable networks including ABC Family, and Disney Channel. Other notable subsidiaries are: Walt Disney Studios produces films through Walt Disney Pictures, Disney Animation, and Pixar; Walt Disney Parks and Resorts runs its popular theme parks. The company’s most recent big acquisition was LucasFilm, which gave them full rights to the Star Wars franchise (Hoovers).

Industry Outlook

Ticker

DIS

Market Value of Investment




Investment Group

Student Equity Management

Industry

Broadcasting & Media

IVA Rating

A

Due to growth in consumer demand, the Broadcasting & Media industry is expected to grow at an annual rate of 2% between 2015 and 2019. Because Disney has subsidiaries in so many diverse industries, it is important to mention that the Motion Picture Production & Distribution Industry (NAICS code: 512120) will increase at an annual rate of 4% between 2015 and 2019, and the Amusement Parks & Arcade Industry (NAICS code: 7131) will increase at an annual rate of 4% between 2015 and 2019 as well (Hoovers).
ESG Related Issues

The key issues within the Media industry and for companies like the Walt Disney Company are human capital development, privacy and data security, energy efficiency, and corporate governance. According to MSCI’s Intangible Value Assessment (IVA) on the Walt Disney Company Human Capital development and Supply Chain Labor Standards are the company’s primary ESG concerns.


Disney has high operational risks associated with talent recruitment and retention. Because of the company’s robust employee programs, Disney is able to reduce potential employee frustrations far better than its peers. The industry average score in this category is 4.1, and Disney is ranked in the 86th percentile with a score of 6.5. The most notable recent disputes were in their resorts subdivision, including a lawsuit over the death of a mechanic during attraction testing, and an employee death caused by a customer losing control of a car. Because Disney is so large and has a presence in a number of diverse locations, occasional employee disputes are likely to occur.
Disney’s supply chain labor standards are exposed to high risks of production disruption and brand damage which could come from labor disputes in the supply chain due to its high volume of production. Disney’s supply chain labor management programs are very strong, however most of its manufacturing is outsourced to developing countries. In 2014 CLW published an investigative report that looked into Chinese factory labor conditions finding various labor violations such as unsafe working conditions, excessive overtime, and lack of union representation. The Walt Disney Company was on the list that these factories supplied to, and while Disney has policies concerning employee Health & Safety, the factories that it outsources to may not. Disney also has a well-recognized brand name, however its brand-licensing model has faced extensive criticism leading to potential reputational risks with the model in the future. The average score for this industry is a 2.5, and despite these moderate issues Disney ranks in the 100th percentile of the industry with a score of 3.9.
Although Disney is less focused on Energy Efficiency and Corporate Governance, it still scored above average in these categories. The Industry average for Energy Efficiency is 8.1, and Disney scored an 8.9 putting it in the 77th percentile due to its initiatives to reduce energy consumption especially in its amusement parks and resorts. The Corporate Governance industry average is a 4.8, and Disney scored a 4.9 putting it in the 43rd percentile due to its internal pay equity problems, but overall diversity of ownership (MSCI).


  • Shem Krey for the Sustainable Investing Advisory Committee

September 2015

References


Hoovers, Inc. (2015). The Walt Disney Company facts sheet. Retrieved October 1, 2015, from Hoover's Company Records database.
Hoovers, Inc. (2015). Broadcasting & Media Industry facts sheet. Retrieved October 1, 2015, from Hoover's Company Records database.
Hoovers, Inc. (2015). Motion Picture Production & Distribution Industry facts sheet. Retrieved October 1, 2015, from Hoover's Company Records database.
Hoovers, Inc. (2015). Amusement Parks & Arcades Industry facts sheet. Retrieved October 1, 2015, from Hoover's Company Records database.
MSCI Intangible Value Assessment (2015, October), the Walt Disney Company. Retrieved from www.esgoncampus.msci.com


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