In 1984, when Eisner took command, the “Mouse House” produced only one animated picture every three to five years. Its entire film library had only 158 features, and its single cable channel, the Disney Channel, lost money. In addition, Disney had virtually no income from sales of videos. To keep afloat, the company depended on its amusement parks and its Mickey Mouse licensing. Yet even with these assets Disney had a tax-free cash flow of just $100 million. Its share price, reflecting this precarious financial position, was $1.33 (adjusted for splits).
In 2005, Disney was one of the richest companies in America. Its enterprise value—Wall street’s favored measure of an entertainment company—had increased 32-fold since 1984 and stood at $69 billion. Its tax-free cash flow had increased 29 times, to $2.9 billion. Its film library had grown to 900 features, which were licensed on TV and sold on video and DVD, and its home-entertainment division accounted for nearly one-third of the revenues of the entire industry. Its share price, reflecting this robust health, had risen to $28.25.
Eisner’s success becomes even more impressive when compared with his peers. Between 1984 and 2005, TimeWarner wrote off $99.7 billion; Vivendi-Universal, $40.6 billion; Viacom, $21.2 billion; News Corporation, $7.2 billion; and Sony, $2.7 billion. Among the six companies (“the sexopoly”) that now dominate the TV industry, Disney alone did not write off any loss during this time.
How Did Michael Eisner Make Disney Profitable? – Not with cartoons. By Edward Jay Epstein at Slate.