A Property, Market and Class-based Foundation of Disney - Essay Example

Disney and Rifkin’s Hollywood model Summary: Rifkin has examined the changing face of contemporary capitalism and its metamorphosis from a property,market and class based foundation to one that is characterized by networking and leasing out of interests. He argues that the organizational model of Hollywood is the best tool for the modern age, because it consists of diverse elements that come together briefly to derive mutual advantages through a coalition partnership and then drift apart to reform in different combinations with different elements. He argues that the new consumerism is the age of access, characterized by cultural commons and gated communities. The Walt Disney Corporation conforms to this model suggested by Rifkin. Firstly, it is akin to a gated, networked community where a virtual reality is created through networking. Secondly, the diversification of its capital and business interests – the shift away from property into internet based leasing, outsourcing and primarily marketing. The third aspect is the shifting emphasis placed on cultural and intellectual capital as opposed to material goods. Introduction: The Hollywood organizational model: Rifkin’s theory is grounded in the basic premise that in the age of access, the foundation of commerce is shifting away from property and out into cyberspace. The Hollywood organizational model is a manifestation of this phenomenon. It consists of individual productions where actors, directors, production personnel, investors and a host of ancillary talent comes together for a short period in order to take advantage of an opportunity offered by a particular market, only to dissolve again once the production is completed (Rifkin 28). For subsequent productions, different elements will be brought together. The idea behind this is a partial synergy of sorts wherein capitalistic self interest in a networked economy is completely governed by the prevailing market at a particular time. Application of the model in the case of Disney: This principle may be seen to operational in the case of Disney, especially in its mergers with other companies that have been carried out at strategic times. Disney’s latest acquisition of a computer animation company Pixar is only one of a long line of mergers and strategic partnerships that have helped Disney to adapt successfully to changes in the environment. The creative elements supplied by Pixar when working in synergy with the financial clout of Disney have served to produce a superior product (www.corporate.disney.go.com). The strategic move of acquisition of Pixar is a response to the technological environment where success is inherent in intellectual products that are a source of revenue through the provision of the license to access. In a similar manner, Disney and ABC television have merged, in order to strategically exploit the combined market that belongs to both companies through one entity. Thus, several diverse elements come together in order to successfully exploit market opportunities, which one company on its own could not capture to the same degree of efficiency, because the two elements would be competing. Disney’s participation as a sponsor in well publicized events such as races and marathons to cancer drives or civil rights initiatives are a means to capture the market by promoting a product that is no longer strictly confined to physical products or properties but has expanded to a cultural consumerism that thrives in intellectual capital that earns revenue through permitting access. Once a particular event such as a marathon has been completed for example, the association between the corporation and the sponsors may not continue, since the market potential has been exhausted. The initial popularity of the Disney mouse has led to this well loved character becoming an icon, so that it has become the foundation for a plethora of activities that have sprung up around it, including movies, websites, consumer products in a cultural consumerism that spans the world – all to exploit the market potential of the cartoon character. Disney is now a Dow 30 Company, with revenues of $32 billion dollars and market capitalization of $54 billion as of May 4, 2006.(www.corporate.disneycom). The Hollywood model is conditioned by pure economic interest, which in fact ranks higher than the achievement of a creative objective. Hollywood packages dreams and sells them to the people in order to profit from them, albeit the reality may be quite a different matter. Hollywood is a master at skillfully packaging illusion in such a manner that it sells, whether the dream has any real substance is immaterial, the realty behind it is immaterial, the fact is that the public loves to feed on the illusion. The same kind of philosophy may be noted even in the case of Disney where all its operations are geared towards the promotion of a particular image irrespective of the reality that may actually exist. Disney theme parks are supposed to be places of fun and adventure, they are the epitome of a kid’s dreams and Disney’s success has largely been conditioned by preserving and maintaining the illusion. Disney employees are trained to play a role and to project this clean, wholesome image of Disney, by projecting an alternate reality within the boundaries of the theme park, packaging illusion and selling it so skillfully that the Company amasses millions of dollars a year through the skilful propagation of its image and the selling of illusion, in the same manner that Hollywood films package and sell illusion. In fact Disney is the classic example of Rifkin’s proposition that the move towards the new capitalistic consumerism is being accompanied by a shift from the work ethic to the play ethic, so that cultural events are being packaged as consumer products (Rifkin Article). Disney is also the typical example of an alternate world or gated community that Rifkin describes under the Hollywood model, whereby the shift from the world of reality into the world of cyber reality is represented in gated communities, which are exclusive areas where there is a different culture and set of norms as compared to the rest of the world. Within the world of Disneyland, it is possible for the average consumer to escape the world of reality with all its hard realities and nasty truths into the world of fun and frolic represented by Disney, where people always remain kids, suspended for ever within the innocence of childhood. Therefore a different set of norms exists within the sphere of Disneyland, where employees are not allowed to be rude to the customers, where they need to project a clean cut appearance and where they play a role of subtly reproving those boisterous elements who try to interfere with the atmosphere of courtesy and politeness, irrespective of the realistic frustrations that may be simmering within. The economic gains to Disney accrue from packaging this world of illusion