Economic Conditions and Trends of the Walt Disney Company
With the economy remaining The Walt Disney Company’s largest threat, the recent turmoil in the financial markets has adversely affected the economic activity in the United States and other regions of the world in which Disney conducts business, and has affected demand for some of Disney’s products and services. A continued decline in economic activity could adversely affect demand for any of their businesses, thus reducing their overall revenue and earnings. A sustained decline in economic conditions could reduce attendance and spending at one or more of Disney’s parks and resorts, purchase of or prices for advertising on broadcast or cable networks or owned stations, prices that Cable Service Providers will pay for cable programming, performance of their theatrical and home entertainment releases, and purchases of Company-branded consumer products. These conditions could also impair the ability of those with whom Disney does business to satisfy their obligations to Disney.
Changes in exchange rates for foreign currencies may also reduce international demand for their products, increase the labor or supply costs in non-United States markets, or reduce the United States dollar value of revenue received from other markets.
Cultural and social values and trends
Each of Disney’s businesses creates entertainment or consumer products whose success depends substantially on consumer tastes and preferences that change in often unpredictable ways. The success of their businesses depends on their ability to consistently create and distribute filmed entertainment, broadcast and cable programming, online material, electronic games, theme park attractions, hotels and other resort facilities and consumer products that meet the changing preferences of the broad consumer market. Many of Disney’s businesses increasingly depend on worldwide acceptance of their offerings and products outside the United States, and the success of these offerings therefore depends on Disney’s ability to successfully predict and adapt to changing consumer tastes and preferences outside as well as inside the United States.
For example:
- The success of Disney’s offerings in the home entertainment market depends in part on consumer preferences with respect to home entertainment formats, including DVD players and personal video recorders, as well as the availability of alternative home entertainment offerings and technologies, including web-based delivery of entertainment offerings.
- Technological developments offer consumers an expanding array of entertainment options and if consumers favor options that Disney has not yet fully developed rather than the entertainment products they do offer, their sales may be adversely affected.
Political and legal issues
The success of Disney’s businesses is highly dependent on maintenance of intellectual property rights in the entertainment products and services they create. New technologies such as the convergence of computing, communication, and entertainment devices, the falling prices of devices incorporating such technologies, and increased broadband internet speed and penetration have made the unauthorized digital copying and distribution of their films, television productions and other creative works easier and faster and enforcement of intellectual property rights more challenging. The unauthorized use of intellectual property rights in the entertainment industry is a significant and rapidly growing phenomenon. These developments require Disney to devote substantial resources to protecting their intellectual property against unauthorized use and present the risk of increased losses of revenue as a result of unauthorized digital distribution of their content and sales of unauthorized DVDs and other counterfeit products.