within its gated community, so that when consumers enter the world of Disney, they feel that they are entering the world of their childhood – clean and simple, where people are kind and courteous, where no unhappiness is allowed to seep in. Rifkin suggests that networked capitalism involves the “bits and pieces of companies” that are engaged in fission and fusion that is directed towards the exploitation of market opportunities – “by embedding one’s own firm in a network of mutually beneficial relationships designed to optimize the collective effort, each individual firm’s success is more likely to be guaranteed in a win-win strategy.” (Rifkin 19). In the case of Disney for example, the corporate body consists of several subsidiaries and affiliates, such as media networks, theme parks and consumer products. The market opportunity provided through films is exploited through additional consumer products, while the networks and theme parks serve to bring to life the fantasy world that is created through the films of Disney and the character of the mouse. Although Disney promotes a clean image, as the classic example of the little guy who rose to greatness from a humble background, the capitalistic element and the objective of financial gains is quite evident as stated in the 2005 Annual report (p 10): ““..we track three major financial metrics: 1) earnings, 2) free cash flow and 3) return on investment. We believe that we must deliver strong results on all three of these metrics over time.” Therefore, it becomes clear that economic gains are the ultimate objective which is in line with capitalistic consumerism, however the Company has been making use of various strategies all geared towards promoting its image among the public in order to fuel enthusiasm for its product, to encourage increased access and thereby more gains. For example, an examination of the revenue distribution from 1996 to 2000 reflects the growing awareness of the importance of technology and the Internet as opposed to physical sale of consumer products. Incomes have jumped from the internet group and the media networks which are the source of information about Disney’s creative product, while revenues from actual consumer products jumped in 1996 but began to slump thereafter in view of the shift towards technology and the Internet. This is also reflected in the fact that expenses on consumer products have however remained more or less constant and this imbalance has been redressed by Disney in the shift in its focus towards its Internet based products, such as the Disney Online newsroom and movies.com which represent Disney’s Internet group, with additional expenses being allowed in this area (a jump from 229 to 770 million dollars between 1999 and 2000). This is a clear reflection of the recognition of economic opportunity in the dispensation of intellectual capital rather than the physical products, a distinct sign of the new capitalist consumerism according to Rifkin. Hence since the prevailing market is now based upon increasing use of the Internet and technology based products, Disney has recognized the opportunity and has moved for creative fission and fusion with Pixar, the computer animation Company while also boosting its costs on its Internet group in order to improve it. Moreover, Disney also practices outsourcing. It gains economic revenues by selling its own concept in other places, so that it does not really need a physical product or property to sell, it is the packaged dream and fantasy world that is the source of its gains. For example, Disney has opened two new theme parks in Tokyo and Hong King, both of which sell the same packaged illusion – and the franchising of the virtual product, i.e, the image, is the factor that creates economic gains for Disney. The shift in consumer goods sales to Internet sales is only a reflection of the phenomenon Rifkin has described as the emergence of the cultural networking that binds human being together rather than the emphasis on property that was placed in the industrial age. Unlike that era, the new consumer capitalism that is being propagated through cyberspace shares information and allows selective access for maximum gains. Products are no more physical entities and they are no longer housed within distinct proprietorial interests, rather the resources are shared through networking and by allowing access. Disney demonstrates this phenomenon in the shift from the attention in its purely physical products and ownership of property to a combined, franchise-type of operation where its subsidiaries function a sits network partners who are the agents helping to sell the dream and vision of Disney. Rather than a real world, it is now a simulated world, a world that can only be accessed by some through their entry into cyberspace, while access is denied to those who cannot network in this manner. Conclusion: From the above, it may be noted that Disney is a good example of the phenomenon that Rifkin describes in his book – the altering human consciousness, wherein there are different levels of simulated consciousness geared to navigate through different virtual worlds. Disney’s theme parks and its movies are only a reflection of the increasing tendency to package illusions and market them, so that the networking of the media and the fantasy combined to provide unsurpassed profits. Disney is a typical representation of a gated community, a world of intellectual capital, a world of fantasy and illusion which can be accessed only by some, yet it forms the new foundation of economic exploitation through networking and cyber activity. The nature of the product being sold has changed, and Disney is a reflection of the skilful packaging and sale of an intellectually designed, networked product rather than a purely physical product. In this packaging of illusion through the synergy of a network of various elements, Disney therefore displays all the traits of the Hollywood model. References: * News report, 2006. Disney completes Pixar acquisition. May 5. [online] available at: http://corporate.disney.go.com/news/corporate/2006/2006_0505_disney_completes_pixar_acquisition.html * Disney-ABC television group takes ABC primetime online, offering hit shows on ABC.com during May and June April 10. [online] available at: http://corporate.disney.go.com/news/corporate/2006/2006_0410_abchitshows.html * Annual Reports 2005 * Rifkin, Jeremy, 2000. The age of access: Putnam. * Rifkin, Jeremy, 2001. Can civilization survive when only the commercial sphere is left as the primary mediator of human life? Resurgence magazine, 207. Rifkin has argued that there is a shift from ownership to access in a new network economy, and has claimed that the Hollywood model is the ideal organisational form for the global economy of the twenty-first century. To what extent does the Walt Disney Company illustrate or refute these arguments and claims? Support your answer with segmental, product market and financial analysis. Read More